Shomer Shekalim

Home » Personal Finance » overview of personal finance

Category Archives: overview of personal finance

components of a financial plan

I am not sure at what point after I began trying to take control of my finances that I realized I had no idea how to know if or when I would actually attain the control I was seeking.  When would all the obsessive research and spreadsheets be enough that I could confidently say that I was in control of my finances?

While there is no magic formula for the perfect financial plan, I knew that whatever plan I’d follow, I would have to take into account four phases of my life: the present, the unknown, the past and the future.  Below is the list I compiled of the major components of my financial plan:

(1) The Present:  Make sure you spend less than you earn

  • (a) Live on a budget – this means composing a monthly spending plan, including your fixed expenses, variable expenses and tzedakah
  • (b) Occasionally review and attempt to reduce expenses
  • (c) Increase income – this includes watching your investments (for example, your keren hishtalmut) to make sure you are getting the most out of your money.

(2) The Unknown:  Plan for occasions when things do not go according to plan

(3) The Past:  Deal with your financial past

(4) The Future:  Plan and build towards your ideal future

What other items do you think are important to a financial plan?

PS – As you can see the plethora of links above, I have written on all of the subjects above except one – planning for an estate.  If anyone has had any experience and would be willing to speak to me about it or write and article, please contact me at

baby steps

If you’ve been following this blog for a while, you’re aware that I am a huge Dave Ramsey fan.  Dave’s plan is simple to understand, easy to follow and inspiring.  Part of my goal in this blog is to take some of his idea and teachings, acculturate them for Israel and spread the information to help others.

At the core of Dave’s plan is what he calls the baby steps.  These steps represent the seven financial milestones for a sound financial plan.

The baby steps are:

Baby Step 1 – Set up an emergency fund of $1000

Baby Step 2 – The debt snowball.  Pay off all your debts from smallest to largest

Baby Step 3 – Bring your emergency fund up to 3-6 months worth of expenses

Baby Step 4 – Invest 15% of your income

Baby Step 5 – Make a college fund for your kids

Baby Step 6 – Pay off your house early

Baby Step 7 – Build wealth and give

In a previous post, I discussed about how I viewed these steps in Israel and where I would make some adjustments.  Now I would like to revisit the topic and introduce a few more ideas and comments.

One thing that always struckme about the baby steps is that in Israel, baby step 4 is unnecessary.  We have a law that all salaried worked receive pensions and this money comes straight out of our paychecks.  Unlike America, a keren pensia is not a goal, but just part of working.  Keeping track of a keren pensia is no different than buying insurance or giving tzedakah – it is part of a sound financial plan, not a financial milestone for which to save.

On the other hand, we in Israel have one important financial milestone that is not as necessary in the US, saving for the down payment of a mortgage.  Unlike in the US, Israeli banks usually want a third of the cost of a house as a down payment.  In order for an Israeli to even get to the point having a mortgage, there has to be a significant amount of saving beforehand.

Keeping this in mind, as well as the issues I mentioned in the previous post, the following are my Israeli baby steps:

Baby Step 1 – Set up an emergency fund of ₪ 4000

Baby Step 2 – The debt snowball.  Pay off all your debts from smallest to largest

Baby Step 3 – Bring your emergency fund up to 3-6 months worth of expenses

Baby Step 4 – Save money for a down payment on a home

Baby Step 5 – Emancipation costs for the kids (weddings, college)

Baby Step 6 – Pay off your mortgage early

Baby Step 7 – Build wealth and give

What have been some of the financial adjustments you’ve had to make as an Israeli?

how to make a home finance file

Do you remember what a pain it was to locate all your old pay stubs last time you had to file something for bituach leumi?  What about the last time you had to find your rental contract to settle a dispute?  And when’s the last time you even looked at your bank statement?

When it comes to money, organization is a tremendous time and money saver.  Organizing your financial documents is important because (1) it makes it easier to find what you need when you need it, (2) it enables you to review and improve your finances on a regular basis and (3) it allows you to find money that is being stolen from you every month through shitat matzliach.

And if that isn’t enough to encourage you, by law, you are required to have 7 years worth of financial documents on file for an audit.  And since the folks over at mas hachnasa can come after you for pretty much any stupid reason,  you may as well be prepared.

