Personal Finance Budgeting: Take Yourself Out of the Equation

We all have bills and we all have to pay them. However, when it comes to personal finance and budgeting, some people pay their bills like this:

1. Get statement (in the mail- as in snail mail).

2. Avoid statement ("ack! a bill! I'm stressed about money!")

3. Two weeks later, remember said statement ("oh &$*%! I have to pay this or I will lose (fill in blank) service!")

4. Write check and send to service provider (and pay almost 50 cents to send it).

Sometimes this happens:

5. Forget about check, spend money that was reserved for bill, check bounces.

6. Never made it to step 3 and service is shut off and the mad dash to pay the bill ensues.

YIKES. If you are stressed about money and bills there are only two things to do: TAKE RESPONSIBILITY and AUTOMATE IT.

Paying your bills this 'old school' way is stressful and it is what is putting you in a financial hole. You are human. Human's aren't reliable. We forget, we make reasons, we are impulsive, we choose 'want' over 'need'. It's our biological nature so don't be offended.

So what is that-person-you-know-who-has-control-over-their-finances doing that you aren't?!?! I mean, they are human too, right??!


They have been responsible about their bills and have set up a system that handles their finances for them. They have taken themselves out of the equation so they can't mess it up! If you do the same, you'll find you are less stressed and more in control of your finances.

Take the following steps today to set your finances straight. Old School is not COOL when it comes to your bank account.

1) You must be responsible about your finances and if you don't know how much TOTAL you need to cover your bills (this includes RENT) every month, you must discover this number, NOW. If you find that your bills leave little for necessities like food, you may need to re-evaluate your income/spending and downsize on services (or get a second job, but who wants to do that?! You work hard enough).

2) Whatever this number is, have it automatically deducted from your paycheck by your employer and put into a separate account. If you are self-employed, ask your bank to take this amount out on certain dates and put it into a separate account. Block the option to withdrawal from this 'bills' account with your debit card.

3) Make every 'mail statement' an electronic statement. 99% of services offer this option. It will come right to your inbox and save trees.

4) EVERY bank and EVERY service offers automatic payments. Most Landlords (if you are still renting-which is just another way of throwing away money by the way) allow e-payments as well. Either set up automatic payment for your bills through your bank or set it up with each service provider. If you do auto-pay with your service providers, I recommend setting them up by bank account/routing number and not debit card number. That way if you lose your debit card, you won't have to go to each service and update them all.

5) Live on stress-free. No more 'bill reminders', no more last minute scrambling. No late fees. Trust me, you will soon get used to only having access to a dedicated spending amount. You will have made your finances 'fool-proof' or rather YOU-proof.

Your credit rating will thank you.

Want a video version of this article? Go to:

Personal Finance Series: No 6 - Shocked! Grandad Bankrupted By Garden!

I read an interesting news article recently. A Grandfather lost everything he owned, including his home because he failed to understand the significance of the single biggest decision made in his Personal Finance Budget - Where to live.

The riskiest yet most rewarding personal finance decision was taken because the man seduced himself into buying a house he couldn't foresee was unaffordable in the medium term. He was ultimately bankrupted, he said, because the yard, the garden, was stunning and it convinced him to buy it. The man, in search of that most primary of needs, shelter, had been seduced by kerb appeal.

Housing Shelter Position: Castles of Deception

The importance of shelter, of a home, connects to a very primitive human need - the need of protection against the cold, the prevailing wind and a place to feel safe, dry and warm.

Searching for a home is therefore a very emotional and deep rooted experience, and all the available advice to house sellers is to make it as easy for the prospective buyers to deceive themselves, to 'see themselves' living in the property.

Kerb Appeal advice lists the following

  1. Paint over blemishes
  2. Remove all visible trash, weeds, and dirt
  3. Groom the gardens and clean the yard
  4. Add foliage, plants, and flowers
  5. Wash the windows

Kerb appeal is all about creating a first impression, making the property sufficiently 'alluring' to make passing cars stop!. Similarly, inside gets the same clean out and clean up treatment.

Housing Shelter Position: The Emotional Sale

The combination therefore of the deep drive for security and the deceptively seductive garden, produce an imaginary high quality of life, imaginary happiness, and imaginary positive experiences.

People stand inside the three dimensional space and 'feel' their future - the conversations, laughter, relaxation, dinners and contentment. If it feels right, the true cost of the purchase, the price, the mortgage and the future repayments are all significantly affordable in the minds eye than if the house is somehow 'wrong.'

That having a home produces this response can be in no doubt - just ask any homeless person what they most desire.

Housing Shelter Position: Taking Preventive Action

Despite the manipulation, buying or renting a home is a big undertaking because of the financial implications of getting it wrong, and the commitment that ensues over a long time The fear of homelessness, or being unable to provide shelter for his family is a very common nightmare among men worried about job security. Housing Shelter Position Spending is one of the 14 different way in which our brain thinks about money. This category includes the hidden costs of moving and settling in, as well as structural changes like adding rooms, conservatories, and knocking down walls.

These are large, considered expenditures because they take out a significant proportion from the personal finance budget, it is important to know how these commitments track over time. Also, by understanding the details of how much and how often you spend within all 14 categories, you can start to control your personal finance budget.

It is very important when taking preventive action, protecting your shelter, that you match up your money in and your money out, and understand the consequences of a variety of decisions regarding spending money.

