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On Monday I confessed that since I stopped tracking my spending, I’ve actually had some trouble paying my bills. It’s not that I don’t have the money — I have plenty! — but that I no longer have a system in place to remind myself to take care of routine financial tasks. Quicken was my system, and when I stopped using it, order vanished.
In the comments on Monday’s post, Rob Bennett made an astute observation:
Good money management is not intellectually difficult. Nor does it connote moral superiority. It is all about habits. Some people get in good habits (for any of a hundred different reasons) and some people get in bad habits (for any of a hundred different reasons). And that determines how things turn out. We should be spending more effort figuring out what causes people to get into good habits and forget the rest of it, which is mostly just people talking.
And Shara wrote:
Maybe you could collect some methods people use and write a post about it. So many people starting out stumble around because “do what works for you” doesn’t work when you don’t have the experience to build a system that works for you. [...] “Track every penny” or “automate your bills” aren’t systems. They’re tools and ideas. Some people need a few more specifics.
I think Rob and Shara are on to something. There’s no one “right” way to manage your money. Instead, there are a bunch of different methods and systems that work for different people.
Today, let’s talk about the systems you use to manage your finances. Are they effective? What works and what doesn’t? What have you tried in the past that didn’t work? What would you recommend for folks just getting started?
As an example, here’s how I used to manage money, back when I was in debt. This system (or non-system, actually) didn’t work at all:
- I had no savings. None. I only had a checking account, and its balance was nearly always between $10 and $30. When I got money, I spent it. If I had none, I didn’t buy anything.
- I dumped my bills on a desk with all of the rest of my mail. I had a mental list of when things were due, but I didn’t do a good job of following through. I often mailed payments on the day they were due. (Though I was rarely, if ever, late.)
- Because I didn’t track my spending, I had to guess at my bank balance. Using the ATM balance as a starting point (this was back before online banking), I’d try to remember what checks I’d written and what purchases I’d made with my debit card. This was very imprecise.
- I was lazy. I got paid twice a month, but often wouldn’t deposit my paycheck for days. This wouldn’t have been a big deal except that (a) I was living paycheck-to-paycheck, and (b) I’d often already mailed bill payments based on the new paycheck. As a result, I suffered from frequent overdrafts.
- I treated credit cards as a sort of sneaky way to buy things when I didn’t have the money. I had several credit cards, which were nearly always maxed out. And when they weren’t maxed out, it was only because I hadn’t found anything to buy.
Basically, I had no control over my financial life. It never occurred to me that I ought to have control.
Now things are mostly different. Obviously, I still struggle with organization, which is why I managed to have a late payment of $23.23 to the hospital. But as I said, I think that error is due to the fact that I recently abandoned the system I’d been using for the past five years or so. Here’s the system that worked for me as I dug out of debt and started building wealth:
- I automate as much of my financial life as possible. This means I set up automatic payments where that’s an option, and I request electronic statements instead of paper statements.
- I use my cash-back credit card for as many purchases as possible. For everything else, I try to use my debit card. I only write a few checks a month now, and the only cash I use is my “adult allowance”, for which I don’t keep detailed records.
- I use my wallet to collect all of my receipts.
- I gather all of my bills and financial documents into one location (usually next to my computer).
- Once a week (sometimes once every two weeks), I sit down to enter all of my data into Quicken. (I chose Quicken because that was the only option for the Mac when I started keeping track of my expenses; you should choose whichever program best fits your needs.)
- Once I’ve “done Quicken”, I shred the unimportant documents. I use a document scanner to digitize the important stuff, and then I shred most of that, too.
- Some documents (like tax forms) end up in our fire-proof safe (purchased cheap at Costco).
- I have three sets of accounts: my everyday checking account at the local credit union, a set of savings accounts (each with a different purpose) at ING Direct, and my retirement accounts (both Roth IRA and 401(k) at Fidelity). I regularly transfer surplus cash from my credit union to the appropriate ING Direct account. And a couple of times per year, I make deposits to my retirement accounts, based on what I think I can afford.
While this may not seem like much of a system, it works for me — or did until I tried to mess with it. That’s why I’ll be going back to the way things were; I feel like I’ve lapesed into a bad habit.
My financial success has been all about replacing my bad habits with good ones, but I did a lot of stumbling around before finding methods and systems that worked for me. My habits still aren’t perfect, and probably never will be, but they’re enough to keep me in positive cash flow while also setting aside money for retirement and giving me a bit to spend on today.
What about you? How did you find the methods and systems that help you manage your money effectively? What are those methods and systems? What sorts of people do you think they’d work for? And what options did you reject before picking the processes you use today?
This article is about Ask the Readers, Basics, Money Hacks, Tools Thursday, 17th June 2010 (by J.D. Roth)
I use a very simple MS Excel sheet to track my spending. It’s basically a column for the date and one for the balance in my account after the transaction. I list all my bank accounts (savings/checking/other), and so I always know when I need to transfer money from one to the other.
Every month, I copy the previous month’s transactions, and change the dates where appropriate (like for paychecks), projecting out what my next month should be.
I estimate transaction amounts (CC bills, Utilities, etc.), and update them when I actually get the bill. This reminds to actually set up the payment if it’s not on auto-pay (infrequently used CCs, for example). I check my online CC activity at least a couple times a week, so I have a good estimate where I’m trending for the month, and I know if BIG expenses are coming up.
I’ve added some frills here and there for things I like to see (like month-to-month cash flow), but for the most part it’s a register that goes both in the past (I have a few years on the file now), and a month or two into the future. If I’m going to be away from a computer for a while, I make sure that all the necessary transactions are scheduled or automatic until I’ll be back.
I stumbled around in the dark for a long time before I found a system that works for me. I have been using some version of this system for 8 years or so (with various tweeks along the way)…
- when mail comes in, I immediately sort it into three folders that I keep in my kitchen (garbage/recycle, file/shred, to be paid).
- The garbage/recycle I do right away. The other two folders I deal with once a week.
- I sit down once a week and pay bills (online through my bank) and update my budget in YNAB. I used a lot of different budget/financial management software but didn’t find one that really clicked with me until YNAB. However, my “system” isn’t dependent on what software I use. It is just dependent on me doing SOMETHING to track my spending.
