No one ever WANTS an emergency to happen. But the reality is, the will. It is just a matter of when.

On the flipside of that, I often hear friends and acquantainces (as well as myself) say, "I'm waiting until the timing is right" or something similar.

Just as emergencies never happen at the right time, neither will there ever be a "right" time for us on anything. It does not matter whether it starting a family, looking to change a career, start a business or move across the country. Those are all major decisions. But at some point we need to stop looking at the information and simply make a decision.

The same goes for your finances. If you "know" you should be doing something, what are you waiting for? Are you afraid of failing? So what? What is the worst that will happen?

Pick one item in regards to your finances that you would like to get in order. Decide that you are going to do it this week. Set a deadline, pick a date and time, and just do it. Do the necessary research on opening an IRA (it literally takes less than an hour). Make the call about getting life insurance. Send an email to the customer service about getting a lower cable bill (speaking to myself there).

There are always more things we could be doing. But if we just sit an worry about which one it should be, we will be stuck in our indecision.

Research released last year showed that almost half of all Americans could not come up with $2,000 in 30 days for an unexpected emergency.

This is why Willpower is Not Enough. We need systems in place to automatically save. We don't wake up one morning and say, "I'm going save $2,000 this month!" We have to systemetically save over the long term, so we are prepared for what faces us in the future.

There is no way to prevent emergencies from happening. We can simply lower our stress by being prepared. The best way to do that is have a system in place, whether it is using a budget or having an automatic savings plan in place through a payroll deduction.

As long as you do not have to consciously think about savying, it will happen. Take yourself out of the equation, and you will save.

There are a number of effective ways to do this.

The best is to make saving automatic. If your employer offers direct deposit, ask if it is possible to split your paycheck between two different accounts. Have a set amount (the amount you want to save) sent to a separate bank account that you will not use. This could even be at a completely different bank than the one you use as your primary bank account. This will keep you from easily accessing the money unless you absolutely have to (remember, for emergencies).

Another option is, if you keep a budget, to include "buffer" amounts into each of your categories. For example, my wife and I budget for Christmas every month of the year. Instead of budgeting all at once in December, we build up our cash throughout, preventing us from getting "Christmas budget shock."

We also do the same, on a smaller scale, for other areas of our budget. For example, since we live in the Ohio, our gas bills obviously increase in the winter and our electric bills in the summer. In order to prepare for these variable costs, we try to build up a small buffer in each of those categories, and budget a little extra each month.

We do this for a number of other categories as well, including our insurance payments that are due every six months. All of these "buffers" have the nice effect of giving us a decent amount of cash in our checking and savings account. We never have to worry about overdrafting because of the extra buffer that is provided.

Most important of all is to do what works for you. There is no right answer. However we are all human. So if we can automate our good behaviors as much as possible, that is a good thing.

After reading The Power of Full Engagement, it all made sense. The authors devoted an entire chapter on the power of having rituals (not spiritual rituals, habits) in our lives. 

The reason is, our brains use a lot of energy when we have to think about difficult ideas. In addition, it also takes a lot of work for our brains when we are required to consciously NOT do somthing, like spend money on an item, or not eat that third cookie. The more times we have to consciously refuse something that we would like to do, the lower our willpower becomes. Eventually we just give in.

That is the power of having systems in place, which both Ramit and the authors of The Power of Full Engagement propose. 

Systems help take our minds out of the equation, so we can focus on more important activities. This enables us to be more engaged at work and at home. 

Going back to why trying harder is not enough, I've discovered why it did not make full sense to me. For as long as I have been reading Ramit's material, my wfie and I already had a system in place. That system was our budget. Granted, Ramit is not a big fan of using a budget, but for my wife and I it works (we're both accountants). The budget does not become this oppressive thing for us. We use it as a guide more than a hard and fast rule. We sit down once a month and plan out where our money is going to go. For us, our budget is the system. We think about it once for the month, and then it is done until next month. 

That being said, a budget is not right for everybody. Tracking every expense is extremely tedious, and if you are not consistent, it can become very frustrating when you get behind. 

Figure out what will work for you. But whatever that is, do all you can to automate your finances so you do not have to think about them so much. That will remove the stress and allow you to focus on the rest of your life.

There are no new tips.

What has worked for the last 100 years will continue working for the next 1,000. Life is not going to change so drastically that "spending less than you earn" will fall out of style (well, I suppose it already is out of style for a lot of people).

The exact way our finances are handled will probably change. In 20 years or so I'm guessing there will be a lot less cash being passed around. We probably will not have credit cards anymore. Instead, just an app on our phone.

But those differences will not change the principles of sound financial management. It will be following those principles that put you in a better financial position, not following the next financial fad, whatever that may be.

What are those basic principles? I think they are the following:

1. Spend less than you earn
2. Have emergency savings of at least 3 months expenses
3. Pay off all debt
4. Save for retirement
5. Give back

There isn't much more to it than those principles. There are different methods and strategies for accomplishing each, but no matter how you do so, if you follow the above, your finances will be a success.

A little over a year ago I bought a Motorcycle. That entire process was a lesson in itself. It made me realize that when you purchase a large item, there is often a host of accessories that have to go with it. I suppose I didn't have to buy a helmet, but that would have been rather foolish (please, no comments that buying a motorcycle was foolish).

