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Reynolds on Ramsey

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This goes into the little-used "Life" section . . . wherein Glenn Reynolds aka Instapundit, a law professor at the University of Tennessee, discusses personal finances and what he does differently from fellow Tennessean Dave Ramsey's approach:

We donít follow the Ramsey approach. Itís good for people who have debt problems, but weíve never had those as weíve avoided debt. My approach is tailored to my laziness, and lets savings be the control on spending. I decide how much money to save, and it goes into a money market account, automatically every month. The key is that this account is for money to go into, not to come out of, except for major purchases (like a house or car) or emergencies. I have a separate ďslush fundĒ savings account that also gets an automatic deposit every month, and that gets hit up for routine unscheduled things like home and car repairs. Every once in a while I sweep money out of the ďdonít touchĒ money market account into another account at a different bank that is inconvenient enough to access that I donít take money out of it. (I guess thatís the ďreally donít touchĒ account). At the end of the year, I look at the various account balances and know if Iíve saved as much as I planned; usually it turns out to be more, as I sometimes put unscheduled money ó speaking fees, royalties, etc. ó in there instead of the slush-fund savings account if Iím feeling flush.

This system turns my considerable sloth into an asset; savings is automatic, while spending takes effort. Taking money out of those ďdonít touchĒ accounts is an event, meaning that I think about it before I do it, and thus donít do it much. Likewise, almost the only credit card I use is American Express, which I pay off every month. You can stretch the payments, but, again, you have to make a conscious decision to do so, which means you have to think about it and realize how dumb it is, so I donít. But the key is to prioritize saving first. Once Iím saving what Iíve planned to, I donít have to worry about what Iím spending; itís taken care of.

Hmm. The Insta-Sloth. Seems to be working for him, judging from the number of fun toys he blogs about on a regular basis . . .