Your Two Bits

I read an interesting post about why Dave Ramsey Followers are Successful that basically states “the real reason that his followers have such great success is because they are ripe for change.” The author has hit the nail on the head. Dave Ramsey helps many people who have it rock bottom financially.

I call this the “Prodigal Principle.” We generally don’t feel the need to change unless our current course is causing significant pain. But like an alcoholic or the prodigal son, once we hit a real low, we start looking for help and a solution. I have encountered the same pattern. People who are at their wit’s end or are desperate for some type of solution to their financial woes are generally more open to discussing options and are much more inclined to take action.

I hope more of us can muster enough desire to change and improve our financial management before getting burned in the refiner’s fire. Listening to people’s stories on something like Dave Ramsey or Clark Howard’s radio shows can be quite motivating. It’s good to learn from our mistakes, but even better to learn from other people’s mistakes and save ourselves the trouble of the prodigal’s long walk home.

That’s my take. Feel free to share your two bits.

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I read this article, “4 Dumb Financial Moves in the Recession.” The four points are legitimate and seem to be pretty common. I just want to focus on one item in the first point, regarding emergency reserves.

The author, Marilyn Kennedy Melia, recommends setting up automatic withdrawal to move money out of your checking account into some type of liquid savings. I think this is a good idea; however, I would also recommend taking another step before this. We have our paycheck automatically deposited into our savings account. Then at the beginning of the month, we move only the amount we have budgeted to spend that month over into our checking account.

The benefit to this method is that it helps keep you within your budget and from spending all of your paycheck. If you want to use additional money, you have to move that money over to checking. This reduces (should eliminate) impulse buys. At a minimum it requires you to acknowledge that you are actually spending your money, not just swiping a debit card. It’s sort of like a macro envelope system.

Of course doing this assumes that you have a budget for the month (I’ve heard budgets can be useful). If you don’t have a budget set up or are not following your budget as strictly as you should, trying this step can help motivate you to create better budgets or follow your budgets better.

I’ve had a few people I’ve shared this with comment on how helpful it is. If you’re not currently doing it, I highly recommend you try it out.

That’s my two bits. What are your two bits? Do you do something similar that works well?

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I was thinking about stuff and decided to write my recession haiku.

Failed economy
Doom and gloom on all-day news
Six months’ income saved

That sums up most of my thoughts.

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