Large financial commitments such as these can be planned for as a financial budget goal, and having a personal finance budget forecast, an ability to see over time which changes need to be made when times get tough, allow for lifestyle adjustments early - rather than those forced on the Grandfather above, whose lifestyle change was forced on him through bankruptcy. He lost control of his life because he didn't take control of his money.

3 Steps to a Simple, Automated Personal Finance Setup

Personal finance can be scary and intimidating. We all know we should be saving for retirement and large purchases, but don't like to talk or even think about it. This article shows you the 3 steps needed to a simple, solid personal finance system.

The Elements of a Solid Personal Finance System
Everyone needs at least 3 accounts for a secure financial set-up. First, a high-yield checking account for everyday purchases. Second, a high-yield savings account for your emergency fund and large purchases. Third, a retirement account, at least a 401(k) (or equivalent), with preferably an IRA in addition. Let's look at each element in detail.

1) High-Yield Checking Account
The foundation of your personal finances should be a checking account that earns interest. If your current bank charges fees for your account, dump it! The bank should be paying you to use their services.

Interest rates are pretty low right now, but check with your local credit union, they usually offer higher interest rates. By finding a high-yield or rewards checking account, your bank will pay you simply for keeping money in your account!

2) High-Yield Savings Account
Are you one of those conspiracy theorists that keeps their savings under your mattress? Get over it! You're losing money by keeping it out of a bank. Your bank should be paying you to keep money in a savings account.

Once again, check with your local credit union first, but most of the higher-interest savings accounts are now found online. ING, Everbank, and Ally are good options to look into. Set up automatic monthly deposits from your checking account into your savings until you have a 3-6 month emergency fund.

3) Retirement Account
If you aren't saving for retirement, plan on flipping burgers at McDonald's in your 80's. Everyone procrastinates saving for retirement and underestimates how much they'll need; bad combination! Talk to your employer about any retirement accounts they offer, such as a 401(k).

Then, set up your own traditional or Roth IRA with an online broker such as Vanguard or Fidelity. Save about 15% of your take home pay by first funding your 401(k) up to the employer match, then maxing out your IRA, then back to your 401(k) if there's any left.

By following these 3 easy steps, you will have a secure financial future.

Emergency Fund Accounts - Personal Finance Basics

As a financial consultant and I have coached a lot people as to why emergency funds are critical. In an earlier post you learned crucial personal finance basics with regards to creating an emergency fund like budgeting, goal setting and automation. Today I'll discuss a few quick tips to help you pick where to invest your emergency fund.

Convenience - If you are like lots of people, you want to make saving into an emergency fund as fluent and simple as you can. Coaching personal finance basics has also shown me that if it's not easy, chances are it won't get done. You likely have a checking account. If so, you probably have a savings account in place too, if not you could open one with your bank on the Internet or at your branch. I recommend using this account to park your emergency funds. Chances are the interest rates aren't great, but it's an a simple account you probably have, or you could set up in a jiffy.

High Interest Savings - You shouldn't worry too much about the interest rate you get with your emergency fund as it's considered a short-term investment. A personal finance basics way of thinking is that you'll probably use the fund within the next five to seven years, it's short-term. ING is avery popular savings vehicle, as is PC in Canada. There are plenty of high interest savings accounts available to create online, just be careful of their fees, terms and conditions and legitimacy. Money market funds is one other choice, and can even provide higher interest than savings accounts, but they aren't guaranteed. I have personally used ING for my emergency fund and think its excellent.

Liquidity - How quick can I get my money? Another important factor you need to think about is how accessible are your emergency funds. The simple rule with this is that it should be available by less than five days at the very most. You should try to get a fund that could pay out your money within 24 hours of when you need it. The personal finance basics question to ask yourself with this when choosing an account is "Can I get the money when I need it?"

I hope these personal finance basics regarding convenience, high interest savings and liquidity will help you make your emergency find into a reality. Check our resource link for free budget spreadsheets and other financial calculators to give you the head start you may need. We go more in depth in our e-book as well. The best tip I can give is to get it started. Even if you only got a 0% rate of return, you will still have money tucked away for those unexpected expenses that you wouldn't have otherwise.


4 Easy Personal Finance Tips

Every month we end up spending more and feel the stretch over financial commitments. Often people think about saving more than doing it seriously. This recession period and subsequent lamed growth, has compelled us to give some serious thought to managing personal finance prudently in order to save enough. This article gives some significant input regarding administration of personal finance.

1. The first step is to create a feasible budget that allows you to spend comfortably and meet your basic needs as well as save sufficiently. It should not just be put on paper to forget; instead the budget must be followed stringently. Keep a track of all your payments including electric, phone, fuel and your credit card bills. You can pay through direct debit which can ensure your timely payments and create good credit ratings for you.

2. Good personal finance management requires some compromises and sacrifices on your end. Try to keep a check of your unnecessary food, snacks and alcohol expenditure. Even saving on them just once a month can make a big difference.

3. Your outstanding mortgages, loan repayments and credit card bills must be a priority while planning your savings and investments. It is important to remember that even a few non payments towards your loan installments can lead to severe financial problems or even bankruptcy in worst cases. If you sense that your credits are mounting and it is difficult for you to pay them, it is advised that you immediately review the situation and consult creditors for a solution. You can ask for easy payment solutions or even raise money from other sources to get out of raising debt.

4. Diversify your investments in insurance, shares and other policies that are safe and give good returns. Remember that wise financial planning can help immensely in solving many of the economic problems that you may encounter in your life.