- Paying bills includes going on line once a week and paying my credit card bill - EVERY WEEK. I never wait until it is mailed to me. If I only dealt with it once a month there would be too many things I forget I put on there. This way I can use the convenience of a credit card but easily keep on top of it.
- I have as may bills as I can paid automatically (often on my credit card) and I have all my savings taken out automatically (to various ING sub accounts - emergency fund, special projects, travel, house taxes etc.).
I had gotten a little lazy about updating my budget recently - more like every 2 weeks or a little more. Last week I made a promise to myself to get back on top of it weekly or even more frequently. If I do it more often it takes SO MUCH LESS TIME than if I put it off.
First things first, my husband and I sat down for an afternoon with our bank and credit card statements and a budget sheet and figured out EXACTLY where our money was going. Sounds easy, but it was an incredibly painful process. It took us about 6 months of talking about it, and about a month and a half of flat-out pulling teeth, and then it was hard to sit down and really be honest about how much we were spending. This was really a crucial exercise for us- it really showed us where the money was going and forced us to wrestle with some really hard numbers.
We knew that, based on those numbers, housing costs and travel costs were our two biggest offenders. While the mortgage was reasonable on the house, when we added up the property tax, the utilities, and the especially the maintenance on a 110-year old house, we realized we were spending virtually my entire take-home salary on a house I didn’t like (it was purchased before I was in the picture). We made another tough decision to prep the house for sale and move into something cheaper.
Our actual travel costs shocked us. We really had never sat down and really added up how much our travel habit was costing us, but at the same time, we were reluctant to give that up, since it’s a huge priority for us. We started up a joint “Travel Fund” and deposited a certain amount for every paycheque. If we want to spend on travel, it HAD to be from that account, and no others. Any extra money (side jobs, etc.) could go into that fund to bulk it up if we wanted to. No money, no travel. This is probably the number one thing that has helped us in keep our costs in check.
We also took some pretty drastic steps to “make more money” (but that’s a whole post of its own).
Now we’ve settled into a pretty stable system. Everything is automated to “pay ourselves first”. The paycheque comes in, money automatically gets transferred out for Debt (the last remaining vestiges of a low-interest student loan), Emergency Fund, Travel Fund, Retirement/Investments. Anything left over is fair game. I do mine weekly because I like the stable cash-flow aspect of it, hubby does it bi-weekly because he likes having it tied directly to his paycheque (different strokes for different folks, even with the same goal).
If we’re overspending, it hits our “left-over” income first. This has two real benefits. a) we notice it right away since that’s our day-to-day spending money, and b) it doesn’t take away from our priorities (debt repayment, emergency fund, travel, investments), only from our “wants”.
I should mention a quick thing on our division of accounts, since it’s a topic that comes up so often. Some of our accounts are shared, some of them are separate. The house is under both our names; our credit cads are separate; some of our savings are shared (travel and e-fund), some are not (debt repayment- my schooling); and our investments are absolutely separate since we have completely different strategies, preferences, and tolerance for risk.
I’m on an almost all electronic regimen. Even when there are bills that aren’t directly linked between my bank and the company I’m paying (i.e. a bank and the electric company), I can still have a paper check sent to them. Through consistent scheduled payments (student loans, mortgage) and occasional manual entry, all of my bill paying takes about 30 mins a month.
Also, I work at a computer all day (as it seems you are too, JD) so even if I’m in the middle of something, if I see an email come in telling me about a payment due, I’ll go schedule it online. If I can’t do it at that moment I give it a high priority, mark it as to-do, leave it unread and anything else I can think of so I remember it. I also use Mint for budget management and if I don’t see a certain category hitting its usual level (i.e. Utilities), I know something is up BEFORE the next billing cycle hits.
I’m curious though. What kinds of bills AREN’T electronic these days? Even if they are just storing PDFs online, it seems that just about everyone has some online component. I’m not sure if you have an aversion to online payments, but I’d give my system a try. I hardly ever miss a payment and when I do I can usually call and ask for them to remove the late charge because I always pay on time (an awesome trick that can work wonders!).
~Chris Gammell
My best guess is that you still need to gather the receipts and bills in one place and go through them every two weeks to make sure you’re on track and not missing anything. You don’t need the data from Quicken any more, so that step is wasted time, but you do need the review process.
I learned an important lesson from a boss who filed most things chronologically. He pointed out that it saved him so much time on the filing, that the extra bit of time looking for something wasn’t really a problem. Lots of people don’t realize that you need to count both filing and retrieving time in deciding on a system.
I now files bills and other papers chronologically by month. I don’t need to track them back too often and it never takes more than 15 minutes even if I don’t remember exactly where something is. And my filing time is zilch, so the system really does work for me.
I use a simple method for ensuring I don’t miss paying any bills.
When a bill arrives in the mail, I immediately put it on the desk in the study, right between my computer’s keyboard and monitor. Every time I’m on the computer, the bills are right there. The next time I’m online, I open the bill and pay it.
Here’s the thing that makes it work: I never open the bill until I’m about to pay it. Thus, if a bill is unopened, that means it’s unpaid. If it’s opened, then I can be 100% certain that it’s been paid, and I can safely file it away.
Of course, if I were to go weeks without using my computer, this system might break down. However, that’s not an issue in my house, as my wife and I both use the computer nightly.
I have a simple method that is working pretty well for me right now… I have a large desk calendar at work and I write all my automatic payments on it, just the number amount, rounded like 325 on the 15th for my car payment. THis helps me make sure that I know what is coming up when budgeting our pays for the next couple of weeks. Having it on my desk does leave it open so that anyone could come in and see, but the amounts only are shown so my coworkers don’t know how much my mortgage payments are
BUT having it on my desk means that I see it 5/7 days of the week, which I need.
We recently set up automatic transfers to new RRSPs, as soon as I came back to my office I put the new payment on the calendar for the next few months. Don’t want to forget about that one
I definitely need to work more on how we deal with money, but this is working quite well for us right now.
For me, the key is keeping track of every penny I spend and making sure my income exceeds my expenditures every month. I tried Mint.com for a while, but I got tired of having to change the categories/descriptions to accurately reflect what I considered them. So I instead created a spreadsheet in excel to keep track of everything. The book ‘The Richest Man in Babylon’ suggests an income allocation of 70% for living expenses, 20% toward debt, and 10% for savings, so those are the categories I use in the spreadsheet. Doing this gives me a budget to work with and the goal each month is to have a surplus in each category. Whatever money I have left over after living expenses either goes toward paying off more debt or into savings.
