I Can't Handle Money. Help!

I have one trick that seems to work for me - I set up a direct deposit to transfer, every month, a certain sum of cash into a savings account that I then don’t touch.

Psychologically, I feel like the rest is my “real salary”, the amount I have to actually spend. If I spend every penny of it, no big deal. OTOH, touching my savings is a line I don’t cross lightly.

Meanwhile, a pile of cash is built up, which I split into retirement savings on the one hand and a “sinking fund” for major future expenses or emergenices on the other. That way, if I need to buy a new car or an emergency crops up, I can do it without borrowing.

This is perhaps a bit backwards from budgeting, which is the process of actually keeping track of what you spend and adjusting accordingly. I don’t have the patience for that. All I do is say I have X dollars to spend every month, and once it is spent I can’t spend any more.

I go even further. I have two deposits made, one is my 401K to which I send every dollar necessary to obtain the maximum contribution from my employer. I then establish a second account to which I send the necessary funds, monthly, so that I can make the maximum contribution to a Roth IRA. I NEVER, NEVER, NEVER touch either. The remainder I budget with the hope of keeping something aside for car repairs, unexpected expenses, vacation, large appliance purchase etc.

I cannot recommend too highly Andrew Tobias’ “The Only Investment Guide You Will Ever Need.” You can buy it for $15 on Amazon including shipping. There is a 2011 edition, which is best, but any edition would be helpful. Do not buy Tobias’ “The Only Other Investment Guide You Will Ever Need.” Everything in that is in the new edition of the recommended book. The recommended book has sold over 1,000,000 copies over 30 years or so and is written in a humorous and easy going style. Most important though, it is not enough to ask for help, when help is given you must follow through. Read this book and follow its advice. It could make you rich or at least keep you out of bankruptcy.

As others have said, direct deposit is a great asset to budgeting. The reason I didn’t mention it is because it works so well that I don’t even think of it as part of my budget. Before my paycheck ever reaches me, money has automatically gone to my 401k, my investment account, and my savings account. What is left is what I consider to be my actual paycheck. Occasionally, I will screw up a financial calculation because I base the numbers on my paycheck, rather than my actual salary – for instance I always think other people are making much more than I do, because I only count the take home.

I always tell people that savings/retirement is like a roach motel: money goes in, but it doesn’t come out.

:dubious:

That sounds idealistic, at best, and frankly impossible for most low or middle income people. I just did a quick tally, and about 2/3 of my rather-modest income goes to necessities (rent, car expenses, utilities, groceries, insurance). Of that remaining “discretionary” income, 1/6 is used for entertainment, eating out, and buying unnecessary gadgets. I usually use the final 1/6 to pay extra on my debts, or deal with various unexpected “surprises”.

I’m going to file this piece of advice next to the usual admonishments of “everyone needs an emergency fund that can last 12 months”. That’d be nice, but it’s far out of reach for most people.

I myself never paid much attention to either percentages (as in ‘you should be spending X percent on Y’) or on my income level. I’ve been poor and I’ve been reasonably well-off, and my strategy has always been the same - save something each month. Obviously more is better, but to my simple and not-financially-acute mind, the really important thing was always to have more at the end of the month and not less.

Reason is that expenses seem to grow to absorb extra income, so that the well-off people I know bitch and moan about debt just as much as the poorer people I know (some are the same people at different times!). While it is obviously true that poorer folks must spend more on necessities, and unexpected expenses can more easily wipe them out financially, it is a sad fact that even when that pressure is off because of increased income it doesn’t really change much for a lot of folks.

Percentages are silly. I never would have bought my first house based on the percentage system. Adding is all you need. Add up all your costs. If they exceed your income you’re in trouble. If they’re the same, eventually you’ll be in trouble. If your income exceeds costs you have money to blow, or perhaps wisely invest for the future. Percentages are irrelevant.

Is the OP even reading all of this good advice?

Am I married to you? My husband is terrible with money. After paying off multiple credit card debts, he agreed that I should be in charge of all the money.

He and I both get a monthly ‘allowance’ and the rest is mine to manage.

Doubtful. Let’s send him a late notice. See if he responds.

The problem with all this good advice is that it is trying to impart common sense on someone who, by there own admission, engages in what I would call “flakey” behavior. Flakey behavior is basically one or more of several forms of self-destructive or irritating behavior patterns that defy logic and reason:

  • Procrastination
  • Failure to follow through on promises
  • Blowing stuff off
  • Ignoring deadlines
  • Buying stuff you can’t afford

…so on and so forth. The behavior is usually followed by some sort of statement like “I meant to…”, “I’m not good at…”, “I forgot about…”, or “I don’t care about…” that is meant to absolve the individual of responsibility.

I assume the OP is not an imbecile, so they probably are familiar with at least the concepts of “living within your means”, “creating a budget”, “direct deposit”, “paying bills” or “overdrawing an account”.

You don’t need to be Warren Buffet to manage your internal finances.

