How to be Rich: The Couple's Guide to a Rich Life Without Worrying About Money by Chuck Rylant

Author:Chuck Rylant [Rylant, Chuck]
Language: eng
Format: epub
Published: 2011-10-06T22:00:00+00:00

They totaled up all the annual expenses and divided this by twelve to get the amount that needed to be transferred into this account each month.

Danny then asked, “Are there any things either of you’d like to spend less on?”

“Do you mean like expensive coffee? I like going to Starbucks, but I probably spend more there than I should,” Richard answered.

“You’re not the first client who has mentioned how much they spend on fancy coffees or restaurants,” Danny said. “There is no right or wrong amount that you should spend on any luxury and no financial advisor should ever impose his or her values on you, but if you feel that way, here is a tip that works very well.

“As I said earlier, it’s possible that eating out or getting coffee is an important part of your life and you’d prefer to cut something else out when money gets tight. But if you do want to limit spending in a specific area, the simplest way is to set a weekly limit. Then make a cash withdrawal each week and put the money in your purse or wallet. Once you’ve spent the money, then you’re done until the next week.”

Janet wasn’t sure. “But what about credit cards? We could always just whip one out if we run out of cash.”

Danny nodded. “You’d have to be disciplined. Some of my clients take their credit cards and freeze them—literally—to keep from using them.”

“You mean, put them in the freezer?” Richard laughed.

“You’d be surprised how effective that is. They’re there if you need them, but it takes awhile for them to thaw out.” Danny grinned when he saw they both were amused by this idea. “Now, back to the cash. If you want to limit your lunch and coffee break expenses to $100 per week, simply withdraw that much from the bank each week. Having this limited amount will help you make better choices when you know you only have so much to work with. This is so simple, yet it works amazingly well at limiting spending and removing any guilt or anxiety you may have previously felt when spending money.”

Danny then summarized it all with bullet points on the sheet of paper. “You will have three separate bank accounts. Deposit income from all sources into account one. Account one will be used to pay mandatory expenses such as rent, car payments, and contributions to savings. Then automatically transfer a fixed amount of money from account one to account two each month for discretionary expenses. Transfer another fixed amount monthly to account three to pay for large and/or annual expenses. Finally, withdraw a predetermined amount of cash at fixed intervals from account one for discretionary spending you want to regulate.”

Danny finished by saying, “The more automated this system is the more effective it will be. With today’s technology of online bill payments, direct deposit, and automatic bank transfers, most of this system can be completely automated, which helps guarantee your success. This system works because it doesn’t force you to track your expenses.

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