Hiding Money Round Up and Uncommon Money News
| October 5, 2010 | Posted by Roshawn Watson under Uncategorized |
By: Roshawn Watson
Last week, I came across a very interesting post from J. Money of Budgets are Sexy entitled Hide Your Money From Yourself (link below). The premise is 1)to create distance between yourself and access to your money thereby decreasing the likelihood of spending it and 2)to fund this “distant” account automatically, so that it grows effortlessly.
This strategy is simple enough to employ by opening an online savings account, and it has personally served me well. I initially opened online accounts because they provided superior interest rates compared to brick-and-mortar banks. However, after using them for a while, I found that they also protected me from me!
These accounts force you to be disciplined, which is vitally necessary if you are not a natural saver and investor. Here is why. If your household makes the median income of $50,000 per year for 30 years (age 35-65), your household will gross approximately $1.5 million. Given this fact, it is particularly disturbing to work your entire lifetime and have little to nothing to show for it. A reality is that many of the elderly cannot write a $5,000 check. Lack of financial discipline (poor money management skills) is also one of the five primary reasons I believe that causes lottery winners to go broke. While people love quoting the profound advice from George Classen’s book The Richest Man in Babylon, “Pay Yourself First,” I wonder how many actually practice it continuously. The problem with paying yourself last is that for some people, there is little to nothing left unless you make your goals a priority. Additionally, restricting your access to your money also helps you avoid (or at least delay) “dipping into savings.”
In short, if you can use some more discipline with your finances, consider implementing this strategy.
Thought Question: Do You Hide Money From Yourself?
Now, it’s time to do the weekly Uncommon Money News and Yakezie Round Up.
Uncommon Money News and Yakezie Round Up
In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!
To my readers: I am so honored by your support. Together, we are telling thousands of the importance of financial literacy. I absolutely could not do it without you: you are vital! Thank you sincerely.
Personal Finance (Yakezie and other PF bloggers)
The End of Free Markets: A Great Reason to Buy Stocks at Balance Junkie – 2 cents argues that now is a great time to buy stock. She gives her rationale, but do you believe her?
How to Allocate a Second Income at Everyday Tips and Thoughts – Kris ponders what to do with an unexpected second income. The comments are pretty interesting too: you can see the disparity in risk aversion clearly by the answers.
Do We Incur Debt Through Our Childhood? at Squirrelers – Squirrelers discusses whether we incur an ethical and financial debt to our parents. I commented on the cultural dynamic of such a provocative question.
The Curse Of The Accidental Millionaire at Money Reasons – He recalls the tragic story of his friend who was very income affluent but never converted that income into wealth: very sad indeed.
Super Freakonomics at Joe Taxpayer – Joe reviews this insanely popular book.
Hide Your Money From Yourself at Budgets Are Sexy– I hide money from myself with online savings accounts, and so do most of J Money’s readers. If you want to read an example of just how powerful and extreme this strategy can be, this is a good and quick read.
Business
College Kids Who Made Millions
Southwest to Buy Air Tran for $1.4 Billion
Investing and Economy
Is Global Debt a Ticking Bomb
The Great Tax Debate: Ben Stein versus Linda McGibney at Biz of Life – He gives a very interesting proposition to all of the wealthy billionaires supporting increased taxes.
Entertainment Money News
Which Celebs get paid get bucks to tweet
The Social Network Takes #1…Here’s the weekend box office breakdown
Offbeat Money News
Toxic Friends – Non-Reciprocal Takers at Invest It Wisely – Some people will always be takers.
My Guest Posts
- Thanks to Jason White (Frugal Dad) for publishing my article: Radical Thoughts About Our Culture of Debt
- Thanks to Nickel (Five Cent Nickel) for publishing my article: Winning The Lottery Won’t Fix Your Finances
- Carnival of Financial Planning at The Skilled Investor– Why Is Debt Really Decreasing? and Economists Blame ME for the Slow Recovery
- Your Financial Independence Carnival at Ditch The Boss –Is Extreme Frugality For You?
- Yakezie Carnival at Personal Finance By The Book – Why Do We Save Anyway?
- Carnival of Personal Finance at US News and World Report – Will Mortgage Rates Really Drop to 0 percent?
- Festival of Frugality at Before You Invest – When is Paying Down Your Mortgage a Bad Idea?
Round ups that linked to posts from this site
- Kevin at Invest it Wisely–Weekend Round Up – Six Month Anniversary Edition
- Kris at Everyday Tips and Thoughts – Round Up – Time To Do some Reading
- Adrian at 7 Million 7 Years – Millionaires Aren’t Rich
- Mich at Beating The Index – Weekend Edition: China’s Economy Soars
Thanks for the mention.
No question I divorce myself from my investments, especially in down markets where you have to resist the urge to be impulsive.
Thanks for including my site in your roundup.
