Automatic Withdrawal Budgeting

Idle hands may be the devil's plaything, but idle funds are what gets us into trouble. Unappropriated money is what leads to splurges, debt, and purchases which are later regretted. I have generally found that creating a budget which allowed for the least amount of idle funds is the best way to ensure that your money is going to where it belongs. But how can you properly appropriate funds. Automatic Withdrawals and payroll deductions.

There are some general payroll deductions which many employers offer which are smart for almost everyone. These include health insurance, 401(k), and a flexible spending account for medical expenses. All of these are deducted from your adjusted gross income, and should be utilized to some extent by everyone.

Then there are some personal initiatives you should take in order to secure yourself financially. Automatically paying off 100% of your credit cards, utility bills, mortgage, and insurance each month. Don't put yourself in a position where you need to think about it. Not only do most banks have online bill pay, but some provide incentives for signing up for it. http://online.wsj.com/article/SB110246841042693926.html Think about it. All of your bills get paid, you don't need to think about it, and you get an incentive.

Lastly, you can create ongoing disbursements for your personal priorities. Automatic withdrawals for your IRA http://helpcenter.ingdirect.com/ingd/Topic.aspx?category=DIST1, 529 Account http://www.529.com/content/how_aippayroll.html, Debt Payments http://www.moneyunder30.com/debt-payments, or just moving 10% of your take home salary to a high interest savings account on a monthly basis. http://www.gobankingrates.com/savings-account/easy-ways-to-build-your-savings-account-automatically/ This will keep your checking account pretty lean, and you will not be tempted by higher balances to purchase things you don't need.

We all have far too many things to think about, and setting up automatic withdrawal budgeting priorities from your checking account takes away the burden of remembering what needs to be done. It allows you to prioritize with a clear head and ensure that your money goes where it needs to be, and not where you may want it merely in the short term. Moving idle funds to your established personal priorities by setting up automatic payments and withdrawals will help you build the financial foundation you want without the revolving burden of keeping your priorities at the top of your to do list.

401(k) Matching

How much do you put away for retirement? The answer, invariably, is not enough. Money put into your   401(k) or other pre-tax retirement program is exempt from Federal income taxes, so it benefits you later by having money saved, and benefits you now in terms of lowering your tax burden. It goes without saying that you should, at the very least, contribute as much as your employer will match. For instance, my employer matches dollar for dollar up to the first 3% of salary, and then 50 cents on the dollar up to 5%. Translation: 5% of my salary is contributed, and 9% of my salary goes to my 401(k) equivalent each month.

But I could do more. For 2012, the contribution limit is $17000. http://www.irs.gov/retirement/participant/article/0,,id=151786,00.html That's just under 654 dollars per paycheck, assuming you get paid on a bi-weekly basis. And because most millennials don't believe social security will be there for them when they get older, or at least, won't pay out what it pays now, http://iomechallenge.org/wp-content/uploads/NEW-iOme-Millennials-on-Social-Security.pdf, you should do whatever you can in your budget to get as close to this $17000 figure as possible. One thought could be this. Many people receive bonuses around Christmas or around the end of the year based on performance or other successes. Perhaps using that bonus to make a balloon contribution to your 401(k) would be a better use of the funds instead of consuming them on something unnecessary or trivial.

If your organization doesn't have a 401(k) program or equivalent with employer matching funds, check out my post on an IRA, and then you can at least get a benefit of $5000 a year (you don't get the tax benefit of the IRA if you also participate in a 401(k) or equivalent. If your organization does have a 401(k) or equivalent, start contributing at least to the point of full matching, BECAUSE IT IS FREE MONEY. Then, take a look at your budget and see if you can increase your contribution an extra 100 dollars per month. That's less taxable income, a more financial secure retirement, and intelligent budgeting for the future.