| Interview: Jean Chatzky |
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Balance
spending and income
 How can people control their spending enough to put money away for an emergency fund?
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| Make financial
goals tangible |
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 Well,
the first thing to do is to put away the money. You
stash it away out of your path. I mean, look at how
people manage money these days. Most people don't
balance their checkbooks. Instead, they go to the
ATM and they take a look at the balance on the slip
and they know that's how much they've got to work
with. But what you're essentially doing is just minimizing
the balance on the slip a little bit. You're not going
to see as big a number and so you won't feel like
you have as much wiggle room. Then, when you walk
into a Banana Republic, you probably won't buy that
T-shirt. There are some great budgeting tools on the
Internet. I like the ones at practicalmoneyskills.com,
which is actually Visa's nonbranded site.
You can pay your bills as they come
in rather than all at once. This is a trick that came
out of the research that I did for my book, which
is called "The Ten Commandments of Financial
Happiness." Essentially what it showed was that
people who pay their bills as they come in, rather
than sort of saving them up in a stack to pay once
or twice a month, have more in savings. This study
also confirmed that those people are less in debt
and much happier. I believe the reason behind this
is that paying your bills as they come in allows you
to do a little bit of mental tap dancing through the
month. For example, if you get a bill for heating
or air conditioning that is higher than you expected
it would be, you're going to automatically compensate
in the same way that you would when you saw that smaller
balance on the statement from the ATM. This means
spending less on other things, and at the end of the
month you'll find that you have fewer financial problems.
“Pay your bills as they come in.”
The other thing that I think really
helps is a little bit of basic goal-setting. When
someone says, "Oh, I want an emergency cushion;
oh, I want a retirement fund; oh, I want to start
saving for college," those are very intangible
goals. They're intangible until you start putting
some numbers with them. So figure out what it means
to have that three months of basic living expenses
and then break that goal down into workable steps.
OK, you know if I have decided that I need $5,000,
well, if I put aside $100 a week for a whole year,
I'm going to have it. Done. $100 a week -- that's
a number that we can understand. That's a number we
can wrap our brains around as opposed to, "I
need to save $5,000" or the even more vague,
"I need an emergency fund."
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