I also pay everything online and set reminders for those bills that aren’t completely automated. This way I never miss a payment.
I use a method that is a hybrid of an idea from The 4 Hour Workweek By Tim Ferris. I call it batching my bills. We moved all of our bill payment days to a five day window (say the 15th-20th of each month) We sit down and pay all of our bills and make our savings and investment contributions on the 15th of each month. That way on the 21st whatever money is left in our account is our “want” money since savings and bills are already taken care of.
Here is a more detailed description I wrote on a Lifehacker guest post. http://lifehacker.com/5439703/avoid-late-fees-by-batching-your-bills
I have 3 very simple rules.
1) I pay myself first, automatically. Some stuff (pension, share plan) is deducted directly from my pay. Others are automated payments from my bank account scheduled to go out a couple of days after my pay is deposited.
2) Every bill I can automate, I have automated. That includes all utilities, communications (TV/phone/internet), subscriptions/memberships, credit cards, and tax.
3) Day-to-day spending all goes on a credit card which is paid in full every month.
On top of these 3 rules I feed stuff into yodlee.com which categorises things for me and shows where I’m spending money, but I don’t sweat it too much. If I’m paying my bills and hitting my savings targets, I don’t much care if I spend more than usual in restaurants or bars in any given month.
3)
Hi everyone!
I had my “I have got to clean this crap up” moment about 6 years ago now.
We will skip on the details, it is essentially the same story everyone else has.
Given my penchant for simplicity, my system had to follow in that mold. I have all my bills entered into a Google calendar as recurring events with reminders coming to my phone. When the bill is payed, that event is deleted. The date used is the date the bill becomes available online, not the date it is due. I pay stuff the first moment I can. (and if you start in on me about the interest my $40 gas bill could have made in a savings account for the next 3 weeks, I’m going to blow a vuvuzela in your face.)
I absolutely do not, however, use automatic billing. It is due in small part to not wanting to have to worry about updating things if stuff changes but mostly I do not want to “lose touch” with my bill paying and obligations. Sitting down to manually execute that payment online is just important to me for some reason.
So far it has worked gloriously.
I started using YNAB (I think I heard about it here) a couple of years ago. I record everything we spend, downloading most of it via online banking. Now that I know where the money is going, I can figure out how much we can realistically put away for savings, and how much we can spend. I’ve never had this much control over my money before.
Once we got our credit card paid off, I started paying it off every week. I don’t want to get back into the habit of spending money we don’t actually have in hand.
My habits:
- Pay bills as they come in, online
- Once pay is deposited into my account, the first thing I do is put some into my savings accounts
- Withdraw an “allowance” for myself every week and if I have any money leftover, I put the surplus in an envelope to save for a specific goal, like vacation spending
- Procrastinate from my work by figuring out how much money I have, what kinds of things I want to buy, and how much money I need to get there (not productive, but definitely a habit!)
- Contribute sporadically to my TFSA (Canada’s version of a Roth, I think?). I don’t have regular pay, so I haven’t been able to practice a regular system
Like yourself, I pay most of my bills electronically and get the majority of my bills that way as well.
One thing I do differently is that with a few exceptions (vonage/msn) I do not use automatic payments. It’s important to me to have control of the cash flow as we are still working our way out of debt.
I pay far enough ahead that delaying a payment does not put me behind. I also tend to pay extra on bills every month.
Not automating means that if something unexpected comes up, I can adjust to meet that need - either by holding back payment for a few days or a couple of weeks or adjusting down to making only the minimum payments and moving the extra money where I need it.
I like the flexibility of this system. That being said, I do use Quicken to track all bills and review the bill schedule every 7 - 10 days. I keep all our bills in Quicken including bi-weekly deposits to savings, quarterly expenses such as oil changes for the vehicles and bi-annual ones such as car insurance.
I think that it is all about managing your lifestyle
When I first started managing my money “properly” automatic bill payments didn’t exist and I only had a visa/debit card. I wrote everything down as I spent it, always rounding up charges and rounding down deposits so I had more money in there than it appeared but I never knew how much (over a year’s time you can build up $500 or so in excess that way without even knowing it).
Most bills that I have today get charged to my credit card. Because my card got cloned last year and a few thousand dollars in charges were racked up before I noticed, I go onto my bank’s website at least once a week to check that everything is okay and to pay any bills. I mostly use one visa card and take out $200 or so in cash about once a month. I have an accountability push to summarize through my site, but I use excel and create a pivot table. 15 minutes once a month.
I ensure that I have a pretty hefty “rainy day fund” in my checking account. If the balance falls below $10k (netted with the visa) I really watch my spending the following month.
Last year when I was still working, I had the following method for saving:
Into high interest savings account - one paycheck, all “extra” income including consulting. I lived on the other paycheck except for major renovations, my son’s university costs and one major vacation once a year.
I only use automated banking for bills that I know will be the same value every time, i.e. mortgage, condo fees, etc. I manually pay (online) the variable bills like my cell phone. By manually paying my variable bills I can double check that there are no errors in the bill. Otherwise I track everything in excel.
I keep things simple (or, as simple as possible).
I have a checking and savings account with one credit union, ING and Sharebuilder accounts linked together, a retirement account and one credit card. My Student Loans are with one company and I have no other debt.
My monthly bills are far from automated and I get paper statements. When I get the statements in the mail, I pay the bill online and shred the statement so that I know it has been paid.
I have direct deposit so that I don’t have to worry about going to the bank to cash checks and use online banking to confirm transactions.
Nothing fancy here. Maybe the best bit of advice I could offer is that when the bills come in the mail, go right to the computer and pay them, or write the check out and put them back in the mail. That way it is fresh in your mind and you don’t forget.
If you don’t get paper statements and are having trouble remembering due dates, opt in for paper statements and follow the advice above.
The worst thing I ever did was to stop getting paper statements for my credit card. I would forget there was a bill due because I was so used to getting statements. That caused a lot of problems!
My method is terribly old fashioned but works for me. When I was a starving college student I began doing this and it’s always been helpful. Because not all bills are electronically delivered (doctor, hospital for example), I open the mail right away and sort out what needs to be paid. If possible, it’s paid right then. Get it done and over with. If not, it goes in the stack, based on due date, and handled accordingly. For me the key is doing little bits daily. That way I always feel I’m on top of the situation. Even if something were to be delinquent at least I’d know where I stood. Whether it’s checking balances, payments, or reworking the budget, a few minutes a day saves me a lot of headaches–and heartache.
