As featured in The Wall Street Journal, Money Magazine, and more!

Recent Changes in My Personal Finance Plan

This article was written by in Saving. 15 comments.

It’s easy to fall into financial habits. Even people who consider themselves inflexible can grow accustomed to a financial change after time. That’s the beauty of automation — an automatic 10 percent transfer to a high-yield savings account every time you receive a paycheck eventually becomes painless.

Habits aren’t always perfect; just as you adjust to your surroundings, it’s easy to forget the situation that inspired the habit, or even worse, that the automated transfer is even there. I suppose it’s easier for things to get lost when you have 60 or more financial accounts like me rather than fewer than ten like most normal people. (I have so many because I continually open new accounts of various types to review for Consumerism Commentary; without this website, I wouldn’t be such a collector.)

I’m making a few changes to my habits.

First, I have been using SmartyPig as a goal-oriented savings mechanism. Every other week, coordinated with my paycheck, $170 has been automatically withdrawn from my ING Direct checking account and deposited into my SmartyPig account. My plan when initiating the automatic transfer was to set aside money for a new digital camera, but since then I’ve decided I’m fine with my current equipment, which admittedly has expanded otherwise since initiating the savings goal, and I probably won’t buy a new camera for another year.

Now that the goal is complete, SmartyPig has stopped the automatic transfers.

I’m in the process of changing my method of dealing with charitable contributions. In the past, I’ve given to charity towards the end of the year. Last year, I matched Consumerism Commentary readers’ charitable donations for Thanksgiving in addition to giving independently to a few of my favorite causes, and I might do the same this year. I’m stepping up my charitable involvement by adding an automatic monthly contribution to my charitable gift fund which I will then use to grant donations to organizations as needed.

The disadvantage of using a charitable gift fund is my employer will not match funds. To have a bigger effect on an organization, as long as I am employed, I usually give directly the charity and submit the paperwork for my employer to match.

One of the biggest factors for me in growing wealth for retirement is the SEP IRA. Self-employed individuals can enjoy a high maximum on tax-deferred growth, and anyone can be self-employed to an extent. In the past, I’ve waited until tax time to fund each year’s SEP IRA, but now I’ll be making an automatic contribution of $1,750 on a monthly basis.

Still for me to consider is whether I should begin investing in a fund for a theoretical future child’s education. The tax benefits are helpful, but there’s no guarantee I’ll ever have children. The penalty for not using funds for educational purposes is steep, so although I may be missing out on some gains, I think I’d rather wait until I know children are in my future.

Updated April 30, 2011 and originally published October 26, 2010.

Email Email Print Print
About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 15 comments… read them below or add one }

avatar 1 Anonymous

Interesting update.

Definitely a good to wait for kids to arrive before starting an educational fund.


Reply to this comment

avatar 2 Anonymous

As I’ve mentioned in previous post I’m a big fan of the “Run your House like a Business” idea when it comes to finances (The Family CFO by Mary Allvine & Christine Larson). What you’re doing is essentially a big part of the “Annual Retreat” recommended in the book. Rethinking cash flow, making adjustments to existing goals and setting new ones is a great way to manage and fortunately for you, should involve a lot of those figurative pats on the back.

Reply to this comment

avatar 3 The Latter-day Saver

You could purchase Series EE or Series I U.S. Savings Bonds in anticipation for any future children. They offer tax benefits when the proceeds are used for education expenses and they are not taxable at the state level. The only “penalty” for not using them for educational purposes would be regular income tax.

Reply to this comment

avatar 4 eric

Beat me to it….I think I Bonds maybe a good choice for you. Look into it.

Reply to this comment

avatar 5 Luke Landes

Thanks LDS and Eric. I seem to conveniently forget about U.S. bonds all the time. I will look into that.

Reply to this comment

avatar 6 Anonymous

I’m a bigger fan of IBonds over EE bonds right now.

Reply to this comment

avatar 7 The Latter-day Saver

Me too. Especially with the recent 5yr TIPS auction resulting in a negaitve yeild; the market is expecting inflation within 5 years.

avatar 8 Anonymous

Another college saving option that is much more flexible than some kind of 529 plan is to put money into a Roth IRA. You can withdraw the principle tax-and-penalty free, and it isn’t treated as an asset if your kid is applying for financial aid.

Reply to this comment

avatar 9 tbork84

That’s the big problem with the 529 plans. They can prevent you from qualifying for financial aid since they count as assets for college, which makes a lot of sense when you think about it.

Reply to this comment

avatar 10 Anonymous

Good tips about creating the right kind of automated systems to help enforce savings and investing discipline. These are also great tips for people with children to pass on so we can help the country grow our savings and investment rate and wage war on the consumer mindset culture.

Reply to this comment

avatar 11 20andengaged

These are definitely great ideas. I’ve been going back and forth with myself on whether or not to start a SmartyPig account, especially since I have 2 savings accounts already. Do you think it’s a good idea, especially with a particular goal in mind?

Reply to this comment

avatar 12 KNS Financial

I think you’ve help convince me to finally start up a Smarty Pig account. The idea of having subaccounts tied to visual goals is quite impressive.

Reply to this comment

avatar 13 tigernicole86

I’m trying to get 2011 off to a good financial start. Not a huge amount of luck with it but I signed up for smartypig and got my boyfriend to finally start a savings account. It’s sort of exciting because he had one of those huge crayon banks filled with coins(he couldn’t lift it because it was so full and the plastic actually bulged),but we got it all changed over and he was excited that he actually had an emergency fund that was gaining some interest. :)

Reply to this comment

avatar 14 Cruxman

Wow, this will help! My wife and I have been talking about saving for retirement and saving for collage for the kids (if they want to go). Thanks for the ideas.

Reply to this comment

avatar 15 lynn

You’re wise not to invest in a future you don’t know will exist. Good advice – not chasing the dollar.

Reply to this comment

Leave a Comment

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.