Ten plagues that afflict your bank account

Ten plagues did our Lord visit upon our enemies, the ancient Egyptians. By virtue of these portents (and by virtue of strong political leadership by our forefather Moses and his brother Aaron), our people were released from bondage.

Four thousand years later, here we are, groaning under the yoke of bondage. This time it isn't our neighbors to the south wielding the whip, it's our chronic overdraft, aided by our credit card bill, which somehow always manages to surprise. Will a prophet of personal financing arise and lead us from the darkness, guide us through the desert of debt into the light?

Not this time, it would seem. These days, savings and finance are a personal matter, and prophecy, well, you know whose province that has been since the destruction of the Temple (fools). Happily, in the age of Internet, there is a richness of Web sites brimming with helpful advice and tips about spending less, saving more and investing wisely.

What are the enemies of our bank account? What are the plagues afflicting our investments portfolio? Here are some possibilities.

Here's where it all begins. If you spend more than you earn, you can't save. The math is simple. People who earn minimum wage really do have trouble living within their means, but overspending isn't the province of the poor. High earners do it too. Why? Because they can't resist that gewgaw, or they want to outdo the Levys next door.

Before the great crisis of 2008, many Americans lived beyond their means, merrily tapping into their savings or borrowing to pay for their over-consumption. Now the American public seems to have woken up. Savings are on the rise. But over here, it seems that consumption never stopped. One can only hope that people buying designer shorts for NIS 2,000 or a jeep for NIS 250,000 are doing it with disposable income, not mortgaging their future for the pleasure.

The desire to get rich quick may actually be a barrier to reaching economic independence. People with this disease tend to risk much and make mistakes. They cut corners. They invest too much in trendy (but risky) shares that may shoot skyward - and drop even faster. When the market trend changes they take fright and sell, and come back to the market only after the rally - usually too late.

The Web site Getrichslowly.org provides some basic financial advice. It points out that people often enjoy their money only when their friends have less than they do. The problem is that everyone is in the race to get the same things, and there will always be people who have less, and people who have more. Make a real effort to ignore what other people have: Focus on your real needs, it urges. Or as Bud Fox asks his idol Gordon Gecko in the movie Wall Street, "How much is enough?"

The first step toward adjusting outlay to income is to know how much you spend. Usually people have some idea of their monthly outlay, but the difference between "some idea" and the actual number can reach thousands of shekels a month.

Planning isn't just about spending. If you want to earn from investments over time, you have to define goals.

For instance, if you can put away some money in a safe place and not touch it for a long time, you can afford to expose your investment portfolio to some riskier financial assets with potentially higher returns.

If you know you face a large expenditure in the near future (buying a car, traveling abroad, college for the kids), you have to plan the resources in advance: how much you'll spend of your own equity, how much to borrow. Planning and creating an investment strategy is the first step toward maximizing returns on investments.

We all like to be spontaneous, to buy something we want when we see it. The trouble is that most of us have to adhere to budgets. If you plan a budget and stick to it, you'll have an easier time controlling your spending. If you go shopping with a list, you'll spend less than if you shop spontaneously.

Here's an exercise for you. Each time you use your credit card, imagine what you'd do if you had to pay in cash. Often enough you'll find you would have refrained. The credit card makes shopping so much easier and more convenient, and leads us into the temptation of buying more than we need. If we're offered 10 equal installments, we feel we got the product practically for free.

It's no coincidence that the western culture of consumption is based largely on the credit card. In countries where credit cards are rarer, consumption is lower. People live within their means and often save more, too.

Pension savings are the money deducted from our wages each month, which disappears into executive insurance, pension, provident and continuing education funds (kranot hishtalmut). This is the money that is supposed to be there for us later in our lives, when we retire.

In Israel, pension savings are deducted by law. Most people trust their employer and the government that when retirement rolls around, they'll have enough to maintain their standard of living. These people prefer to pay little attention to that money.

On the one hand, this is good - there is no need to be preoccupied with long-term savings. It is better to let them grow slowly until the day we need them. On the other hand, completely neglecting these savings is not good either.

At certain times, our savings need some attention. Saving plans must be updated in accordance with the saver's age. Insurance components must be updated in accordance with changes in family status.

Various funds and plans begun with different employers must be tracked; and insurance savings must be examined periodically and compared with new savings options that could be better.

The Israeli public is gradually approaching an era in which workers will be in charge of the major decisions regarding the character of their pension savings. This means employees will have to take personal responsibility for all the components of the largest, most important savings plan of their lives.