Selling my motorcycle (after the birth of my daughter) was yet another lesson. It is sometimes more difficult to get rid of stuff you no longer want than you might think. I had the motorcycle on Craigslist on two separate occasions. The first time around I did not get any responses. No surprise there, because I did not post any pictures.

The second time I listed it, I received at least 20 responses, probably more. And yet only two of those people ever came to see the bike in person. Thankfully, the second person did end up buying it. But that was almost two months after originally listing the bike for sale.

What is the point of all this?

Buying Stuff has deeper consequences and longer term ramifications than we often think. This is especially true for large ticket items (Stuff $1,000 or more).

Once you decide you no longer need an item, it may take longer to get rid of than you would like. Also, we almost never get our full "investment" back. In the case of the motorcycle, I thankfully only "lost" $100 when selling it.

However that does not count the extra money I put into it throughout the year I owned it. A new battery, oil change and a few other miscellaneous items. I'm not complaining that I spent that money. Those are the requirements of owning a vehicle, whether a car or motorcycle or anything else with an engine.

Next time you are in the market or considering a large purchase, be sure to evaluate how easy (or hard) it will be to sell that item.

The one disadvantage of a tankless water heater, or any newer technology for that matter, is that it can cost quite a bit more than the normal solution. Although you will have cost savings over time, it takes a while to make up the difference in cost that you paid. To truly know if you save money, you would have to look at all of your bills for many years to come. Personally, my time is more valuable than that. I may look at my gas bills and compare them to past years, but beyond that, I’m going to be doing any extra work.

With all that said, what can you purchase to save some money? Perhaps you could purchase some insulation for your attic to save on your heating bills. How old is your refrigerator or the freezer in your garage? They may be using a lot more energy than you realize if they are more than ten years old.

Part of why I say this is because my employer sent several emails explaining and apologizing for the problem. And while I appreciate how they handled it, the problem didn't bother me at all. This is all due to the fact that my wife and I live on last months income and never have to think about how much cash is in our account. Budgeting on last month's income essentially enables us to not even think about when we receive our paychecks. As I said before, it is a wonderful feeling. 

Yesterday I was listening to the fantastic (and new) YNAB podcast. I don't remember which episode it was as I listened to all three, but it occurred to me that the majority of our marriage, my wife and I have been living on last month's income. Or in other words, we have never lived paycheck to paycheck since using YNAB beginning in the spring of 2007.

I was reminded of this because Jesse mentioned an idea from another personal finance blogger (I forget the name) which essentially says "$1,000 is the new zero." In other words, if your bank account goes below $1,000, then it is time to be a little worried. Personally, I cannot remember the last time our bank accounts (all of them in total that is) went below even $3,000 or $4,000. I am not saying that to brag or that we are better than anyone else for having more than $1,000 in cash. I say that because of the amazing relief it is. I have never had to worry about knowing when our paychecks get deposited so that we can pay our next bill. As long as we get paid before the next month, there is always plenty of cash at hand.

Until you start living on last month's income, that amazing feeling of not worrying about cash in the bank cannot happen. Simply the best way at making that happen is by following YNAB's four rules:

1. Give every dollar a job
2. Save for a rainy day
3. Roll with the punches
4. Stop living paycheck to paycheck

The first three rules are what helps you to get to rule four. For example, my wife and I "save for a rainy day" in a number of different categories. Despite not actually having an expense every month, we budget money into our car maintenance, insurance, taxes and Christmas line items. This builds up a natural buffer (and our cash in the bank) that we can then use later. It really is financial bliss!

This article on MSN Money lists eight “drawbacks” of being a millionaire (phrases have been changed slightly):

1. Higher Taxes
2. A second job (managing all your Stuff)
3. Keeping up with the Jones
4. Gift giving (everyone expects nicer gifts)
5. People asking for money
6. Large fluctuations in net worth
7. Do you know who your friends are?
8. A bigger target for crime

So here is the deal. I agree with the article that the items on this list COULD be a problem. But not all of them have to be. Some of the issues addressed relate to you Stuff. Specifically, items two through four and eight all relate to the Stuff the author is assuming you would have if you are a millionaire.

But the reality is, not all millionaires are like this. Just ask Thomas Stanley, coauthor of The Millionaire Next Door and author of Stop Acting Rich. He has done years of research about millionaires. What he found surprises most people: the majority of millionaires are not who we think they are. They are average Joes who drive normal cars and live in normal houses.

If you want to become a millionaire, don’t be like the millionaire depicted in this article. If you become a millionaire, you can more easily keep your millionaire status if you continue living a normal life, as opposed to keeping up with the Joneses. Keep in mind that no matter how much you have, there will always be someone else with more.

And there certainly was for us. Our friend commended us for tithing. But he also reminded us that since we still have a considerable amount of debt to not give over 10% of our income. Also, that we should not give out of obligation (I was), but because I want to give. I do want to give, but I have also felt some resentment about giving because we could be paying our debt off faster. So my wife and I have decided to cut back on our giving and only budget slightly above what we have committed to giving each month.

That is what a fresh perspective can do for you. It can help you see things in a different light. No one sees things exaclty the same way.

Remember that your finances are your finances. You can do with them whatever you like. But if there is someone else in your life that you know handles their finances well, perhaps they should look at your budget. (You do keep a budget, right? If not, You Need a Budget!)