Zen Habits is one of my favorite personal philosophy web sites. It is chocked full of great ideas for productivity, de-cluttering, exercise, mindfulness, etc.
Recently, I came across this article about not automating personal finance, which is actually by the Man vs. Debt blogger.
I go back and forth on this issue as I'm a big fan of automating retirement savings, bill paying and budgeting to make life easier.
First, I'm a big proponent of automating savings. For us, our 401k contributions are automatically deducted by our respective employers. As such, we never see that money and therefore never get a chance to spend it. Furthermore, our 401k contributions are undertaken, in general (we also each have a Roth 401k option) pre-tax which is one of the significant benefits of a 401k plan. I can't see a way to or a reason to unautomate 401k contributions, but I'm all ears. However, we are mindful of the amount we are contributing to our 401k plans each year. We are mindful to adjust the amount withheld by our respective employers in order to max out our plan each year.
When it comes to our other savings, I find that our automated savings work better than our unautomated savings. For example, we are putting $400 per pay period towards our emergency fund, as such we are generally on track to meet our goal of adding $10,000 to our emergency fund in 2012. For other savings goals which are not automated, i.e. our 2012 IRA savings or our trading account savings goal, we are lagging behind in part because I making those savings decisions after I pay bills, allocate allowance, etc. Meaning, that if I have a decision making process when it comes to savings, I might not transfer that money to savings. Often, I'm not spending it on other things but I get nervous having our day to day checking account get so low.
When it comes to debt repayment, if you are struggling with debt, I think a measure of automation can help. If you can get all of your minimum payments set up and automated (where you are pushing payments, I don't think its a great idea to allow banks access to your checking account) you know you won't miss any more payments and incur late fees and penalties.
But, I also recognize the importance of being mindful with one's spending and personal finances.
We use the $100 and $300 rule to keep engaged with our spending. The $100 rule provides that for every "want" purchase over $100 we must wait one day per $100. Which means if we are faced with a $500 want, we must wait at least 5 days. The $300 rule provides that for every purchase over $300 we must discuss the purchase and agree between the two of us (bribing the dog to your side doesn't work).
We also don't use credit cards for day to day spending. Using debit cards tied to our respective checking accounts in tandem with our adult allowance system requires each of us to think before we swipe since we each have a limited amount available to us for spending.
How do you maintain mindful spending?
1 comment:
Sadly we have had to struggle with this lately as my wife has left her engineering job. She has reinvented herself in real estate investing and private lending, but it will take a couple more years for her income level to return to that of her previous job.
So we often are faced with choices tat would have been no brainers on two incomes, that now we must reflect on, and more often than not, just walk away.
Plus the first of our four kids starts college now, so we need to further tighten the belt as the last four years of college savings growth projections didn't manifest themselves!
Post a Comment