‘Out of sight, Out of mind’

It’s not much, but it’s something. We’re talking about $800 a month.

A: You have to rely on two pieces of conventional wisdom : "Pay your self first" and "out of sight, out of mind." You have to make a commitment to saving. Establish a savings goal and then implement a way to reach that goal.

Make the transfer into savings your first transaction out of your monthly income. This will do two things; it will force you to establish a realistic savings goal, and it will take that money off the table.

There are quite a few automatic savings plans. Your bank could automatically transfer money from your checking account into a savings account or certificate of deposit (CD). You can establish an account with a mutual fund family and do an automatic transfer into a mutual fund.

Key in all this is to establish what your financial goals are in saving this money. If you’re saving for retirement, you’ll want to look at investing in a traditional account, assuming that you meet the income-eligibility requirements for these accounts.

Saving for a short-term goal is a different investment strategy than saving for a long-term goal such as retirement. In general you’re more willing to accept risk in your investment when you’re investing for the long haul. That means using more stock and bond investments than short-term money market investments when investing long term.

The hardest part of a savings plan for most people is just getting started. You’re committed to doing that, and you should be successful by just paying yourself first and putting the money out of sight in one of these new accounts.

Forget budgeting

Get a ‘spending plan’

Q: HOW do I go about budgeting?

A: A money coach and author, Deborah Knuckey says she doesn’t even use the word "budget" when she counsels people because of its negative connotations.

"The word ‘budget’ says self-deprivation," she says. "The way I approach, I talk about creating a spending plan and start from, ‘What do I want to make room for?’ Start with what you’d really like to spend and how you can create that space. It’s not about being frugal. It’s about saying, ‘What’s most important to me and how do I get there?’ "

OK, so you can say budget, but think spending plan.

Just like eating right and exercise, just about everyone understands the value of a spending plan or "budget." But unlike nutrition and exercise, most people don’t get an education in money management.

"Most people don’t budget properly because they’re not taught to," says Howard Dvorkin, president of Consolidated Credit Counseling Services in Fort Lauderdale, Fla. "There are no courses I know of, especially in the high school level. A lot of families purposely don’t talk about finances; I think that’s extremely detrimental."

All the experts say that the place to start is to track every expense, even snacks from vending machines and change put in parking meters, for a month. The process itself is time-consuming at the outset, but it’s not difficult. On one chart, write down all your income.

On another, write down all your expenses, broken into categories for fixed expenses like the house and car payments; flexible expenses that vary each month, including the phone and electric bills; and discretionary expenses, such as gifts and recreation.