If I had a superpower, it would be the power of self-control. I know that’s mega-lame and a waste of a perfectly good super-power opportunity, but some days it just takes more willpower to make a good decision than to read minds.
Name Every Dollar
“What’s in a name? A rose by any other name would smell as sweet.”–Romeo, Romeo & Juliet
why she named me Matthew—which means “gift from God.” Cool story, right!?
“Buster so excelled at being neither seen nor heard that he remained at the school a full two semesters after he was supposed to graduate.”– Ron Howard, Arrested Development
“A man without a goal is like a ship without a rudder.”
- Read more articles about personal finance
- Eliminate all credit card debt
- Eliminate all student loan debt
- Max out a Roth IRA this year
- Start a side-hustle that pays $500/month
- Buy your next car with a briefcase full of cash
- Start an emergency fund
- Save for a 20% down-payment on a house
- Save for a vacation to Thailand
- Buy a guitar
- Buy an engagement ring
- Buy a wife from Ukraine for that engagement ring
- Are you single? Save one month of take-home income.
- Married? Save three months.
- Married+Kids? Save six months.
“If you want to recapture your youth, just cut off his allowance.”-Al Bernstein
Budgeting is too tightly associated with being nit-picky or cheap. Budgeting isn’t supposed to suck away your life. You should be able to spend money on things that make you happy and still move toward your financial goals.
Delay Out-of-Budget Purchases
Cut Yourself Some Slack
Any “benefit” you receive from a credit card is psychologically designed to get more money out of you than back to you. That 2% cash back benefits the credit card company, NOT YOU! It’s very tempting to leverage credit cards for points, but don’t. Behavioral psychology trumps financial literacy here.
- 50% – Constants (Past)
- Rent, utilities, cell phone, insurance, car payment
- Charity, subscriptions, gym
- 20% – Financial Goals (Future)
- Debt repayment
- Retirement, savings, investing
- Saving for Ukrainian Wife
- 30% – Variables (Present)
- Groceries, restaurants, shopping
- Hobbies, entertainment, gas, date money
Based on our choices in the past, we now make consistent payments to retain our standard of living. We chose to live in a certain type of house in the past and now we pay rent or a mortgage. We chose a certain style of car, an insurance plan, a gym membership, and cell phone plan in the past and now we make monthly payments.
“Past” money is boring money. We don’t really want to spend it, but we have to. This is the easy money to automate.
Those who delay gratification live happier lives. We can practice delayed gratification with our money by setting it aside for something awesome in the future.
“Future” money is also boring money… for now. We don’t want to spend it, but we should. This makes it the best candidate for automation because it is the easiest component to forget or neglect.
“Present” money is not boring money. It is the best money! Present money is burritos and concerts and Dr. Who t-shirts. Present money is paint-balling and skydiving and road trips. No one needs to teach us to spend money on the present. It is important money, but never at the expense of “past” and “future” money.
Honestly, all we’re doing when we make a budget is making sure that all of the “past” and “future” money goes to the right place so that we can get the appropriate amount of awesome out of our “present” money.