One thing I’ve found to be incredibly helpful in keeping track of my credit card purchases, and in making sure I can pay the bill in full each month, is to write down each credit card expense in my checkbook register and deduct it from my balance. I denote it as a credit card payment (as opposed to a check, debit, whatever). When the bill comes in once a month, I’ve already accounted for all expenditures on that bill, and I pay it off knowing that once it’s paid, the banks records will match mine. (Also, no surprise $500 cc bill when I only have $300 in my account.) I write it down when I pay it so I have a record, but obviously don’t deduct it from my balance, because it’s basically already been done, in bits and pieces. (I then go back to those purchases and check them off, just like I do when I see a check has cleared.)
I double-check my own math along the way by going on to my bank’s site, deducting the total of all my credit card purchases for the month from the amount they say I have. It should equal exactly what my own register says I have, i.e.–bank says I have $800, but my checkbook register reflects that I have $600. I’ve put a total of $200 on my credit card. Right on track. This also helps with knowing that my total bill should be x, but it’s only y, if I wait a day or two I’ll be able to pay for all purchases I count for that month. (That’s just my particularity thought. If I charged $200 in June, then I want to pay off all $200. I feel like I get a fresh start each new month that way.)
In general budgeting terms, I’m absolutely someone who needs to track everything. I give myself a set amount for the month for Groceries, Gas, and “Other” (a broad category that covers smaller unexpected bills, fun money, whatever—it works for me) with the money I have after accounting for bills, giving, investing, and saving. It took some tweaking to get down to the perfect amount for groceries and “other” without feeling deprived, but gas was easy to figure out, since my spending on that varies little each month. Each of the three has their own column with the beginning balance at the top. Each time I spend in that category, I enter the amount and deduct it, so I know what my new balance is. If I don’t, I totally lose track of where my money is going. As for which system I use, it’s a fancy bit of budgeting software: a steno-pad, pencil, and small calculator that I usually keep in my purse—1 page per month. Even if I’m not near a computer, I still have my entire budget and know how much money I’ve left to spend on x, y, or z. (Having it on hand has saved my tail on many an occasion.)
I had to laugh at your non-methods. I have a friend whose “method” is this: When he gets a bill, he puts it in a folder. When he gets paid, he pays the bills in the folder. When the folder, is empty, he buys furniture!
For me, I use a lot of charts and spreadsheets, because I love them. I have an amazing one for my savings and student loan payments. It has lines that travel out 25 years showing the projected balance if I make minimum payments, the balance if I make the payments I’m planning to make (more than the minimum, obviously), and another line for the payments I’ve actually made that projects out to a payoff date if I only made the minimum from here out. It’s very motivating because each time I make an extra payment I get to see my payoff date get closer. It also has lines for projected and actual long-term and short-term savings. I’d like to see that long-term savings line and the actual loan balance line cross.
I have another for my monthly bills that I fill out each month. It makes it really obvious what bills haven’t come yet, or which have come and need to be paid. When I get a bill I enter the balance, due date, and minimum payment into the spreadsheet (or for rent, student loans, etc, I enter it right away because I already know this info). Then when I pay it I enter the amount I paid and when. This makes it easy to track what I’m going to need to pay over the rest of the month, and if I haven’t gotten a particular bill yet it’s easy to page up and see when it was due last month and have an idea of what to expect.
Every Friday one of us gets a paycheck and I pay all the bills that came. Then at the end of the month I transfer the remaining money (above our checking buffer) to distribute it between 2 student loans and 2 savings accounts.
I look forward to the end of the month when I can do this and also when I “pay” myself from my small business. I love to see those lines on my chart get closer and closer together
I use Mint.com to give me an overview of budget categories, tracking spending, and tracking my net worth. Mint can be as simple or as complicated as the user would like. Mine is fairly complicated - but after an initial few days setting it up, I’m good to go.
I also keep a spreadsheet to know the allocation in our accounts - for example, there is a $3000 buffer in checking (so $3000 actually counts as $0) and in one lump savings account, some is for emergencies, some for yearly car insurance payments, some for vacation, some as a “not-quite-emergency-but-need-money fund (for things like tires on the car, birthday presents), and then the rest is general savings.
This system works really well for me. I also have ALL of our bills set up automatically - I then go in and make bigger payments to the credit card and mortgage but at least I know the minimum is done. For bills that come in the mail, they get paid on a counter by the door and sent out in the mail the next day. Waiting even one day is recipe for failure for me.
1) Daily: When a bill come’s in I pay it immediately (Never Pay Interest)
. . . 3-hole-punch it and file in a loose-leaf notebook.
. . . also enter pay-stubs, investments, Dividends, Interest, etc
. . . in different sections, “Income & Expenses”
. . . (Broken down by type)
. . . in the same loose-leaf notebook.
2) Monthly: Spreadsheet tracks “Time VS Money.”
. . . (by Months and Cross-footed)
. . . Vertical columns are “Months”
. . . Horizontal columns, “Income & Expenses” (Broken down by type)
3) Yearly: I save a copy of this years spreadsheet in “RED”
. . . . . . as “PLAN” VS “ACTUAL” for next year.
, , , As this years amounts are entered in “BLACK”
. . . . . . . it is easy to see how things have changed.
. . . It also give’s me a heads-up to save for bills, like:
. . . . . . Insurance, House, Car etc.
. . . . . . Tax’s, Property, Car Registration, etc.
. . . . . . Vacation, Christmas, Presents, etc.
. . . . . . Home Heating fuel, etc.
. . . Start a New “Current Years” loose-leaf notebook.
. . . Comes Income Tax time, everything I need,
. . . . . . . is in the “Last-Years” loose-leaf notebook.
I use a combination of methods, but it’s actually pretty simple once I got it set up.
I keep a mid-sized notebook. When I get a bill, it goes straight into the notebook, on the month it’s due. On that page, I keep a list of my fixed costs, as well as a list of intermittent costs (i.e. birthday presents, hair cuts, etc). I also track how much income is due–both my paychecks and one-time sort of income such as business reimbursements, money people owe me, etc.
