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February 21, 2011

9

Building a Foundation

In my last post, I let readers in on the secret to financial stability.

Spend Less Than You Make.

In this post, let’s discuss how to make that happen, shall we?

Like I said before, when I learned about this I was working a temp job.  My weekly paycheck was just a smidge under $225.  Like everyone else, I had rent, bills, and a stomach.  I was barely making it as it was, how the heck was I going to save any money?  Then I realized that the only thing holding me back was my attitude.  I couldn’t save any money because I had convinced myself that I didn’t have any money to save.  In my head, I was standing on the edge of a cliff and as they say, that first step looked like a doozy.  If you’ve ever seen “Indiana Jones and the Last Crusade”, think of it as the scene where Indy has to cross a wide chasm that for all he knew was bottomless.  But he had to save his dad, so he took that first step and the chasm turned out to be a trick of the eye.  The mindset that made it so hard to move forward was just a trick of the mind.  Maybe it was the last vestiges of the way I was raised to regard money (a topic all on it’s own.)  Once I took the first step, I realized I was just on the edge of a curb.  And not a particularly high one, either.  Sure, I lost a couple of inches in height, but now I knew I could make it to the other side with little trouble.

That’s a long-winded way of saying that no matter what your brain tells you about saving money, it’s not nearly as scary as it seems.  You won’t lose your home, your kids won’t starve, your marriage won’t fall apart.  The only thing that will happen is you have some extra money stashed away.  Stash enough of it and maybe you can even start using it to make more money (again, a topic for another time.)

So how do you start?  Got a bank account?  Yes?  Then you’re already on your way.  If not, now you know where to start.  Get one.  Preferably one that doesn’t charge fees.  I prefer Credit Unions, myself.  Less fees and better service.

I’m going to assume that your employer has some kind of direct deposit available and that if you’ve got a bank account you’re already enrolled.  If not, then either get enrolled or commit to going to the bank and depositing your check on payday.

Okay, now go to your bank and open up a second savings account.  DO NOT get a debit card for it.  The harder it is for you to withdraw money, the better.  Ideally, you should have to actually go stand in line at the bank to get the money back out.

While you’re there, set up an automatic transfer.  Every payday, transfer out some money from your primary account into the new account.  How much?  Start with $25.  It worked for me.  If you’re feeling adventurous, try for more.  The more you save, the better you’ll feel over time.  And if you find you need to throttle back, it’s easier to save a few bucks less than it is to convince a credit card company to reduce your payment by a few bucks.

Now, leave it alone.  Seriously, forget it exists.  Don’t spend it, don’t look at it, don’t even think about it.  As far as you’re concerned, that money is gone.

Now continue with your life as usual.

That’s it.  Now you know the secret to personal finance.  What you do with it is up to you.

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