Like Biz, I turn my back on my investments somewhat. However, when it comes to day-to-day money, I spend what I have to. I am not a spender by nature, so I don't know that hiding money from myself would really make a difference. Maybe I wouldn't grab that chicken quesadilla from taco bell, but that is about it.
My recent post To Annuity or Not to Annuity…
Thanks for including my post. For the record, I didn't believe me! 😉 I do think stocks can rise, but I can't bring myself to actually buy them because I don't believe the economy has fundamentally improved.
My recent post 2010 Financial Plan- Q3 Update
Thanks for including my article in your roundup.
As for the hiding money from ourselves topic is concerned, I think that it's a good idea for those who know that they can't control themselves. It's like keeping junk food out of the house for those who like to snack. If it isn't there, you can't eat it!
Better to have a high level self-discipline and self-control, in my opinion. That said, it's easier said than done for many, so if people know that they aren't quite there yet, then it seems like a good idea to put measures in place to protect yourself from yourself.
My recent post Squirreling Gone Wild 16- The Crafty Waitress
Hello,
You are quite welcome. Yes, I have to divorce myself from my investments too. One thing that also decreased my stress was having a more balanced portfolio.
My recent post Hiding Money Round Up and Uncommon Money News
@2 cents,
I get your stance. It is hard to gain control of the emotional side of investing in this uncertain environment. As you point out, there are some present dysfunctions in our economy that simply cannot be ignored.
Thanks for a great article!
My recent post Hiding Money Round Up and Uncommon Money News
@Squirrelers, Great analogy, and I do that one (keeping junk food out the house) too. Hopefully, this doesn't imply lack of discipline as much as my embracing systems that keep me moving forward effortlessly.
Thanks for comment and an interesting post!
My recent post Hiding Money Round Up and Uncommon Money News
"We have met the enemy, and the enemy is us". Yes automating finances is a great way to become wealth by protecting our hard earned money from ourselves!
That's why I contribute 15% of my money directly to my 401k. While it's not entirely hidden to me, it's not withing arms reach either! This way, I save while not thinking about it… 🙂
Thanks for the mention 🙂
My recent post Saving Money With Google Applications
@Money Reasons,
I think it is interesting that we can be our own biggest problems, so acting like the money isn't there makes perfect sense to me. Since you are banking those pretax/tax-deferred dollars, you are truly Paying Yourself First.
My recent post Hiding Money Round Up and Uncommon Money News
By the way, I really liked your accidental millionaire post and struggled with whether or not to make it the theme of the round up.
My recent post Hiding Money Round Up and Uncommon Money News
1000% do I "hide money" from myself. For some reason that I can't explain my ING accounts are not mine. I have no emotional tie so I keep myself "cash poor" just so those saving accounts can be high.
My recent post Building an Empire Using Mind Mapping
@Evan sounds like a very conservative strategy to me. Treat it like it is not there (or in your case like it is not even yours) for sake of spending. "Hidden money" is money that can't be spent!
My recent post Hiding Money Round Up and Uncommon Money News
@Matthew,
They are absolutely a better deal. The one thing that I realized was that I was slow to the party. I got my online account when they were around 4%. They then went up to 5% before plummeting. I was kind of disheartened. Still, it is a heck of a lot better than the alternative (next to nothing).Thanks for your comment!
My recent post Hiding Money Round Up and Uncommon Money News
I definitely have to hide money from myself. Each paycheck, I have a few automated payments that go into an online savings account (each payment represents a different goal) just to ensure that I don't even consider this money when making financial decisions!
I don't hide money from myself, but I have automatic pension contributions. Other than that… I don't know, I don't have a high need for material consumption since I already have a car, a computer, a TV, etc…. I do pay myself first, though I certainly didn't in the past.
Thanks for mentioning my post and roundup!
My recent post Looking for a Solution to a Problem- but Can’t Find One SolutionAuctionscom is Here to Help
Khaleef,
Systems such as these are very pragmatic and quite efficient. I can definitely understand why you would employ them. Additionally, it is working for you, so I say why not! Do you sometimes have to adjust based on random things that come up (car repair) or is there enough money not automatically siphoned to cover extra expenses. In other words, how much leeway do you give yourself.
BTW, I found deciding this to be my primary challenge with automatically doing this.
My recent post The Problem with Being Budget Minded is Other People
Kevin,
If you and your GF are in control of yourselves, I can completely understand why you would find hiding unnecessary. For some reasons, we have plenty of the materials we need and desire, but can always find a cool "toy" or "doodad" to purchase.
No problem on the mention!!!!
My recent post The Problem with Being Budget Minded is Other People
Right now we keep a $500 (actually about $600 now) cushion in our regular bank account for things like that. If the emergency is more than that, then we will have to tap into our emergency fund.
That's why we are still working on building one – had a few unexpected things come up that depleted the account!
Khaleef,
That's right. I do remember reading about the $500 buffer on your site.
My recent post The Problem with Being Budget Minded is Other People
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