Most people’s personal finances don’t measure up to the typical advice from experts. This is particularly true for young people who haven’t had a chance to build up retirement savings or an emergency fund. Knowing that your finances need improvement can make you feel guilty and worried every time you spend some money. The remedy for this is some planning and setting yourself on the right path. I think of my savings as three categories: long-term savings, medium-term savings, and an emergency fund. Each serves a different purpose in keeping your finances on track. Long-Term Savings Most experts call this “retirement savings,” but I prefer “long-term savings” for a couple of reasons. For one, it can be difficult to motivate people to save for their much older selves. Another reason is that you may end up using the money for some other purpose. You shouldn’t use it for consumer purchases like cars, but you may use some of it to fund a career change or a move to another countr...

Rob Carrick asked this question as a subtitle to an interview with Kerry Taylor about budgeting. The question is whether a viable alternative to budgeting is to take a percentage off the top of your income for savings and just spend all the rest. The unsatisfying short answer is “it depends”. I have no doubt that Carrick can make this approach work for him; he has proven many times over that he’s very financially savvy. Less sophisticated people can easily get themselves into trouble. These people might misunderstand “pay yourself first and blow the rest” to mean that as long as they set aside 10% of their pay cheques for long-term savings they can do whatever else they want. Building savings won’t help much if you build up lines of credit, car loans, and credit-card debt even faster. When the various debts grow large enough that your finances reach a breaking point, you’ll be forced to pay off the debts with the supposed long-term savings. So, paying yourself first and blow...