Tuesday, July 22, 2008

It's all in my head

My relationship with money is ALL about psychology. I have all the tips and ideas in my head. Spend less that you earn, save for retirement..blah blah blah (yeah this is what I hear sometimes).

To overcome my psychological issue when it comes to savings I have stared putting the emergency fund into 6 month CDs. Once it grows by a few hundred dollars I open another CD. This may seem impractical, maybe even crazy to some people. I can hear the questions now, why not just leave all the money in a regular savings account? Well, because I will find bills or something else to spend the money on. If I know it is sitting in a CD I will not touch. Am not a psychologist so please do not ask me to explain. Saving for retirement is easy, it is saving for emergencies and short term issues that is my downfall.

The CD solution is the only thing I could come up with.

Am open to suggestions.


My Girlish Figures said...

Tired of being broke....i TOTALLY understand what you mean...it's funny how you and i are alot alike...for me it is all psychological as well...i don't know why if i have money i feel i have to spend it...i have also started saving a little bit at a time in a mutal fund since it's accesible but not as easy as in a savings where i can just transfer it to a savings...

Sistah Ant said...

I've read other people talk about something called CD laddering as a way to have a place to put their savings. Sounds sensible to me, actually. Shoot - whatever works!

Contemplations of a Woman said...

I agree - sounds like a good plan to me my only question is why have several CD's why not just continue to put it all into one.. ?

Torvel said...

Why not find someone you trust and is reliable to be accountable to? Maybe if you can communicate when you are thinking about spending your savings, they can put a bug in your ear to stop you. Maybe something like that will slowly but surely transition your urges to spend into responsible fiscal behavior. Just a thought.

Tired of being broke said...

Girlish figures I am just trying to do what works for now. As the CDs come up for renewal I will add more cash to it and start over again.

Sistah Ant I've heard is CD laddering too, haven't done any research to know much about it.

Contemplations my first CD is at my credit union. Once it is opened they do not allow you to put money until renewal.

Torvel that sounds good but there isn't really anyone other than people who read my blog that know that much about my finances. In my family it is not something you really talk about. When I save money it is not that I spend it on things, I tend to pay forward bills and pay down credit cards. The problem there is that even though I am paying down debt am not saving at all.

Anonymous said...

I think that if it works for you, it's worth doing. The only thing I would be a little uncertain about would be the fact that it's for emergencies, and it'll cost you if you ever had to take the money out in a hurry.

I think that if I were putting emergency money into 6-month CDs, I would open one CD each month for six months. That way, I would know that if I had an emergency, I could clean out whichever CD was due during that month without paying a penalty.

What I do is a little different-- I have a regular bank account for my expected expenses and a bit extra there to cover an acute emergency. And then I have some Vanguard accounts which in my head are untouchable unless something dire happens. All of my deposits go to the regular bank account, and when I'm over a certain amount, I transfer the excess "up" to Vanguard. For me the act of putting the money into a separate institution is enough, but I can see how that might not work for everyone.