Each Monday, I spend about 5 minutes balancing my checkbook. I pencil in the new amounts (along with a date), and add up all the figures too see if I’m on target for the month or not. I prefer working in pencil, rather than on the computer, bc I can keep track of when I revise figures, by noting the dates when I change them.
I pay all of my bills online when I’m there checking my balance, so I don’t have to mail anything out–I don’t like to set up auto bill-pay, bc I like taking some time to review the bills and make sure there’s nothing hinky going on.
In addition to the “analog” notebook, I keep a yearly Excel budget. In this document, I also have spreadsheets tracking our mortgage, our savings, our car loan, etc. By simply entering the amount I will have left at the end of the month, I can quickly see if I’m still on track for the year overall. I find the computer works best for me for computing long term benefits, while the notebook works best for managing the daily/weekly changes.
In terms of breaking down my budget, besides the fixed amounts (child care, mortgage, etc), I figured out how much I “needed” in a given week for gas & spending money. It’s basically an envelope system without the envelopes–I just withdraw the spending money and use my card at the pump. As long as I don’t spend more than that weekly amount, I don’t bother tracking every penny. I also build a few “safeties” into my budget by budgeting for the high end of my typical costs. So on a month where I either have a few unexpected costs, such as joining friends for dinner, or when all my normal bills are on the high end, I’m fine, and on regular months, I usually end up with spare $$.
I have a current (checking) account, with paper statements and online access, including bill pay. Regular expenses like rent come out of using automatic payments (direct debit), and my credit card is also paid off in full automatically on the due date from here.
This account is managed so that there is a float of about £1000 just before my pay comes in. Any excess gets swept to my instant-access savings. There are other savings, but they are longer term.
I only use my credit and debit card for what I term “exceptional” spending - which I have to know I have money free for, or transfer money in from savings for if it falls under the acceptable uses of savings (e.g. holiday I’ve been saving up for, emergencies).
All day-to-day spending is done in cash. I withdraw £50 each saturday, and that lasts me the week. At the end of the week, small change goes in the charity jar, and everything else goes in the “kitty”. The kitty funds can be used for anything at all. They actually tend to accumulate, so once the kitty exceeds £50, I take my weekly cash out of it, and note that on the “kitty register”, which is simply a note of how much kitty money is actually in my savings account (or will be on payday). Otherwise I end up with lots of cash lying around.
All my statements are on paper, and are filed in ring binders. Nothing gets filed until it is “reconciled” - I go over every transaction and tick it when I’ve matched it with a receipt or bill. I’ve picked up fraud twice by this method, when my bank missed it (small amounts both times, which were refunded).
The few bills that need to be paid get put on the keyboard, and paid online next morning.
This works for me, partly because I live a long way below my means. If I was advising someone who was in debt, or on a tight budget, I’d suggest keeping tight records of the amount of money available to be spent on debit/credit to ensure that the paycheck doesn’t run out, and possible to do a small transfer to savings after the paycheck comes in.
I’ve found a pretty simple but effective system that works very well for me and helped me climb out of debt and build my emergency fund much faster than I thought possible when I was still deep in debt.
1. Automatic Savings
“Pay Myself First”, whatever you want to call it. The day after each paycheck, I have my bank setup to automatically put aside a certain dollar amount into savings. This comes out to roughly 40% of my take-home pay right now.
2. Automatic Bill Pay
Like you, I’ve automated as many bills as possible. This was a hard thing to get started on as I never felt confident I’d have the cash on-hand every month at the same time to pay my bills. But once I hit my financial stride, this was pretty easy.
3. Mint.com is the Dashboard to my Financial Life
Mint beats the pants off of every money management tool I’ve ever used. Quicken etc is great if you’re balancing a checkbook as in the olden days, but I found it very difficult to get useful INFORMATION out of it (Quicken is data-centric whereas Mint is information-centric). Charts, trends, transaction lists etc gave me the complete picture of my finances I needed to get out of debt and now build my wealth. There’s nothing more awesome than looking at the “Net Worth Over Time” graph to see the chart flip from red to green.
4. Shift Money to Hard-to-Reach Places
Whenever the savings account at my local bank hits a certain cash threshold, I take everything above my imposed minimum balance and move it into an ING Direct account. This has two advantages. First, higher interest rates so I earn a small bit on my money instead of it sitting doing nothing at the local bank. Second, that money is now essentially “gone” for the purposes of regular spending and only gets used very deliberately and after much consideration.
5. Accounts for Special Savings Targets
When there’s something my almost-wife and I want but it’s beyond what we normally have in on-hand cash, we set up a special account to save for a given goal. I use SmartyPig and have automated deductions going to it every month. This is how we’re getting a better TV, new computers (both of ours died and we’re sharing a laptop I’m borrowing from work). It’s working out great so far. I’m essentially treating future purchases as current bills so it fits into my system perfectly.
6. What’s left over is free to spend.
After I’ve paid the bills, done my savings and paid for other misc essentials like food, the rest of that money is “mine” to do with as I like. Now, if I see I consistently have a LOT left over at the end of the month, I usually adjust my automated savings (this is how I got to nearly half my take-home pay going into savings) accordingly.
If you look closely at any financial plan built around automated savings, automated bill pay etc, it’s really a plan about “spending” every penny that comes in, just that some of the spending is going to your own pocket.
Beyond this, I’ve started to play with minor investing, putting $50/month into a sharebuilder account spread between a few misc stocks and index funds. Right now, it’s more about learning how that works than making any real money.
In the next year, my goal is to add to this system maximum annual contributions to a Roth IRA.
Let’s see…
I get paid the first of the month. Most of my bills are due around the 7th of the month (I called up and switched things that weren’t a long time ago).
I use a credit card for everything I can. For things I can’t, I use a checkbook… and I must be the last person left on earth who balances it the old fashioned way using the check register. If I didn’t do that I would either have to keep a lot more in checking or I’d get lots of overdraft fees.
Like I said in the last post… Money comes in around the first, direct deposited. Bills come in all the time but they’re generally due at the beginning of the month after I get paid. I stick them in a pile during the week and process them every Saturday, which helps me with odd bills that aren’t due at the beginning of the month. They get put on a table near the mailbox with their due dates on the envelope and go out around the first of the month (unless due earlier). Retirement comes out before I get the paycheck. 529 gets taken out of savings on the 2nd.
