The invisible money trap – and how to escape it

What comes to mind when you hear the words ‘invisible money’?  It’s a term that I only recently became aware of and, when I heard it used, it stopped me in my tracks.

Invisible money is a phrase that was coined to describe debit cards and other forms of digital payments.  It is a form of money that only exists electronically and, because you can’t see or touch the currency, it’s called ‘invisible’.

Money that we can’t see includes: PayPal, Apple Pay, payments we make on credit and store cards, all forms of ‘buy now, pay later’ methods including Klarna, as well as the likes of dipping into your overdraft even when it’s interest free, and digital assets like bitcoin which can also be thought of as a kind of currency.

That’s already a long list, but to me, invisible money also includes those easy-to-make and easily forgotten payments that we make via subscriptions, habitual spending and any of the many other ways that money leaves our bank accounts without us really noticing.  That is, until it’s three weeks before pay day and we’re 50p away from going into the red. At this point, we notice the fate of every single penny.

Invisible money is everywhere

While the generations before my own largely relied on cash, nowadays, money is invisible.  If you’re a millennial like me, the chances are as a child you received pocket money in cash but very quickly moved on to using a debit card for most transactions.  This probably seems pretty primitive if you’re part of Generation Alpha – people born between 2010 and 2014 – who have grown up in the digital age.

The problem

I love the convenience of the digital world, and this includes the many ways in addition to cash I can use money.  But the problem is that invisible money eats away at our bank balance – and we don’t even know it’s happening.

Digital payments are quick, frictionless, and they don’t feel real.  The same applies to digital forms of debt, such as using a credit card or using Klarna and other forms of delayed payment schemes liberally and in a way that amounts to spending beyond your means.

The solution

What are the options if you want to escape the invisible money trap?  Some people might be happy reverting to using cash, but I’m not a fan of this approach.  While cash has an in-built boundary and using it to pay for things helps us to quickly and easily see and feel what we are spending, the approach isn’t always practical given the number of cashless stores and coffee shops.

I think there’s a lot to be said for developing habits fit for our times.  Money is becoming increasingly invisible, and the trend is unlikely to reverse.  This makes it crucial to learn how to spend and save in the digital age.

Tips

1.Know where your money is going. In other words, make the invisible, visible.  Audit where your money has gone over the last three to six months.  You will quickly identify patterns and become aware of where you are spending money unconsciously.

2.Have a plan.  This will enable you to take control of where you are spending money.  Include savings in your plan.

3.Cancel unnecessary subscriptions.  Once upon a time we only bought magazines and newspapers on subscription.  Nowadays, we’re encouraged to ‘subscribe and save’ on all forms of purchases, from deodorant to toilet roll. Before signing up, ask yourself if the small upfront saving is really worth it, or if you’d be better off purchasing the item less frequently, which could mean you spend less in the long run.

4.Engage with your debt. Keep on top of what you owe and how much loans, overdrafts and credit cards cost. Ensure you have a credible and realistic plan to pay off what you owe.  If you can, pay off your credit card balance in full each month.

5.Have regular money dates.  Check your bank balance, card statements and assess your budget on a regular basis. The more you engage with your money, the more real your digital transactions will feel.