Knowing What to Waste

My most useful tool to help me understand how much money I truly have to waste is immediately distributing incoming money to its respective accounts soon as it comes in.

For example, yesterday my bi-weekly paycheck was directly deposited into my general account (The point where all money goes in and out of my hands). The total came to $246. The FIRST thing I did was login to my Bank of America account and transfer the money in the following amounts:

  • $49 to Bills Account (20%)
  • $49 to Spending Account (20%)
  • $74 to Permanent Savings (30%)
  • $74 to Investment Account (30%)
  • Total = $246

So the money has been distributed into the different accounts and it can no longer tempt me to spend it by sitting in one giant account. Only 20% of it goes into my spending account which can be spent on any frivilous expenditure I choose. If I don’t have enough money in the spending account, I don’t buy it.

Yesterday was one of those awsomely hectic days where you run from place to place (I love those), but the highlight of the day was seeing Carl Stuart speak at a University Investors Association meeting. He has been hosting a personal finance radio show based in Austin for over 10 years. The man KNOWS HIS STUFF. I’ve never seen someone so adept at quckly answering a barrage of quick, tough personal finance questions. He also manages over $250,000,000 of other people’s money.

Some of the interesting points he brought up:

  • We experience financial losses twice as hard as we experience gains.
  • Only two investments have consistently outpaced inflation: Stock and real estate.
  • Doing financial research on the interenet is like taking a drink from a fire hydrant.
  • The two best teachers are Trial and Error

It turns out he too was a political science major who just wanted to get out of college and jump into the real world. It seems he’s done pretty well for himself so far!