Send Yourself a Bill

People tend to do very well at taking care of current needs but plan very poorly for distant needs.  This is unfortunate since it is fairly easy to take care fo things like college and retirement if you start early but nearly impossible if you wait until a few years before.  Don’t plan on Uncle Sam helping you out either since it is likely the US Government will be unable to sustain programs like Social Security and Medicare, let alone Healthcare and Tuition Assistance for more than a few more years.  You will be on your own, so start planning now!

Part of the problem is that things like retirement seem so far off and there are so many other priorities.  For most people, liabilities will be added – cable, memberships, automobile payments, loans, etc… until there is no more cash free at the end of the month.  The secret is to get ahead of this and secure the needed cash for future expenses before it is swallowed by an unlimited phone plan or something.

One idea is to “send yourself a bill” for future expenses.  Each month, send a check or move money to accounts setup for specific, long-term items.  These could be tax-advantaged accounts such as IRAs or Educational Savings Accounts, but they need not be.  The important thing at first is to simply be putting money away.  Here are some example bills:

Retirement:  $200 per month per person.  This is a starter IRA and would be in addition to a 401K account.  Ideally you should be putting about 15% of your gross pay away for retirement each month while you are young.

College:  $300 per month per child.  This will not be enough for full room and board at a swanky private school, but at least will cover tuition and some expenses at most public schools.  Note that this will count against you when applying for financial aid, but what’s wrong with paying for your own children’s education?

Cars:  $200 per month.  Put away $200 per month and you’ll have enough to buy a replacement used car about every four or five years.  Bump this up as your income grows if you desire nicer cars, but you can get a lot for about $8,000.

Home Repairs:  $200 per month.  You never know when the furnace or the water heater will die, and you will need to replace that roof eventually.  Put away a few thousand each year and you’ll be ready when the inevitable comes.

Vacations: $300 per month.  Put away money for vacations regularly and you’ll need not fear the credit card bill in your mailbox each month.

Healthcare: $200 per month.  You hopefully won’t need much healthcare when you are young, but if you save and invest the money you will have a lot more flexibility when you are older.  Like college tuition, many people who would never go on food stamps are happy to take assistance for nursing homes but you can get better care and have more options if you can pay for yourself.


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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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