This goes into the little-used “Life” section . . . wherein Glenn Reynolds aka Instapundit,
[*1] a law professor at the University of Tennessee, discusses personal finances
[*2] and what he does differently from fellow Tennessean Dave Ramsey’s
We don’t follow the Ramsey approach. It’s good for people who have debt problems, but we’ve never had those as we’ve 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 “slush fund” 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 “don’t touch” money market account into another account at a different bank that is inconvenient enough to access that I don’t take money out of it. (I guess that’s the “really don’t touch” account). At the end of the year, I look at the various account balances and know if I’ve saved as much as I planned; usually it turns out to be more, as I sometimes put unscheduled money — speaking fees, royalties, etc. — in there instead of the slush-fund savings account if I’m feeling flush.
This system turns my considerable sloth into an asset; savings is automatic, while spending takes effort. Taking money out of those “don’t touch” accounts is an event, meaning that I think about it before I do it, and thus don’t 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 don’t. But the key is to prioritize saving first. Once I’m saving what I’ve planned to, I don’t have to worry about what I’m spending; it’s 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 . . .