Firevalt Blog - Personal finance and entrepreneurship

Self-Debt

For those of you that are in the habit of paying yourself a portion of your income each month (hopefully for the purpose of investing and growing your wealth), I have a question. What do you do if there is some financial emergency during the month that makes it impossible to pay yourself a portion of that month’s income?

For example, one month my car died and I had to replace the engine. I used the money in my checking account - not savings - to cover the expense, but was then unable to pay myself 20% of that month’s income (20% is what I try to pay myself each month). My budgeting system still shows that I owe myself for that month and I intend to pay it off as my checking account recovers from the car expense. I would like to hear what others do in similar situations. Do you keep a running self-debt balance or do you just forget that month and start paying yourself next month when cash isn’t as tight?

3 comments June 27th, 2006

Timeless advice from a leading financial expert

Vanguard has an interview with Eric Tyson, author of Personal Finance for Dummies and a few other books. He says more people are involved in investing than ever before and the Internet is making it very easy, but few people research the stocks they invest in and few people live within their means.

From the beginning, I knew that many people simply are never taught how to manage money. What I’ve learned over the years is just how serious the problem is. There’s clearly a lot of financial illiteracy in America, though there’s more information available on the subject than ever before.

I’ve also come to realize that a pretty significant portion of the population has great difficulty changing their financial habits, even when they know they’re making serious mistakes. People have a hard time changing their behavior, even if they’re shown the correct path.

The interview was a good read.

Source: Vanguard

Add comment June 3rd, 2006