Happy Friday everybody! Are you in TGIF mode or do you see Friday as just another day at the office/golf course? My favourite Fridays are found in the fall, when they are referred to as “the day before” the football game in which I’m coaching that week. Here is the first in a series of Friday posts that will hopefully leave you curious and hungry to learn and explore one of my increasingly preferred subjects – personal finance!
A number of people that I read up on regularly are religious users of a free mobile app/website known as Mint.com. Mint is an awesome financial tracking tool which gathers information from your online back account and provides real-time spending updates, which then allows you to track and manage how your various monthly budgets are holding up. All budgets can be easily tweaked and adjusted, and can be setup to cover expenditures that arise every 2-, 3-, 6-months, etc. (hint: use the desktop version of the program to do this!). The system is very secure and cannot manipulate your money like a mobile bank app can. It is simply a passive tracking vehicle which helps to keep people on pace throughout their daily, weekly, and monthly fiscal lives.
Starting last month, I began making semi-monthly automatic transfers of a preset dollar amount from my chequing account to my TFSA investment account. This action has two very powerful psychological effects on me.
Many people view saving for anything as a result of plugging their monthly or annual surpluses of cash into whatever venture they are pursuing; in effect, they are paying themselves last. Whatever is available to them after all their regular spending wraps up is what is left for their future financial plans (be it retirement, saving for a down payment on a house, paying for a vacation, etc.). Automatic withdrawals/transfers allow a person to pay themselves first, which is a widely-discussed theme in personal finance (this blog won’t reinvent the wheel on this matter!). Simply put, by diverting funds as you earn them, you gain the desired and structured boost in savings without really feeling any serious effects on your discretionary income. Try it out!
What Mint allows me to do is take this process one step further – I’ve actually created a custom budget for these types of transfers. This tracks the withdrawals as they happen and puts them in context with the rest of my monthly spending – in essence, I’m budgeting my monthly savings, just as I budget every other aspect of my life. Doing this holds me really accountable to my long-term plan of early financial independence, hence the title of the post. It makes my long-term goals part of my short-term life habits.
Got questions? Fire away in the comments section below! Please keep in mind that I am not a trained financial adviser, just a very curious, self-educated money man. Until next time, happy budgeting!