Stop Saving Your Money!

[Aleta]

Re: Stop Saving Your Money!

From each paycheck, I allocate money to different categories. For instance, I allocate money monthly to car maintenace, home maint., Xmas spending, gifts, household suppolies, car insurance, and many irregular bills that will become due. I transfer this money from my household spending account to my money market and let it sit there until the bill is due. Sometimes I don't know if you call this saving or not. I call it allocating because it will be spent. Also, to me saving is for the future for shortterm needs as well. Saving for a car, downpayment on a home, vacation, etc.

[The Budget Man]

Re: Stop Saving Your Money!

From each paycheck, I allocate money to different categories. For instance, I allocate money monthly to car maintenace, home maint., Xmas spending, gifts, household suppolies, car insurance, and many irregular bills that will become due. I transfer this money from my household spending account to my money market and let it sit there until the bill is due. Sometimes I don't know if you call this saving or not. I call it allocating because it will be spent. Also, to me saving is for the future for shortterm needs as well. Saving for a car, downpayment on a home, vacation, etc.

I used to try allocatng so much for each bill until I gave up! It was just too much work to recalculate my budget every time something changed.

So I take my hat off to people like you you who does budget that way.

Now I let a budgeting program do all of the hard work for me. I put in bills once and frrom then on the program does all the hard work. It shows me how much I need to put in the bill account each pay and even tells shows me on the calendar what is going to be happening.

In the old days I was always getting surprises, now I spend less than 10 minutes a week on the budget and it's always right.

Enjoy Your Money
The Budget Man

https://www.PersonalityBudgeting.com

The budget that does all the hard work for you

[jmerinka7]

Re: Stop Saving Your Money!

Dear The Budget Man,
Please name your budgeting program. You boght it on web or issue yourself?
Thanks.

[The Budget Man]

Re: Stop Saving Your Money!

Dear The Budget Man,
Please name your budgeting program. You boght it on web or issue yourself?
Thanks.

Hi we spent over $150,000 developing the "Personality Budgeting Program". It's the first ever budgeting program that can be used in different ways to suit different people's personalities and needs.

The program started out 20 plus years ago as what I needed for our budget and has grown and grown till today where it is popular in over 42 different countries.


Enjoy Your Money
The Budget Man

https://www.PersonalityBudgeting.com

Where you get the budget you can live with!

[myself]

Re: Stop Saving Your Money!

Hi we spent over $150,000 developing the "Personality Budgeting Program". It's the first ever budgeting program that can be used in different ways to suit different people's personalities and needs.

The program started out 20 plus years ago as what I needed for our budget and has grown and grown till today where it is popular in over 42 different countries.


Enjoy Your Money
The Budget Man

https://www.PersonalityBudgeting.com

Where you get the budget you can live with!

As with anything, I think that it depends upon one's own level of understanding. Personally I find an Excel spreadsheet easy to use, although I admit I want a different way to budget. My preference is to see financial results of my present actions, for months/years down the road. Presently, my spreadsheet is calculated out for the next 4-5 years, but I'll have to see if the "personalitybudgeting" can work better.
And FWIW, my preference nowadays is to use 0%-2.99% credit card balance transfers, and move it into either an ING direct savings account, or EmigrantDirect savings account (and make sure to use it to pay the minimum payments, and pay the CC in full before the low balance transfer rate expires).

[myself]

Re: Stop Saving Your Money!

OK, a quick glance tells me that the "personalitybudgeting" isn't for me.
Why?
We're not at the point that I believe it would be of use.
This is because my wife and I charge every single thing we can on our reward card, and pay the bill in full when it arrives. Thus, our day to day expenses are literally on the credit card (and we get the 1% or 3% - for gas purchases, cash back when we request it), only to be paid in full. It's the equivalent of using cash, but getting the rewards at the same time.
If someone is having trouble budgeting, it looks like that may be a very good product to try though and for a relatively small fee.

[jIM_Ohio]

Re: Stop Saving Your Money!

