Clone Awareness Month 2014 - Week 2 - The B Word

Clone Awareness Month 2014

As we mentioned last week, the goal of this month is to figure out what your clone has been up to over the past year.  There is no better way to see what your money has been up to than to see where the money is going day to day, month to month.

As you guessed this week we are going to discuss budgeting.  What B Word did you think we were going to discuss?

Budgeting is not a very popular or exciting topic.  That is because it can take so long to make a budget and to track your progress and there is very little immediate impact from creating it or monitoring it.  Also, because of basic human psychology the upside of staying on your budget isn't as high as the downside of missing your budget is low.

If you currently have a budget and are successfully implementing it, you get the week off.

If you don't currently have a budget you will be happy to read that the goal for you is not to create a detailed budget.  The goal for this week is to create a savings budget.  So, instead of planning how much you are going to spend in each and every category imaginable, you should instead plan how much you are going to save.  Just complete the three steps below.

1. Determine an amount that you can realistically siphon off of your paycheck.  You want this amount to be somewhat of a stretch, but you don't want to set yourself up for failure.

2. Automate the savings process.

• Clone Level 1 or 4 (Emergency Savings):  See if your employer will direct deposit your paycheck split across two accounts; your main account and your emergency fund account.  If not, set up an automatic transfer from you main account to your emergency fund account scheduled to take place when your paycheck is deposited.

• Clone Level 2, 5 or 7 (Retirement Savings): If you are using a retirement account through work these contributions should already be automated.  If you are using an IRA try automating the amount you want to save each month.

• Clone Level 3 (Credit Card Debt): Instead of just paying extra with your regularly scheduled payment try send additional payments once your paycheck comes in.  Minimize the time that money is in your account.  You have to think of this money as not your money, but the credit card companies money.  The less time it is in your account the less time you get to look at an account balance that is higher than it actually is.

• Clone Level 6 (College Savings): Similar to emergency savings, your goal should be to automate this as much as possible.  Try to set up a transfer from you main (non-emergency) savings account to your child's savings account.

3. Set a reminder for a month or two from now to try to up your savings amount*.

*If you are finding yourself hitting a plateau then you might need to start a standard spending budget to find out where you could squeeze some more money out.