by Odin Kyle

Created on: April 07, 2008

Managing your money should be automatic. It should be easy. The more difficult you make it to manage your money the less likely you are to follow through. Creating an automatic plan is easy, here's your step-by-step guide.

1. Make a plan or even better make a couple.

Your initial plan needs to be simple. It should just involve you setting aside a certain percentage of your salary in savings. A good rule of thumb is if you have a company matched 401k save as much as necessary to receive the full company match.

Save at least 10% of your after tax salary, save as much more as you comfortably can but for your basic plan 10% will not stress your budget, most likely if you do it properly you won't even notice it's gone.

Initially this savings should go to fund an emergency account. Set aside three to six months income then use the same money stream to fund an IRA.

For your advanced plan, you can be imaginative, but under no circumstances should it take money from your initial plan. It should only be funded by what remains of your income. Use this revenue stream to fund other investments, businesses, or plain savings.

2. Make sure your plan is automatic.

You will be far more likely to stick with your plan if the money comes out of your salary before you get the money. The government does this with taxes because they know you won't save enough money to pay the taxes all at once.

Most banks, money market accounts, and investment accounts along with other investment options offer automatic deposits. Use these, so that the money is moved effortlessly into savings you will be less likely to withdraw it than you would be to simply not write a check for deposit if you feel a little strain.

3. Pay off your debs.

Pay yourself using your basic plan, then with what is left over start paying off your debts. Too many people pay everyone except themselves. Of course you will want to concentrate on the highest interest rates first, the only exception being if you can pay off a debt quickly and simplify your life by getting rid of it.

No matter what your financial situation do not pay anyone unless you've paid yourself. Make special arrangements, do whatever is necessary but make sure you can pay your debts while still paying yourself.

4. Make goals that are reasonable.

Make goals. Make both long term and short term goals but make sure they are reasonable. Write your goals down and draw a line through them when they are complete, when you see progress you are more likely to stick with your plan.

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