I try to keep on month’s expenses in credit union savings (linked to the checkbook) at all times. If, after doing bills, savings is less than 1 month, we cut back on spending. If savings is more than 1 month, I put the extra into online savings. When there’s “too much” in online savings, I stick it in the stock market or CDs.
We don’t get paid regularly over the summer so in those months I move money from online savings to credit union savings at the first of the month.
I wrote about my tracking system a few months ago. http://thepathlesstraveled.net/blog/2009/10/how-to-track-your-expenses/ It’s similar to yours except I use Google Spreadsheet instead of Quicken. Also, our cumulative data is saved in MySQL so we can easily (well to us) get the meta information we want.
The system I have been using (with modifications) for about 10 years or so is fairly simple:
1. I have accounts at 2 banks: A local Credit Union (where my paychecks are automatically deposited) and at Charles Schwab (long term savings, investing, and a SMALL cash account with refunded ATM fees).
2. EVERYTHING I can pay for with my credit card is paid for with the credit card. I keep an eye on the balance and the transactions. I have a goal for the bill amount.
3. Anything that can be automated is. Recurring bills (mortgage and such) are paid by my CU’s bill pay. Variable bills except my credit card are paid via the credit card if they can be.
4. The remaining paper bills get put on my computer keyboard as soon as they come in. First thing I do on the computer is schedule the bills using the CU bill pay.
5. Almost all my bills are due in the second half of the month. The only thing due at the end is my credit card. I use the paycheck on the 15th to pay the bills leaving the rest in the CU savings account.
6. At the end of the month, I pay the credit card. Anything that is left over is sent to the Schwab account to be saved for a specific goal (retirement, housing, vehicle, emergency funds, etc.). If I fail to meet my credit card bill goal, in addition to feeling bad
I go through the expenses with a fine tooth comb and figure out why and how to correct it. Usually, for me, it is some major purchase that I really did not need to make. If I am under my goal I count it as a real good month.
You’ll note that I don’t use ‘Pay yourself first’. Its not a bad idea, but I have found that working to a total expenditures goal helps me to save more. You’ll also notice I use a credit card. That is because debit cards are evil.
I’ve found a pretty simple but effective system that works very well for me and helped me climb out of debt and build my emergency fund much faster than I thought possible when I was still deep in debt.
1. Automatic Savings
“Pay Myself First”, whatever you want to call it. The day after each paycheck, I have my bank setup to automatically put aside a certain dollar amount into savings. This comes out to roughly 40% of my take-home pay right now.
2. Automatic Bill Pay
Like you, I’ve automated as many bills as possible. This was a hard thing to get started on as I never felt confident I’d have the cash on-hand every month at the same time to pay my bills. But once I hit my financial stride, this was pretty easy.
3. Mint.com is the Dashboard to my Financial Life
Mint beats the pants off of every money management tool I’ve ever used. Quicken etc is great if you’re balancing a checkbook as in the olden days, but I found it very difficult to get useful INFORMATION out of it (Quicken is data-centric whereas Mint is information-centric). Charts, trends, transaction lists etc gave me the complete picture of my finances I needed to get out of debt and now build my wealth. There’s nothing more awesome than looking at the “Net Worth Over Time” graph to see the chart flip from red to green.
4. Shift Money to Hard-to-Reach Places
Whenever the savings account at my local bank hits a certain cash threshold, I take everything above my imposed minimum balance and move it into an ING Direct account. This has two advantages. First, higher interest rates so I earn a small bit on my money instead of it sitting doing nothing at the local bank. Second, that money is now essentially “gone” for the purposes of regular spending and only gets used very deliberately and after much consideration.
5. Accounts for Special Savings Targets
When there’s something my almost-wife and I want but it’s beyond what we normally have in on-hand cash, we set up a special account to save for a given goal. I use SmartyPig and have automated deductions going to it every month. This is how we’re getting a better TV, new computers (both of ours died and we’re sharing a laptop I’m borrowing from work). It’s working out great so far. I’m essentially treating future purchases as current bills so it fits into my system perfectly.
6. What’s left over is free to spend.
After I’ve paid the bills, done my savings and paid for other misc essentials like food, the rest of that money is “mine” to do with as I like. Now, if I see I consistently have a LOT left over at the end of the month, I usually adjust my automated savings (this is how I got to nearly half my take-home pay going into savings) accordingly.
If you look closely at any financial plan built around automated savings, automated bill pay etc, it’s really a plan about “spending” every penny that comes in, just that some of the spending is going to your own pocket.
Beyond this, I’ve started to play with minor investing, putting $50/month into a sharebuilder account spread between a few misc stocks and index funds. Right now, it’s more about learning how that works than making any real money.
In the next year, my goal is to add to this system maximum annual contributions to a Roth IRA.
-Automated savings. My 401(k) comes out pre-tax, obviously, but my Roth IRA payment is deducted automatically from my checking accout a day or two after payday. I don’t have time to forget it. Then regular savings (car fund, wedding fund, travel fund) is automatically taken out a day after that. It takes a number of additional steps for me to stop saving.
-Digital bills. All of my bills come to me by email, I leave them unread until I pay them, and I pay them online. The only physical bill I get is for rent, which is slipped under my door a few days before the end of the month.
-Track spending. I track every dollar. I’m not very good about doing it every single day anymore, but I catch up at least once a week. My fiance made a fabulous spreadsheet that helps me keep track of the balances in all my accounts and the cash in my wallet.
-Receipts. Receipts go in the “pickle jar” which is where we keep our household cash. If you take money out of the pickle jar, you have to either leave a receipt or an IOU.
-Regular meetings with myself. I have regular finance maintenance meetings with myself once a week. They take only about 20 minutes — balance the spreadsheet and compare to accounts, pay any bills, call and cancel promotional mailings from any company that’s still sending me junk mail, stuff like that. Keeping on top of it regularly helps the meeting not last so long, which makes it not as intimidating to do.
I use YNAB. I would absolutely recommend it for anyone who wants to have complete control of his/her finances. I enter all things manually, though, because there are so many ‘funding’ categories that require frequent adjustments.
The only bills I have automated are my auto, homeowners, and life insurance payments and 2 cc’s (which are almost paid off - can’t wait!). I automate just the minimum payment on the cc’s just to make sure they’re never paid late; but I decide each month how much more I can put toward it and submit the extra payment online. I like to be able to adjust to account for variations in income.