So, how do you organize a money folder?  Here is a simple 3 step process:


Step 1:  Get some supplies:

A binder, a hole puncher, dividers, and some sheet protectors


Step 2:  Divide your money folder into the following five sections:

1 – Pay slips

2 – Bank statements

3 – Investments

4 – Payments

5 – Contracts, policies and communications


Step 3: Review you financial paperwork and load it into each section

1 – Pay slips.  Every month you need to receive, check, and store your pay slips.  Upon receiving your pay slip, use the tax calculator to make sure the proper taxes were taken off. If something is incorrect, contact your company’s HR person and find out if you are misunderstanding something or if there is an error.  Once you approve the pay slip, put it into your binder for storage.  I put each year’s pay slips into a different sheet protector, with my 106 on top of each pile

2 – Bank statements.  I don’t advocate keeping every piece of paper written to you by the bank; only the important ones.  Once a month I set a day to print the list of transactions from my bank’s websites and check off each one as I approve it.  If there is a transaction that I don’t recognize (usually a bank fee) then I contact the bank and ask for my money back.  Also, your credit card deducts from your bank once a month, so in order to approve the transaction where money goes to your credit card, you need to review your credit card statement.  The sleazy guys at my bank moved the bank fees they were not supposed to charge me onto my credit card, hoping I would not find it.  Look for these as well as any other charges you do not recognize and either confirm that the statement is correct or fight the charge.

3 – Investments.  In this part of your binder, you should store any material relevant to your keren pensia and, if applicable, keren hishtalmut.  This includes any letters you are sent, quarterly reviews and payment notices.  Make sure to make sure you understand every piece of paper as you put it in.  If you don’t, call the company and have someone explain it to you.  Don’t be embarrassed; it’s your money and you have every right to know what they are doing with it; that’s why you are paying them a management fee.  Also, as times goes on, it will become easier to read these statements without any assistance.

4 – Payments.  Include any payments that you have paid to anyone who can hunt you down and demand payment again.  This includes rent, mortgage, arnona, electricity, mas hachnasa and bituach leumi.  Receipts for household items with a warranty will be kept in the final section…

5 – Contracts, policies and communications.  In this section you should include your rental agreements, insurance policy, work contracts, communications with bituach leumi and mas hachnasa, warranties on your electronics and any other relevant paperwork.  Of course, if a particular contract or policy is too big, it may merit its own binder.

If you’re like me, although you know you have hundreds of papers lying somewhere, you can currently locate only two relevant sheets of paper.  That is fine; just start and other papers will turn up.  In the meantime,  pray to God that you will not be hit with an audit any time in the next seven years.

baby steps – Dave Ramsey the Israeli way

Over the past few months, I read (okay listened to an audiobook of) Dave Ramsey’s Total Money Makeover.  He employs a brilliant system for earning and saving money that has truly taught me a lot.  But living in Israel, the financial situation is quite different.  Our financial laws, labors laws, and investments work quite differently form the United States and in order to make it in Israel, one has to think like and Israeli, not an American.

First let me introduce Dave Ramsey’s system.  His system follows 7 baby steps to building wealth.  The idea is to only go to the next step when the previous steps are completed.

Baby Step 1 – Set up an emergency fund of $1000

Baby Step 2 – The debt snowball.  Pay off all your debts from smallest to largest

Baby Step 3 – Bring your emergency fund up to 3-6 months worth of expenses

Baby Step 4 – Invest 15% of your income

Baby Step 5 – Make a college fund for your kids

Baby Step 6 – Pay off your house early

Baby Step 7 – Build wealth and give

While I agree with Dave on many items, I think some have to be changed based on the current volatile financial system and the Israeli market and government.  Below are the list steps I would recommend in Israel.

Baby Step 1 – Set up an emergency fund of 3 months worth of expenses.  We live in dangerous times.  Unemployment is up and jobs are hard to come by.  Unless you’re very secure in your job, be prepared.

Baby Step 2 – The debt snowball.  Pay off all your debts from smallest to largest. – I agree with this step.  Many criticize this step and claim that the debt snowball should be from the largest interest to the smallest and if you have the proper discipline, this is the way to go.  Otherwise, enjoy the small victories of conquering each debt and get to the bottom of the pile.

Baby Step 3 – Bring your emergency fund up to 6 months worth of expenses

Baby Step 4 – Invest more of your income.  You should already be investing in your pension (and keren hishtalmut is applicable) at your work.  Pushing off these items in order to pay a debt would be turning down a 200% return on investment (because of the match from your workplace) in order to pay off a debt that is at its worst 20% – 30%. One should enjoy the investment offered by a working place even before Baby Step 1, but only begin to invest beyond that when one reaches Baby Step 4.  At this point I agree that 15% of income to be invested is an optimal amount.

Baby Step 5 – Children’s Emancipation – Thank God we live in Israel.  College here is much cheaper.  But another major cost can hit you up more faster than college – a wedding.  Put aside the money you need to get your kids out of the house when the time is right.  You don’t have to put aside every last agorah, but enough to help your kids and yourself ensure that a time of blessing does not become a source of distress.

Baby Step 6 – Pay off your mortgage early – I absolutely agree with this one.  If your kids are young enough, I would even recommend switching the placing of this Baby Step with Baby Step 5.

Baby Step 7 – Build wealth and give – This would be a great time to learn the laws of tzedakah.  Share not only your wealth, but also your learning with others.

I hope to, in the coming weeks go through a numbers of tips for making it financially and living in Israel.  If anyone has any tips, ideas or would like to be a guest writer, drop me a line at

Shabbat Shalom