Credit Cards do that to you, lull you into thinking that you don't have to worry about it. If you spend too much you can always make it up next month or some similarly seductive justification goes through your head. I just got my first debit card (never wanted one before), and have surprised myself at how much more conscious I am of how much I am putting on it, which in my mind has now become 'taking from it', an important distinction, if only psychological. If you change your thinking, you can change your habits. But that was Kyle's One Money Advice. Here is mine:
Save your money.
Sorry, nothing very profound here. But people aren't doing it. I haven't been doing it like I should. But nothing will put you back in the clutches of debt like not having money to fall back on when you need it.
Paying off debt is almost a form of saving as it reduces your liabilities and frees more of your money to save. But once you get on top of debt, save like crazy. Get obsessed about it. Make it a priority. Pay yourself first. Trick yourself into having money if you have too.
Save a thousand dollars. Save a month's pay. Then save three to six. Save for Christmas. Save for vacations. Save for the things you know you are going to need. Save for those special somethings and surprises. Save for those nasty somethings and surprises.
I do have to "trick myself" a little into actually having money when I need it. I must confess that I used to be a little too much grasshopper and not enough ant. But to make sure that I should always have next month's mortgage payment when I bought my house (only 5% down!), I set up a Money Market Account with a $1000 minimum that my mortgage payment is drafted from. I don't dip past that minimum or else I get dinged $7. I'm cheap enough that I don't ever do that if I can help it, plus the fact that this account is almost exclusively dedicated to my mortgage also gives it a sort of "off limits" aura for me.
It seemed like a good idea, so I set another one up when I got a car payment again (not such a good idea, but it was pre-financial epiphany, and I'm keeping my sweet 2004 Jeep Wrangler Unlimited). This other money market gets fed each month with an automatic transfer that I set up. When I pay it off, I plan to keep transferring the same money into it, and hopefully SAVE up for my next car purchase. But this other money money market account forces me to keep another $1000 minimum laying around, and I have it purposed for automobile related emergencies and repairs. But that 7$ ding keeps my hands off of it when I don't need it, and is not enough to bother me when I do.
Online savings accounts are another great tool for sequestering money for specific purposes. They are real easy to open, and they also put those savings a little farther out of reach and temptation. I've just opened one myself, and I can say ING at least makes it real easy to set up automatic monthly transfers so that these savings goals or budgeting categories that I might want to have can be funded with no further participation from me.
You can even have multiple accounts for different categories with their own automatic transfers, so that the things you want to save for can become bills you pay now, but you pay yourself and profit from the interest involved, instead of some banker.
That is not even beginning to talk about retirement savings, which is really beyond the scope of this post. But take it from a reformed grasshopper, save now and save often.
If you are Kyle: Thanks for the tag and the bond advice.
Labels: "Personal Finance"