I use my cc to track expenses and enter the transaction into YNAB as soon as it’s made so that I am always with enough $ to pay in full. This works really well since I get the added cc benefits such as extended warranty, insurance, and rewards.
I finally organized my finances this year and it works for me because I can keep on top of it without spending a lot of time on it.
1) I set up Mint.com with budgets. Each time a bill — phone, cable, etc, goes over, Mint sends me an alert.
2) I get paid bi-weekly, so ING Direct takes out money for savings bi-weekly. My Roth IRA takes out at the end of the month. My student loans are also paid at the end of the month. The only other bills that aren’t covered by the credit card are gas and electric–I get online statements and I pay them as soon as they come in — electronically of course.
3) Everything else is billed to my credit card so I get points. This includes: cable, phone, internet, groceries, eating out, etc. This is easier for me because I have a monthly amount that I’m allowed to spend on my credit card and when i notice it getting close to this amount, I can scale back.
4)My two biggest expenses just come to rent, paid at the beginning, and my credit card, paid after my second paycheck comes in.
5) Any other paper bills that come in are paid according to when my paycheck lands and I keep a buffer in my checking account for these unexpected bills.
I have been using Quicken ever since I bought my very first computer back in 1996. I also manage our business finances through QUickbooks. Any bill that comes in the mail is put into a folder. About once a week, I pay all of my outstanding bills online and enter anything into the software. Our biz finances tend to be a lot more involved w/ monthly & quarterly taxes and payroll, so I have a checklist of weekly, monthly and quarterly things that need to be done. This is posted at my desk and has helped me prevent anything slipping between the cracks.
I also created an easy excel spreadsheet for easy reference to our accounts, debts and financial goals.
Thanks for the kind words, J.D.
The only thing that has worked for me is to have a goal of intense personal concern that I am pursuing with my money management efforts. There was a time when I was trying to save enough to be able to leave my corporate job and become a freelance writer. In those days, I was thinking about places to cut my budget when I was in the shower and when I was riding a bike and when I was waiting for a bus. It all happened without effort.
When I don’t have a particular goal in mind, things tend to slip. I tend to think that something like this is what is happening with you, J.D. You have more money now, so the concern about getting it right is not as great. So things naturally slip.
I see the saving goal as the driver of all money management decisions. You have to start with the question “What is it I am hoping to achieve with all this effort?” If that’s clear in your head, you will effortlessly do what it takes. Once the goal becomes fuzzy (”I’d like to be able to retire when I get old” is an extremely fuzzy goal to a 30-year-old), other priorities assume greater relative importance.
Rob
Google calendar is the key! Create events for recurring bills with an (email) event reminder sent to yourself at least seven days before the bill is due. Don’t delete the email until the bill is paid (using bill pay of course!).
Also use automatic deposits to named accounts. I have at least three automatic deposits:
1 - joint household cash spending (groceries, dining etc).
2 - joint household recurring spending (mortgage, utilities etc.)
3 - savings (emergency fund, named accounts).
The remains are used for personal spending but when that account gets a little extra cash in it (100-200 dollars) it goes right into the savings account.
Trick is to deposit only what you’ve budgeted into the spending accounts. After a while you’ll find yourself trying to reduce/eliminate recurring expenses for things like dining.
Tracking every penny seems excessive but I can see how it works for some folks.
I use an excel spreadsheet and track every penny. I pay all my bills as soon as I get them. It is a pretty simple system but it works for me.
I’ll be the first to admit that my system is still growing and I have a lot of bad habits that need to be fixed (I only remember to keep a handful of receipts, for example), but even though I could be doing a lot more, what I’m doing now is letting me save quite a bit. So maybe my bare-bones “system” could be helpful for people just starting to figure out what works for them.
- I have a savings account and a checking account. Unless there’s a huge emergency or a big planned purchase, the money only goes one way: Checking==>Savings. I get paid once a week, and if there aren’t any outstanding checks that are waiting to clear (Rent and utilities are the only two that I have to pay by check, so it’s easy to keep track of my outstanding checks. Everything else is automatic and shows up on my account immediately), I will shove as much of my paycheck as possible into savings while keeping enough in my checking account to get by until the next paycheck (usually in the $100 to $500 dollar range, depending on my plans for the week).
- I’m not allowed to touch the savings unless it is an emergency (like a car repair that costs more than I thought or a medical bill), so in my brain the only money I have is the money in my checking account. I completely ignore the money in my savings account. It’s not there. Not allowed to use it. If I have too much money in my checking account, I am tempted to spend it, so I try to keep that number low, which keeps my spending in check.
- I have a couple credit cards with bonus cash/miles/etc, and I try to buy most of my stuff with those. However, instead of waiting until the end of the month to pay them off, if I have the money available this week I pay them off online immediately, so I don’t lose track of how much I owe and end up with a surprise at the end of the month.
The main component of this is “Savings account, checking account, put money from checking into savings every paycheck, then completely forget about savings account because you’re not allowed to use that money unless you really really have to.” It might be really obvious to a lot of people, but I’ve run into a ton of people my age (mid-20s) who have never had a savings account and live completely out of their checking account. If I had all my money in my checking account I would be tempted to SPEND that money. It’s an easy first step to start building savings.
Hi all,
The method I started using about 5 years ago was one I learned at a wealth seminar where we were taught to allocate our income into “jars”. This, along with other things enabled me to become completely and utterly debt free (even mortgage) March of this year (woohoo!).
It works like this:
paycheck / income comes in
1. 10% goes into an account called Financial Freedom. This is essentially your “golden goose” that you use for retirement or passive income.
2. 10% goes to education: to educate yourself about finance, enhance your business skills etc.
3. 10% in long term savings: like a car (gently used of course), house down payment, new AC, kid’s braces. i.e. things you know are coming up and you can plan for them.
4. 10% into “play”. Every month, you blow this money on fun things. You treat yourself to the nicest things you can. Kind of a release valve for your mind.
5. 5% goes into charity that you donate without any expectation of getting anything in return.
6. The last 55% is used to pay bills, food. i.e. all necessities. If you have extra left over, move it to the financial freedom account. You might find that you run out of month before money, and have to get creative (Raman noodles for example!) but you learn quickly.
