He budgets in his head

Something that comes up a lot is this idea that you can budget in your head.

The “budgeter” says they know about how much they have in the bank and they are pretty sure they know how much all their bills are. They use this to “budget” their money – which really means they assume they have enough in the bank to cover whatever they’re doing.

There is no plan, no goal, only assump­tions.

If this offends you, I’m sorry, but if your budget is in your head then you aren’t budgeting. Instead, you are fooling yourself into thinking you know how to handle money when you really don’t or don’t care to.

I’ve been there. I’ve lived that life and been that fool. Those “budgets” aren’t helping you do anything except lie to yourself.

Why It Doesn’t Work

Budgeting in your head is doomed from the start. There are several reasons for this; I’ll highlight a few:

• The total is unknown. When budgeting in your head, you don’t know how much you have when the month begins or how much you’ve made. Even if you’re paid on salary you aren’t going to remember the exact dollar amount added to your account. This starts you out at a disad­van­tage when trying to figure out how much you should have.
• The cate­gories are jumbled. This kind of budgeting jumbles all the cate­gories. Instead of answering the question, “how much did I spend eating out” your budget asks the question, “did I eat out too often”. Do you see the differ­ence? One has a number behind it, the other a feeling. There are areas in this budget you can’t account for without keeping a record of what you spend.
• Bills are unknown. If you don’t have them written out, you will forget how much your bills are. Sure, you have a pretty good idea of how much each bill is, but what about gas, food, and utilities? These bills change every month and if you don’t plan your spending you won’t know how much you really have in the bank once they’ve been paid.
• Money happens to you. The worst thing about budgeting in your head is that money happens to you every month, instead of a real budget where you happen to your money. What’s most insidious about this is it makes you feel like you’re in control when you’ve really lost all control of your money and spending habits.

What To Do

What should you do if you’re budget is stuck in your head? How to get over ignoring your respon­si­bil­i­ties with money? I’ll tell you on Thursday.

Until then, I have a question for you:

How do you budget?

I wanted you to hear more stories than my own. So, as part of the My Money Story series I am asking you to submit your story to me as a guest post. All of you have a money story. This is Tim’s story. Tim is a friend of mine and the person who intro­duced me to Dave Ramsey.

First of all, I would like to thank Alex for letting me make a guest post on his Website and allowing me to share my money story and thoughts on money and how to use it.

What is Money? Continue Reading…

This week’s highlights:

The 53% — A somewhat snarky response to Occupy Wallstreet

Four Char­ac­ter­is­tics of a Good Protest — Speaking of Occupy Wall­street, here is another inter­esting response to the protests.

Gone in 60 nanosec­onds — Is every­thing we know about Physics wrong? If some new research is true, then yes.

Helping the Poor — Matt continues his posts on Public Policy. Mandatory reading for all.

Why Siri Just Might Work — Apple is planning to release Siri, a program that responds to voice commands like a person would. This is huge news, assuming it works as advertised.

What Everyone is Too Polite To Say About Steve Jobs — With all the Jobs articles appearing after his death, this one was espe­cially inter­esting. You probably knew some of this stuff, but certainly not all of it. The question this leaves me: is Steve Jobs someone we should want to emulate?

CC: taxbrackets.org

I got a letter from American Express (Amex) a few weeks ago.

Usually I just shred those letters, but since my Financial Peace Univer­sity class is collecting credit card offers, I decided to open it up.

Turns out, American Express wasn’t selling me a credit card; they’re selling a savings account.

Saving With a Credit Card Company

I remember when I saw the first Capital One banks going up. I had one of their cards, but even so I thought it was a bad idea to bank at a credit card company. I wasn’t too surprised when the banks took off — even with their crummy accounts and shady practices, people really like Capital One. I think it’s the viking commer­cials.  

With Capital One’s success, I shouldn’t have been so surprised with Amex getting into the banking game.

American Express: Scum of the Earth

American Express claims to be a different sort of Credit Card Company. They do things random things that go far above the call of duty for any business.

