Steps You Can Take to Improve Your Finances

July 25, 2009 at 1:20 pm | Posted in Finances, stress | Leave a comment
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It’s no secret that bipolar people often have trouble with their finances. Both depression and mania can lead to overspending. When I’m depressed, I tend to spend money in an attempt to lift my spirits; when I’m hypomanic, I do the manic-spending thing, playing ducks and drakes with any money I can lay my hands on. Even so, I’ve done a lot to keep my finances in reasonably good shape. Here are a few tips on how to structure your finances to preserve as much as possible for emergencies and retirement.

1. Educate yourself. My favorite way to learn about personal finance is to read the excellent blogs that abound on the subject. Three of the best are Get Rich Slowly, The Simple Dollar, and Queercents. I like the latter even though I’m not a lesbian; it’s great for any single person, and if I had to guess, I’d say that bipolar people have greater-than-average difficulty forming stable romantic partnerships. The first two blogs can be annoying because they assume, not only that you’re married with kids, but that your life is kind of empty and pointless if you’re single. Nonetheless, all three are great resources on everything from frugality to Roth IRAs.

Both GRS and TSD have lists of recommended books on personal finance; I suggest that you look these up and do some reading. My favorite book is Your Money or Your Life, which includes a rigorous — perhaps too rigorous — program for gaining financial independence. And the phrases “gazingus pin” and “left-handed veeblefitzer” have practically replaced “thnead” (from Dr. Seuss’ The Lorax in my vocabulary as words for consumer objects that I don’t need but desperately desire.

2. Structure your finances so that it’s difficult to get at your money. I use ING Direct for savings for two reasons: they pay a relatively high interest rate, and it takes two business days to transfer money from savings to my credit union checking account. Often just knowing that I don’t have instant access to my money keeps me from spending it on some passing whimsy. It also forces me to exercise thrift during the waiting period if I do decide to transfer money. When it comes to thrift, I need all the practice I can get.

Along these lines, I also suggest that if you have an emergency fund, keep it divided between a money market account, which is fairly liquid, and short-term CDs. If you do run into a true emergency — like being laid off — you’ll be able to scrape by while you wait for the CD to mature. If you don’t have an emergency fund, start saving immediately using automatic withdrawal (see below).

Also, take a hard look at cutting up your credit cards and closing extra credit card accounts, especially if you’ve maxed them out. Credit cards represent deadly temptation for many bipolar people who experience full-blown mania. Screw freezing them in a coffee can — just get them out of your life entirely. Closing accounts that you’ve had for a long time can ding your credit score temporarily, but that beats the damage the accounts themselves can do if you fall behind in your payments.

Finally, take advantage of automatic withdrawal. For some people, it’s an excellent way to whisk away money before you can see it, feel rich, and spend it. It’s how I saved for the down payment on my house. Just be sure that your money goes to an account at an institution like ING Direct that will make it difficult to suck that money back into checking.

3. Contribute to your 401K — it’s a nearly painless way to save money for retirement, and it will reduce your tax burden. If your employer matches it, then you’re crazy not to. Shoot for a contribution totaling 10-20% of your income. Saving for retirement is crucial when your illness might force you to stop working at any time.

4. Make every effort to purchase short- and long-term disability insurance. Given that you do have a potentially crippling illness, it will be nearly impossible to buy this on your own. If your employer offers disability insurance, then definitely opt in. Chances are, you will be unable to work at least part of the time. Plan for that.

5. If your financial situation is particularly desperate, consult 31 Days to Fix Your Finances, an excellent program offered by The Simple Dollar. If you’re carrying a lot of debt, consider buying Dave Ramsey’s Total Money Makeover, which is devoted to that topic. Be warned, though, that the techniques he describes will be very difficult to follow without carefully structuring your finances to separate you from your money. Also, the book contains religious overtones that some people find difficult to swallow. That said, it’s an excellent program that has benefited many, many people.

6. If you’ve been fired or laid off, collect unemployment. My dad, who spent much of his career working for the Arizona state unemployment office says that it’s stunning and sad how many people refuse to collect unemployment out of pride — they mistakenly believe that it’s some sort of welfare. In fact, it’s called unemployment insurance for a reason: you and your employer pay for it with every paycheck you receive. So take advantage of this crucial benefit.

7. Keep good financial, medical, and employment records. This is crucial in case you should ever be ill enough to apply for medicaid or Social Security (SSI). I will discuss the process of getting SSI in a future post. For now, know that the Social Security Administration will tax your abilities to work the system to the limit if you should ever need it. Prepare yourself in advance for that ordeal.

8. If you work for a company with more than 50 employees, find out the process for getting intermittent leave via the Family and Medical Leave Act. This is worth its weight in gold. Rather than disappear suddenly when you get sick, you can call in intermittently without having to give an excuse. FMLA is unpaid, but it beats getting fired.

I’ll try to write a general introduction later. For now, think about setting aside a weekend day to prioritize these steps and implement at least one or two.

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