That’s funny. I have a math degree and my wife is an artsy and I let her do all the money stuff. It started when she realized that I considered my checkbook balanced if it was withing $5 of what the bank said it was, while she insisted on chasing down every penny. It’s not that I can’t do it, it’s that I can’t be bothered. So for 48 years she has been doing it.

But my attitude towards money is “Don’t spend it unless I really really want whatever it is I am buying.” We have never had a budget, but that principle has kept us solvent and a bit more.

You would be surprised at the number of people who are not imbeciles, but who nevertheless are not familiar with those concepts. The fact is that in the U.S. they are not officially taught to most people, so unless you have parents who taught them, went to one of the few schools that provide personal finance education, or are motivated enough to seek out the information on your own, you may not understand the most basic finance concepts.

That works great if your “really, really wants” are limited. If I bought all of the clothing, jewelry and entertainment that I “really, really want” I would be broke in a matter of months, which is why I had to put myself on a budget.

Better yet, borrow it from the library and save the $15. :slight_smile:

Yes, I am. I’m soaking it all in. ATM the jar idea holds a lot of promise…

I feel your pain, HeyHomie. I grew up in a financially ignorant family, and it’s been a struggle to learn to live sanely. I’ve tried making a budget, but always realize that I don’t make enough to live on. Somehow I do okay without the budget.

What works is tricking myself. I’m allowed very little cash, because I will spend it if I have it. I have to make it easy to pay bills (online), but difficult to spend on non-essentials.

My paycheck is directly deposited, with automatic deductions into a couple of savings accounts and my retirement fund. One of the savings accounts is inaccessible unless I make a trip to the bank, and I purposely misplace the account number to make it even harder.

When I use a debit or credit card, I write the amount in my checkbook and subtract it from my balance. When the credit card bill comes, the money has already been accounted for. So I can pay the full balance, which means I can use a credit card with a rewards program. (The best money tip I ever got was “don’t turn down free money”.)

This is going to make a lot of people squirm, but when I enter an expense in my checkbook, I subtract the next highest dollar amount from my balance. This builds up a “fudge factor” in my account. Although I verify my expenses against my bank statement, I do not attempt to reconcile the balance. It’s unlikely the bank has made a mistake.

My system is so confusing that I never really know how much I have in the bank, only that I have a growing positive balance. If there were a dire emergency, I could figure it out.

Some of us are financial imbeciles and will probably never manage our money with an accountant’s precision. We can, however, take a few stumbling baby steps to improve the situation.

I’m not sure what needs to be “taught”. You make a certain amount of money. You spend less than that. It’s basic arithmatic.

The problem is people have a sense of entitlement and no willpower or discipline.

A lot of it is lack of setting up the systems. Budgeting and dieting have a lot in common - and in both cases, what works for one person won’t work for another. For me, in dieting its a willpower thing, but I have more willpower in the store than at home - so if I don’t bring it in, it doesn’t get eaten. The budgeting equivalent of this is only leaving the house with the cash you need and a phone to call a friend if your car breaks down. Some of the tricks of budgeting (multiple accounts, using cash) work well for a lot of people, and are some lightbulb for other people who never have thought, “I can leave my ATM card at home.”

Dieting is “just biology and physics” - but its a lot of psychology as well. So is living to a budget - its “just basic arithmetic” but you also have to get over the psychology involved. With both, there are some tricks some people think are easier.

I think it has more to do with having a realistic sense of what you can and cannot afford. One thing that helps me is using Quicken. I update and categorize my transactions about once a month. I try to make as many purchases as possible using my credit card (which I pay off each month) so I have a record, as opposed to just throwing cash away.

One really important thing here that I think a lot of people, especially young people, miss: don’t look to your peer group to see what you can afford. It’s really easy to get to college and see that other people can afford to drink beer every weekend or to eat fast food every day or whatever, and to assume that means you can, too. Our idea of what basic lifestyle we are entitled to often comes from what we see. But you never see the whole picture of other people’s finances: sometimes people have income sources you don’t know about, sometimes you don’t see that those people are not spending money on things you do spend money on, sometimes people are drowning in debt.

In watching shows about personal finance, one of the most common things I see is the “I deserve” attitude. There are a lot of people, many of them young, but not all of them, who think that they “should” have certain things – like a high-end car, a fancy handbag, or an exotic vacation. They spend money based on a set of things they want, rather than the amount of money they have on hand. Spending more money than you make is ridiculously easy these days – credit cards, payday loans, overdrafts, 401k loans, digging into savings, and good old-fashioned mooching are all ways you can get in over your head. A big factor in our current economic problems was the combination of easy mortgage credit and home equity loans. Many people don’t make the connection that just because these income sources are available, that doesn’t mean that you have that money to spend. The woman I’m currently giving financial advice explained to me how she spends more than her takehome – she has overdraft protection, so it just comes out of her savings. When I asked her about savings, she told me that she had a standard amount automatically saved from each paycheck. She didn’t get that if she then spent this amount through overdraft protection, it wasn’t being saved. These types of stories are incredibly common.