The title of this article probably caught you a little by surprise. The first thing to make clear is that the article's title is not a typo. That being said, you are probably wondering why an author dedicated to helping people with their personal finances is writing an article that plainly states not to save money. The answer is quite simple: there is a much better way to be utilizing your money than putting it into your savings account.

Before we get into the heart of this article, let's take a minute to look at money from a different perspective. Most people assume that if they have an account with money in it, then they have "savings." On the surface this may seem logical, but if you take a deeper look into the reality of most people's financial situation, it simply isn't true. What they have is not savings, but an easily accessed pool of money in case of an emergency.

Most people see the two as the same thing. This article will show you that they are not. Savings is a pool of money that you have above and beyond all current debts that you owe. While most people have a pool of money that is easily accessible in the event of an emergency, this money is rarely money above and beyond their current debts (if it is in your case, you can disregard the article title and save to your heart's content). While this concept may seem like trivial semantics, understanding the difference will go a long way in helping you truly save money for your future. Let's look at an example that will help to illustrate the point.

I assume that most of you have a savings account of some type. If you are lucky with the current economic conditions, it is earning a few percentage points in interest each year. Let say, purely for example's sake, that you have $5000 earning 2%. On the surface you would assume that your money is gaining 2% a year. Unfortunately, you also have to take the inflation rate (the increase in cost of the same items year to year) into consideration. In this example, the current inflation rate wipes out the interest you are earning meaning that you are breaking even each year. While breaking even is better than losing money (the situation if you kept your money someplace that isn't earning any interest), we still need to take into account some other issues that most likely apply to you.

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Chances are you have some credit card debt. Let's say, again purely as an example, that you're paying 18% interest on a $5000 outstanding balance on your credit card. While the money in your savings account is earning 2% (which is actually 0% when inflation is factored in), you are at the same time paying out 18% to the credit card company for the same amount. Taking this into account means that your $5000 in "savings" is actually losing 16% a year (or 18% with inflation factored in). While this is definitely not a rosy picture when you thought your were saving money all this time, it gets even worse. You are required to pay taxes on the 2% interest you earn in your savings account while you are paying the credit card interest rate with after tax dollars.

When you look at your savings from this reality, the first thing that should be obvious is that it makes no sense to "save" and thus the title of this article. Don't save money! Instead, take any extra money you have and start paying down your outstanding credit card (or if you don't have credit card debt, any other) debts with it. By taking this approach, you will be getting an 18% guaranteed return (or whatever your current credit card interest rate is) on your money instead of losing 16+%. Better yet, you will save yourself hundreds, if not thousands, of dollars in interest charges and you will move toward the point when you really can save money for your future.

I agree- why earn 5% when other money is costing you 18%... it's simple math.

It comes down to several factors. If you have an "emergency fund" but you do not budget to replenish the emergency fund, you really have a "one time" emergency fund. BIG difference. Last I checked I ran into 5-6 emergencies of varying degrees each year.

Solution- within the budget you need to see what is a FIXED cost (mortgage), what is a RECURRING expense (satellite bill), what is a "variable recurring" expense (electric) and what is a mid term fixed cost (CC bills, car debt, revolving debt)... not to mention other necessities (groceries and gas).

I make my IRA a fixed expense, and try to budget this expense as high as possible (before the wife complains). $625/month for example. 4k comes in month 7, so the other 5 months are the emergency fund. If an emergency comes up in first 7 months, IRA payment is delayed one month. If no emergency comes up, then we pay down mortgage $625 in months 7-12 (also using some of this for xmas gifts).

An emergency fund needs to funded. Every year as part of the budget.

[Aleta]

Re: Stop Saving Your Money!

Something that I do that I'm not sure of that many people think of is that I raise my Emergency Fund by 4% a year. It could be more if some of your particular expenses are increased (house taxes, car insurance, property insurance, etc.).

[jmerinka7]

Dear Jim_ohio,

[QUOTE=jIM_Ohio;105018]
"Solution- within the budget you need to see what is a FIXED cost (mortgage), what is a RECURRING expense (satellite bill), what is a "variable recurring" expense (electric) and what is a mid term fixed cost (CC bills, car debt, revolving debt)... not to mention other necessities (groceries and gas).