In one 1989 example, they covered the cremation and transfer costs of a family whose father died while out of the country.  By trans­fer­ring $2,500 dollars on a Sunday, they saved the family a govern­ment sponsored grief. They never asked for the family to pay them back and they even followed up a few times to make sure the family was taken care of.

More recently, they donated $100,000 to the Japan relief efforts and waved merchant fees for donations to the Red Cross.

How can I call Amex scum of the Earth when they have stories like that? Because for every good story, there are hundreds of bad ones:

• Dave Ramsey’s wife, Sharon, was asked by Amex why she didn’t divorce a man who can’t pay his bills.
• Amex took $2,000 from a guy’s checking account even though they told him they wouldn’t.
• After a man lost his job, Amex agreed to take payments of $480 a month until he got back on his feet. When he called back, they said “$520 is the best we can do.”
• They call old disabled ladies 10 or more times per day in an attempt to emotion­ally abuse them into making payments.
• After paying off her account balance, Amex charged a woman more than $300 dollars in fees on a closed account.
• They transfer customers who are making payments to collections.
• Amex’s collec­tions depart­ment: calls multiple times a day, calls neighbors and family members, and yell at people until they give up their disability income.

There are just a few of the horror stories. Most of these stories come from consumeraffiars.com. There are many more on the web and probably thousands that aren’t reported.

Over and over again, Amex proves they don’t care about customers, they’re willing to lie to get money, and they are okay ignoring the Fair Debt Collec­tion Practices Act.

This is not the way any business should be run. Companies like this should be shut down, not by the govern­ment, but by us. By spending our dollars somewhere else.

You vote with your money every day. If you have an Amex card, cancel it. There are a million other credit cards out there waiting for you (though, I wouldn’t recommend any of them).

Final Thoughts

I will not be opening an Amex savings account. This is non-negotiable. Any business who abuses their customers the way Amex does will never get my business.

This isn’t an oppor­tu­nity to get a high interest rate on a savings account, this is a chance to get in bed with an evil company. I’m called to a higher standard than that, and so are you.

What companies do you put your savings into?

Saving With American Express Is Dumb

Everyone agrees: credit cards aren’t that great.

They abuse their customers, charge obscene interest rates, and do every­thing in their power to take as much money from us as possible. It’s a big enough issue that the govern­ment passed extensive laws about it.

Why do we keep using these products? Because we think the good they bring outweighs the bad. But there really isn’t any good to credit cards, and most of the reasons we believe make credit cards good are things that are destroying us financially.

Here are 5 credit card myths that need to be busted: Continue Reading…

Why is this stuff so hard to hold onto?

One of the great tragedies of my gener­a­tion is that we don’t under­stand where money comes from.

I’m not exempt from this.

One of the funda­mental issues of 18-to-35-year-olds is that we don’t under­stand how to make money.

That seems basic, but if it was why are we doing so poorly? Why are so many of us moving back in with our parents? Why are we so fright­ened to go out and live on our own?

The Problem

I talked about this issue a bit in money 101, but it’s worth another discussion.

The problem starts when we’re young. Our parents don’t teach us about money in any sort of depth. Instead, we glean our spending habits from TV, credit card offers, and the spending habits of those around us.

And with poor spending habits come poor earning habits. Continue Reading…

After the move last weekend, I’ve mostly been working on setting up the new place with my wife. Most of the boxes are unpacked. The problem now? The still packed boxes are mostly junk that need to be sorted through. Not much fun…

What if the NFL Played by Teacher’s Rules — What if the NFL was run like the teachers union? A very good post about a hot topic. “Let’s face the truth about this alternate reality: The on-field product would steadily decline. Why bother playing harder or better and risk getting hurt?”

The “Hunger” Hoax — Are American children dying of star­va­tion every day? Are the poor going to die without the government’s help? An article worth reading. “When the Centers for Disease Control and the Depart­ment of Agri­cul­ture examined people from a variety of income levels, however, they found no evidence of malnu­tri­tion among those in the lowest income brackets. Nor was there any signif­i­cant differ­ence in the intake of vitamins, minerals, and other nutrients from one income level to another.”

