I thought it would be helpful for some to get really into the nitty-gritty of how we manage our money on a daily (or at least monthly) basis. It’s simple to say “we have joint accounts” or “we use Mint” but what does that really mean? (You can reference a copy of our current budget if you like.)
Start with a Clean Slate
On the first of the month the only money in our checking accounts is the paychecks we recently received – we don’t owe anything and we don’t have anything extra. Basically, we pay all our bills in a month with that month’s money.
First Things First
In our budgeting, we prioritize paying taxes, tithing, and saving for retirement. The paychecks we receive already have taxes withheld and we give to our church and “pay ourselves” as set times during the month. I like to get all the month’s non-discretionary spending out of our checking account as early as is reasonable.
Retirement savings: We both contribute to Roth IRAs bimonthly and we staggered our contributions so that we are buying in just about every week. This was the best dollar cost averaging we could do within Vanguard, though I admit it’s probably overkill!
Tithe/Giving: We tithe individually but our church somehow combines our statements at the end of the year. This is a holdover from when we were single. We also recently added support of a missionary, and we transfer money to her church early in the month.
Targeted Savings: We transfer out the savings for our short-term targeted savings accounts out of checking on the 5th of the month.
We auto-draft all the bills we can (these are mostly utilities), including mailing our property management company our (paper) rent check (I love Ally!). The only bill we pay manually is our water bill, and Kyle takes care of that. We have our credit cards set to auto-draft their full balances late in the month, but we usually pay them manually 2-3 times per month so that autodraft is never triggered.
We use credit cards whenever possible to pay for things to get the rewards and protection, and our Ally debit card otherwise. Our discretionary spending is basically just food, gas, small random purchases for the house, and purchases that will ultimately be paid by our targeted savings accounts.
We use Mint to track our spending against our budget. We share one Mint account that has all of our accounts linked to it.
In addition to Mint, I use Excel to track the transfers in and out of our targeted savings accounts. Mint has a record of these transfers, of course, but I like to extra control Excel gives me, especially to make notes to myself and play with estimates of upcoming expenses. I basically just have a pair of columns for each of our targeted savings accounts on which I record the amount of the transaction and a label for what it was for and I track of what the balance of the account should be (not including interest earned).
For all of our irregular but anticipated expenses, we use short-term targeted savings accounts. This is so our budget doesn’t get busted by months when several costly purchases hit us and to keep us from wasting money in months when we don’t have those big expenses. Our current targeted savings accounts are for: travel and personal gifts (plane tickets, Christmas), cars (car insurance, repairs), entertainment (season tickets to basketball games, season tickets to musicals), CSA, appearance, medical (dental, optical), electronics (laptops, phones), charitable giving, and taxes. (We also have a general savings account we call our “nest egg” and an emergency fund.)
We save into these accounts near the beginning of the month, and every time a qualified expense hits our credit cards or our checking account I transfer over the money needed from one of these accounts.
Paychecks and Buffer
We get paid on the 25th of every month. We still have a few more expenses between then and the end of the month but we don’t use this money – we preserve it for the start of the next month to pay that month’s expenses with. This “time buffer” is the reason we don’t keep a monetary buffer in our checking account. If some kind of crazy thing happened that drafted money out of our account right at the end of the month, we would have our paychecks there to absorb the blow until we could get it sorted out.
In the second half of the month I start doing projections as to how much money we’ll spend and whether or not we’ll end up with a surplus. If it looks like we have a chance of overspending the money we have left in our checking accounts, we’ll be a little more conscientious about buying only what can’t be put off until the next month. By the last day of the month I’m able to calculate our surplus or deficit by taking the remaining balance in our checking account and subtracting our paychecks and the remaining balances on our credit cards. I transfer the left over money to one of our targeted savings accounts, usually our travel account.
Extra Income/Found Money
When Kyle is paid for his small side hustle, we divvy up the paycheck and tithe part, save part, put part aside for taxes, and put the rest into our travel account. With other types of found money that are not income, we either add it to that month’s pot of money (if it’s small, like $30 or less) or put it directly into a targeted savings account (usually a fun one like travel).
So that is how we manage our money throughout the month! I do most of the monitoring and hands-on stuff, but Kyle has access to the same information I do. We talk over or at least alert one another to any purchase we’re about to make and revise our budget together whenever necessary.
How do you manage your money day in and day out – any peculiarities? Do you play any tricks on yourself like we do with our targeted savings accounts? Do you keep a checking account buffer?
photo from Free Digital Photos