I make my IRA a fixed expense, and try to budget this expense as high as possible (before the wife complains). $625/month for example. 4k comes in month 7, so the other 5 months are the emergency fund. If an emergency comes up in first 7 months, IRA payment is delayed one month. If no emergency comes up, then we pay down mortgage $625 in months 7-12 (also using some of this for xmas gifts).

An emergency fund needs to funded. Every year as part of the budget."


I'd like your points. Please explain it with more details. I am very interesting of your theory and would like to follow.
Sincerely,
jmerinka7

[jIM_Ohio]

check my blog.

I figured this out after creating a budget spreadsheet and sorting through it.

Think of all the local bills you pay each month.

Account A

trash
water/swer
phone
cell
cable/satellite
electric

all of these could be paid electronically. If these bills cost $750/month, and you get paid 2X a month, have $375 from each check go into an account with free online banking, and pay these bills from this account.

Account B

Car
Student Loans
Credit Cards
Other short term debt.

If the budget for these is $2000 a month, then open a savings account and set up automatic payments for these bills from this account. Send $1000 from each paycheck into this account.

Keep in mind these bills "go away" over time, so this $1000/month accumulates once this "mid term debt" is paid off.

Account C IRAs and mortgage. I lump these together because these are long term "projects" which go away over a longer period of time. If monthly budget for mortgage is $1500, and you can budget $500/month for IRA, the total budget for this account is $2000/month. Send $1000 from each paycheck to this savings account.

The IRA would max out in the 8th month (August). So in Sept, oct, Nov and Dec, the IRA adds $2000 to this account. I use this to replace emergency fund. If a $500 expense comes halfway thru year, you could stop IRA payment for month if needed.

Account D If groceries, gas, hair and going out is $300/month, send $150 from each paycheck to a 4th account. Withdraw this money as cash on payday. When it's gone, you have to wait until the next payday for this portion of budget.

Your payroll department will give you a direct deposit form.

It will ask you amount/account. Account D is the "primary" account.

Send $750 to account A (give acct #/routing #)
Send $1000 to account B (give acct #, routing #)
send $1000 to account C (give acct #, routing #)
send remainder to primary account (account D acct #, routing #)

If you get a raise, you see it in account D, which is where your disposable/spending cash is.

If your rates for something go up, you'll see accounts A-C running at a deficit.

[tinapbeana]

jim, congrats on finding a system that works for you.

with that said, i just prefer not to have that many accounts that i am regularly accessing. don't know if it's a security preference or laziness, maybe a little bit of both. i have a main checking, secondary checking, local and online savings. yes, the same number of accounts, but it's the frequent access that doesn't work for me.

all pay goes into main checking, and my allowance and grocery money is taken out in cash. cash works for me. roth and savings are taken out of main checking the 3rd of the month and sent to the online account. all bills are paid via the main checking account.

any extra from my allowance is put into 2ndary checking b/c i use that money for extras and/or side businesses, so there's no co-mingling of funds. any money left from main checking at the end of the month goes into the local savings account as a slush fund (aka EF).

[jIM_Ohio]

for us, I send my paycheck to two accounts and the wife to three accounts. Our "old" bank charges for electronic bill pay, and we have about 500 checks left... so we are keeping that checking account for cash purposes. The corresponding savings account has some loans which are about the paid off.

It is a system, and I like many small piles as opposed to 1 or 2 big ones when it comes to money.

[tinapbeana]

It is a system, and I like many small piles as opposed to 1 or 2 big ones when it comes to money.

heheheh! maybe that's my preference: a few bigger piles to make me feel like i'm getting ahead

whichever way, i agree with you jim: find a system that works for you.

[Stuartthomas]

Great Post, I really appreciate your issues in this perspective...Lot’s of resources in this thread; I’ve got lots of reading and research ahead of me but I tip my hat to you guys!!

[av2000]

Agree. Saving money on savings account is a dead investment. Taking the risk and putting your money into something that is profitable is a great venture.