Steve Jobs For Jesus? — Timothy Dalrymple has a great article asking, “What if there was a Steve Jobs who loved Jesus?” It’s a loss less preachy than it sounds.

Why I Dumped My iPhone — And I’m Not Going Back — One of the most inter­esting articles you will read all week. An iPhone junkie gives up his smart phone for one that ‘just makes phone calls’. A must read!

Visa Exposed As Massive Credit Card Scam — This hilarious article from the Onion is satire at its best! “Calling the scam’s breadth and sophis­ti­ca­tion “unpar­al­leled,” Holder said the ring­leaders of the plot carefully portrayed them­selves as top-level financial exec­u­tives, spent untold sums of victims’ money on a luxurious high-rise head­quar­ters in San Francisco, and employed scores of graduates from elite business schools—all as a means to perpet­uate an elaborate confi­dence game.”

Poverty Culture — This short docu­men­tary asks the question, “How do we help the poor of the world?” The answer might surprise you. (via Matt Rawling)

I was listening to Dan Miller’s 48 days podcast a few weeks ago and something he said really stuck out to me:

“Everyone needs a mentor, an encour­ager, and a follower.”

It’s an inter­esting thought. I need someone to mentor me, to encourage me in the hard times, and to follow me as I go.

Unfor­tu­nately, it’s unre­al­istic and dumb to think that’s going to happen. The problem with the mentor-encourager-follower mindset is that it assumes 3 things that are rarely true. Continue Reading…

It’s weird that you don’t tell people how much you make.

It doesn’t feel weird, but it is.

Think about it; it’s okay to talk about careers, rela­tion­ships, family, sex, education, and politics with friends, family, and even strangers; but it’s completely taboo to tell someone how much money you make.

Does anyone know how much you made last year? How about how much you expect to make this year? Probably not.

Some married couples don’t even tell each other what they make! (I hope that is as crazy to you as it is to me). Continue Reading…

It’s October, and you know what that means…Christmas!

No, not really. But everyone is announcing their new products and the biggest announce­ment so far is the Amazon Kindle Fire aka the first real chal­lenger to the iPad. As an entre­pre­neur and tech lover, I’ll be paying attention to this over the next few months. If you want one in time for Christmas, it’s probably a good idea to order now. They might run out as the season gets closer. Hurry up and order yours so I can get the commis­sion and order my own! lol.

Okay, down to business. Here are this week’s highlights:

Amazon Takes On Apple — Here is the low down on what’s going on with the Kindle Fire vs. iPad: “Amazon’s announce­ments this morning were the most important in the gadget world since Apple announced the iPad on January 27, 2010. With the announce­ment of a $79 regular Kindle, $99 touch-enabled Kindle, and $199 Kindle Fire tablet, Amazon set itself up for a Christmas clash with Apple’s iOS jugger­naut. While many tablet contenders have come at Apple, few can throw as many punches as Amazon.”

E-Books Directory — this site takes all the free ebooks on the web and puts them in a single place where you can download and read them. This may be the best free resource I have found in a very long time.

Obama Is Not A Socialist Part 2 — Matt Rawling continues his fantastic series on Obama’s politics. Required reading for all voters (espe­cially conser­v­a­tives who call Obama a Socialist).

The Dangers Of A Single Story — Bryan Davis high­lights a recent TED talk that explains the dangers of a single story. “Stereo-types are created when we take one story, one scenario, one event and play it over and over again until that becomes the only view.”

What Cohab­i­ta­tion Does For Marriage — A compelling article on what research shows in relation to cohab­i­ta­tion and marriage. “But unmarried cohab­i­ta­tion is the fastest growing family/domestic form in the United States as well as most of the Western world. It’s exploding, having increased 15-fold since 1960. And that growth has more than doubled in real numbers since the mid-1990s in the U.S.”

Fat, Sick, & Nearly Dead — This is a docu­men­tary I’ll be picking up. Check out the trailer.