Fiscal Responsibility

So I was talking to one of my friends today and we somehow got around to spending habits, saving habits, and all around fiscal responsibility. I shared with her the biggest fiscal lesson I learned: THERE IS A RIGHT AND WRONG WAY TO SAVE.

I was making stupid money at my last job. STUPID money. I was putting money into my savings account at a rate of $200 a week (automatically drafted from my checking) with additional funds on those weeks I really didnt have anything to pay, but you know what? When my contract ended in July, I aint have a lick of savings. How is that, you ask? Well, I'll tell you how.

I was pretty much tallying up what I had to pay and then putting whatever was left into my savings account (minus the maybe $200 I left in my checking for incidentals). Most of the time, I didnt miss that $200/week, but every so often I would forget about a bill or something would come up that I didnt have the money in my checking account to cover. I would wind up taking the money out of my savings account, then never putting it back. While I had those weeks I had very little to pay, I had other weeks where I needed nearly my whole check for bills, and I'd be dipping into my savings for "living money" for that week. God forbid another unexpected expense arose in that same week, cause I'd put a huge dent in my savings account.

The lesson: even if you think you have it, save in small, consistent amounts every pay cycle. I woulda been fine if I had put it away $50 at a time, week to week. I wasnt gonna miss $50 in any given week. Then after three weeks of pay, if there was still a chunk of it I havent needed in all that time, THEN I coulda moved it over into my savings account, confident that I wouldnt need to go back for it. The object is to have the bulk of your money in your checking account, so you have little or no need to even look at your savings account. Small sums that you set aside will accumulate quickly and you wont even be thinking about it cause you wont need it.

Another thing, CARRY CASH. The reason most people's bank accounts end up overdrawn is because they arent keeping proper track of whats coming out. Most of us swipe our debit cards without even thinking about it, and because its often for small amounts ($2 here, $6 there) we dont think about its impact on our balances. But those small transactions add up. And lets not forget the automatic drafts some of us have. Netflix has fucked me up on more than one occasion, leaving me less money available than I thought I had. Because it comes out of my account automatically, I have a tendency to forget about it until I think I have $50 to cover my $37 wifi bill and find I only have $25 in there. "Dammit, man!" LOL....

When you get paid, pay your bills and take out a lump sum of money for the week. That's an easy way to create a budget and a good way to keep track of how much you're spending. When you get close to depleting those funds, you will be forced to look at your account again before you take any more out, and you wont take out more than you should. It also helps you determine how much you actually spend in a normal week, so when you go over that, you will know you need to rein it in. Try that and see if you dont find yourself in better financial position.

Oh, one more thing: Your checks come with a transaction ledger for a reason. USE IT. Not just every time you write a check, but also anytime you pay a bill or take money out of your account. Its a pain in the ass at first but once you form a habit, it just becomes natural. Taking those lump sums out will reduce how much you have to track though (as opposed to keeping up with little $20 and $30 withdrawals here and there). And keep receipts for anything other than food for at least 3 months. You never know.

I learned these lessons the hard way. Hopefully you wont have to.