Money, oh money, thy praises I sing...
Posted by Ben Thu, 27 Oct 2005 01:15:00 GMT
With our upcoming home purchase, Amanda and I have started to become a little more conscious of our spending habits the past little while.
During the summer, when I was working full-time, it was quite easy to sock away a tidy sum into the savings account in anticipation of the home purchase. Since I’ve cut my hours back for school, that hasn’t been as easy. We’re not hurting, by any means, but we probably have a few expenses creating money leaks that we could plug up. And with a mortgage looming close on the horizon, its becoming more important to cut back our outgoings.
I’ll readily admit that Amanda has been smarter with her money than I have. Though, maybe a lot of the difference disappears when we factor in our student loans. Still, I like to buy things, and Amanda is more of a saver, though I am moving in the savings direction.
You need a budget
We’ve been using a sort of budget the past few months to help us figure out how to spend our money. Our problem has been that we usually use the budget categories as we look back on a month, so by then its a little late to make any adjustments.
In my wanderings around the web, I stumbled across a budget system that looked good to me. Funny enough, it was made up by a fellow BYU student. It is called: You Need a Budget. (YNAB)
The idea behind it is that you lag one month behind your paychecks, so you know exactly how much money you have to spend in a monthly budget. For example, Amanda and I are both bringing in paychecks this month (October). The money we get from these checks is the money that we will spend in November.
It isn’t always easy to get the the point where you can lag paychecks like this. We are very lucky in that our relative expenses are pretty low right now. We decided that using this system was something we wanted to do, so we’ve cut back on a lot of our frivolous expenses during October. We already had an “extra” paycheck from September, and we’ve supplemented our other needs with some money that we had saved up this summer.
The real beauty of this system is that it prevents the living paycheck to paycheck that so many (including us) have gotten by with. Just this month, our rent was due by the 5th, but the first October paycheck didn’t come until the 14th! So we were already being forced to use September money for October expenses, why not go all the way and lag the whole month?
Smart Saving
In my quest to be a saver instead of a spender, I’ve started to pay more attention to interest rates, savings accounts an other opportunities to sock money away. The YNAB creator mentioned on his website that he keeps his savings money in an ING Direct account. This is a savings account managed via the internet, and linked with your existing checking account, to make getting money in and out easy. The coolest thing about these new online savings accounts is the interest rates they pay. ING is currently paying 3.4% interest! The great thing is that these accounts aren’t like CDs. Your money isn’t locked away for some set time period, they are true FDIC savings accounts.
In checking out ING Direct, I did some google research and found that it is indeed a reputable company, and a lot of people are very happy with it. In my research, I stumbled onto another online savings account that almost made me fall off my chair: Emigrant Direct. boasting a 4.0% interest rate!
Really amazing stuff. For the financially disciplined and creative folks out there, you could get a low interest credit card, maybe with a low introductory rate, charge all of your expenses on the card, and instead of paying off the card every month, sock the money into Emigrant Direct and make a minimum payment. For this to work, the interest rate on the card needs to be lower than 4.0%. If it is,your “beating” the system and making those credit cards work for you. Instead of paying them interest, you get to use the cards to make yourself interest.
We decided to go with Emigrant Direct. While the sign-up procedure is longer than with ING, 4.0% is hard to resist.
Continuing
As a member of the LDS Church, I’ve taken the warnings our leaders have given about financial and other preparedness very seriously. It seems clear to me that we need to get our financial houses in order, and the sooner the better. Our consumer society encourages unnecessary purchases, luxury living, etc. without giving much emphasis to saving, reducing debt, and thriftiness. Our approach needs to be the opposite: save first, and live on the rest.
