Personal Budget Planning

People and computers cannot share bank accounts. We spend money in different ways. That’s why it’s crucial to maintain separate accounts.

How Computers and People Spend Money

Computers take money on a scheduled, event driven, basis. Computers pay our bills on time, withdraw money when they need it, and insert money based on our employer’s schedule. They are accountable and timely.

People are the opposite. We take money based on utility and instant gratification. We go to the grocery store or fill up our gas tanks on irregular schedules. We might buy two martinis at the lounge this week and buy two movie tickets the next. We’ll swipe our cards buying a sweater from the gap once a season and pay cash for a haircut every 4 to 6 weeks.

When Man and Machine Collide

You have $2000 in your bank account.

What happens when you have:

• a mortgage payment scheduled on the 1st [-$1300]
• a car payment auto debited on the 8th [-$380]
• a cell phone payment billpayed on the 17th. [-$70]

Then you:

• buy new clothes on the 2nd [-$150]
• fill up your gas tank on the 4th [-$36]
• buy groceries on the 7th [-$95]
• go out to eat on the 15th [-$-54]

Unless you are keeping tight records of your day to day spending and balancing your checkbook, you’re going to overdraw your account. Even if you logged into your bank online or checked your balance at an ATM, you’re still going to overdraw.

In this debit card age how many of you keep your receipts and enter them into your ledger?

Telling the Difference between Computers and People

To really get this you need to look behind the transactions that occur in everyday financial life. Trace the sale all the way back to the root till you get to the initiator. Was this process initiated by man or machine?

Man

• ATM cash withdrawal
• Debit Card Purchase
• Depositing money at bank
• Writing a check

Machine

• Autodebit bills
• Direct Deposit
• Bill Pay scheduled payment

The Answer

The answer is to setup two separate bank accounts. One for a computer and one for you. The computer account takes care of all of your planned and scheduled bills. The “you” account lets you live life. You get an allowance and spend money as you please till it runs out.

With all these devices like autodebit, billpay, and direct deposit, why not utilize them to their fullest? Think of the computer account as your own personal money manager.

Further Resources

Free eBook on setting up an automated budget.

Setting up the budget four week challenge.

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