Automation: Add a “Stupid Mistakes” sub-savings account
April 20th, 2010 - 59 Comments
Let me show you how I handle stupid mistakes like traffic tickets in my automation system for personal finances.
One of the most common reasons people can’t get ahead is expenses they just didn’t expect. I constantly hear things like this:
- “I was just about to pay off my credit card debt FOREVER, and then I had to get a new ___ for my ___”
- “God, I didn’t expect to get that traffic ticket.”
- “Every time I think I’m getting ahead, my car breaks down or I have to replace some appliance.”
These “unpredictable” expenses are very predictable
Here’s the trick: A lot of what seems unpredictable is extremely predictable — over the long term. What seems like surprise expenses is actually not a surprise if you analyze your spending for the past 5 years. Which of course nobody does.
For example, that “surprise” car repair? It might not happen in the same month, but every year, you might average spending about $400 on car repair. That’s $33/month. Once you know that, set up an automatic deposit into your sub-savings account and you’re done.
Keep a “Stupid Mistakes” sub-savings account
I keep a sub-savings account called “Stupid Mistakes” in my Capital One 360 (formerly ING Direct) account.
I’ll explain some of the other ones later
What I use “Stupid Mistakes” for:
- Traffic tickets
- Late fees or penalties that I can’t negotiate out of
- Re-buying things that I lost
I save $100/month into it. If there’s anything left at the end of the year, I take out 20% to reward myself, and roll the rest back into my main savings account.
Keep a “Stupid Mistakes” sub-savings account. Just the simple fact of having one will sharpen your focus on avoiding the mistakes in the first place. And when you do make a stupid mistake, you’ll be able to use your sub-savings account as a buffer to keep your automation system on track.
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