Making Ends Meet

The real trick to getting your money under control is using mind tricks. Having Yoda around would help. Unfortunately we have no way to Dagobah.

It has been common belief among economists for decades that humans, given two financial choices, will always choose the choice that is best for them. If you ever “accidentally” bought a car you will understand just how overwhelmingly stupid that statement is.

Almost every day we make financial decisions that make less than good sense. For instance- you have two choices- spend $2.00 on 20 ounces of Coke or spend $1.00 on 67 ounces? Spend $1 a night for movies for 22 nights a month or pay $17 a month for 30 nights of movies?

The reasons we make silly financial decisions is actually a whole line of study in itself- it’s called Neuroeconomics or behavioral economics. And it boils down to this- choosing a cold 20oz Coke when you are thirsty at the gas station is not the same decision as getting a warm 2 liter from the grocery story later tonight.

In other words there are lots and lots of reasons we make the decisions to spend our money the way we do.

That brings us back to the ways of the Jedi.

Just being aware that your mind and emotions can lead you down financial paths you don’t like can help you make the right decisions.

The biggest mind trick is a key part of what I teach in the Three Piece Plan.

When using the Three Piece Plan you separate out your “Everyday” spending money. This is a mind trick. Actually it’s a reverse mind trick- when your money is all in one place you think you have more to spend than you actually do– that’s the trick. And it’s what gets you into debt.

So you pull a fast one- you pull out your spending money, put it in a separate account and suddenly you don’t spend more than you should. Simple trick. Super effective.

Each of these “Ten Reasons” needs their own blog post. But if I want to get them in here for you site visitors to be able to see.

Ask me questions about them-  then once you read them you should fill out the form below to get started with your own Three Piece Plan.

1. It requires no continuous work- no entering categories, dividing up receipts, etc-   who has time for that?

2. You get paid every week. Or at least that is the way you will feel when you are on the Three Piece Plan.

3. You are doing SOMETHING.  Doing nothing won’t work. So having a simple system helps you keep your mind focused on getting out of debt and not overspending.

4. The Three Piece Plan decreases consumption. Because now you feel like you run out of money more often. So every week you find yourself eating at home, not shopping, etc. And the best part is that you don’t mind it!  You know you have money in the bank and that “pay day” is just a few days away.

5. You build an emergency fund almost automatically. Enough said!

6. You KNOW, instead of guessing and overshooting, exactly how much money you have to spend. This keeps you from bouncing checks, etc.  No more, “Whoops, I thought that check had cleared!”

7. You enjoy your money so it motivates you to spend it right. It is an UPWARD spiral. You spend less, you stress less, you worry less, you take care of things faster, etc.

8.  It is easy to adjust. If you get extra income you are not inclined to spend it so fast. If your income goes down it is easy to look at where you are and adjust accordingly.

9. Communication. It gets much easier on the Three Piece Plan. You look at how much cash you have, or how much you have in your “Today’s Money” account and know exactly what you have to spend. So it is easier to tell your spouse, “Uh, honey, we only have $25 to last two days, can you wait until Wednesday to get your hair cut?”

10. The Three Piece Plan family budget system is sooooo easy to set up. I can literally set up the basis for one in less than five minutes. It also works well for budgeting on a variable income.