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As far as bill payments, like most here, they are automatically charged to my CC, which gives me cash back. I think I’ve mailed one bill payment this year (I can’t tell you how much a first class stamp is anymore), since everything can be done with my bank’s online bill payment system. My water utility bill is the only recurring bill I cannot automate (local government - go figure).
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I also created an excel tool several years ago to help me balance my account(s) and forecast my balances, which was very useful, especially when I ran into those pesky “challenges” and had to do some creative economics! Perhaps I can post it here for others to try out?
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Thanks for the forum. Wish I had learned this at school!!!! I hope to be able to contribute here and give to you what others have taught me.
Cheers,
Simon.
I don’t like automatic bill-pay in the form where the company you’re paying “pulls” from your account - what if I cancel my service, and they “forget”? Withdraw the wrong amount? Too many potential headaches!
Instead, I minimize my bills by putting as much as possible - including my recurring payments - on my credit card (where at least I have a dispute mechanism should some of the problems I mentioned occur). Then, I use do an electronic transfer by “pushing” the money from my bank. For my cc, and the main recurring bill I can’t put on my cc, I set up recurring outgoing payments for a low estimate of what I tend to owe. That way, even if I forget, not only is it getting paid, but more than the minimum is.
When I get my bill, it goes by the computer, and next time I’m online, I update the amount (for recurring payments), or enter a future payment (for irregular payments). That way, I keep the money in the bank for an extra week or two, but I don’t have to think about it again. I do try to check my accounts shortly after the payment should go out, just to be sure, but I’m pretty bad about remembering to do that.
Oh, as for budgeting - I am OBSESSIVE about spreadsheets. I’ve taken PearBudget’s old spreadsheet (which I love) and put it on steroids, with extra sheets for allocating long-term savings, retirement accounts, etc. I actually find my very numerical approach useful not to reign in spending, but to give me permission to spend, as I am a compulsive saver.
I have never been BAD with money, but I have struggled when my financial life became more complicated, like after I got married, graduated college, etc.
* The first thing I did was I WROTE A BUDGET (in Excel). I read a few articles to come up with likely categories. I then populated the budget with what I thought were reasonable numbers and added them up to make sure the total was less than we were bringing in. I made a note of all irregular expenses (like biannual car insurance or gifts) and had a scheduled transfer to savings from each paycheck (total annual expense/# of paychecks)
* This worked okay but there was a lot of stuff falling through the cracks and as our belts tightened (bought a new house, had a kid) I wanted better resolution to my spending. The first thing I did was I took our irregular spending fund and wrote a spreadsheet for it. I just took the numbers from my budget and copied them into another spreadsheet which would keep track of the ‘balance’ in any category. I don’t worry about overspending because I’m looking for averages. But this keeps me plugged into how much we are actually spending and IF OUR SPENDING ALIGNS WITH OUR BUDGET. If there isn’t enough we revisit the budget. I have an awful time tracking receipts, especially since my husband is supportive, but not overly cooperative. This serves the same purpose of knowing where my money goes.
* We wasted a LOT of money on food, especially during grilling season when my husband wouldn’t bat an eye on $30 in steaks for the two of us. So I put us on a strict cash diet for food and household items. This was tough and really hard to get used to. I allowed some extra money for the first couple weeks so I wouldn’t have to put stuff back, but it made me a lot lot lot more conscious of what food cost and where we could save money.
One tool I use that I haven’t heard anyone has something similar is a binder we call The Grey Book. It has a page for each debt. At the top it is all contact info (I never have to go searching for an old statement if I need to call or send in a payment) and the rest is a blank spreadsheet. Each time I make a payment I make a note of the date and the new balance. Behind each page is an amortization table (created at http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx if you need help creating a table for an existing debt let me know and I’ll walk you through it). I like this method because writing out the mortgage check can be painful, but it’s nice to see it also bring down my balance. I also play with this tool to see what would happen to my mortgage if I threw extra money at it. It can be a real motivator to pay things off.
My husband and I simplified our financial systems several years ago and it’s worked great. First of all, we opted to combine finances–each to have a monthly allowance of fun money that is not itemized. Then, we appointed one person to manage the bill paying process.
We eliminated all credit cards and credit card debt and now we only use our debit cards for purchases. We set up a budget in Quicken and we pay our bills online through our bank. When the bill comes in, I schedule its payment right away, then toss the bill (or rather, recycle). Debit card receipts go into a basket and I enter them daily. Transfer to savings is an automatically monthly “bill”.
At the end of the month, we pull budget reports on Quicken and review them together–making tweaks if necessary.
I also try to automate everything. Luckily, all of my bills have the option to be paid either by ETF or credit card. Very rarely do I use cash. The only time I use a check, is for church on Sunday. (BTW even churches are starting to take ETF’s from checking accounts)
At the end of the month, I total up all of my expenses in an spreadsheet (I modified the family budget doc in Google), track my net worth, and pay my goals first.
Seems to work for me, but not the only way you can handle your finances.
A lot of people won’t like my system, either because they don’t trust it, or because they don’t feel like they’re doing enough. That’s why I like it, though, you never have to worry about it, it’s great.
1) Put *everything* on automatic bill payments.
2) Set all billing to electronic so you don’t get bills in the mail.
3) Automate regular transfers to savings accounts.
4) You’re done. Spend at will. Throw receipts in the trash. Just stop spending if your checking account balance drops below $1000.
This system is great. It lets you act like J.D. used to (if there’s money in my account, I can spend it on anything I want), but all your bills get paid and you build savings at the same time. You never even have to look at your bills. It’s the ultimate low-effort system.
How much did I spend on electricity last month? I haven’t the slightest idea, but I don’t care, because my checking account balance is still over $1000, I met my savings goals, and the electricity is still on, so things seem to have turned out fine.
Here is what I started about 2 years ago and it works great. This system works best getting paid twice a month:
1) Sort all your bills by what time of the month they are due. Either group A) 1st - 15th and group B) 16th - 31st
2) We have two paychecks to work with - paycheck 1 (aprox the 15th) and paycheck 2 (aprox 30th). We use paycheck 1 to pay off group B and then paycheck 2 to pay off group A for the next month. I sit down on payday morning and pay all the bills from that group online at once.
3) Usually (for our bills anyhow) this usually splits up the amount of ‘bill’ money pretty equally from both checks. Sometimes with really large payments (like the house) I will split up half the amount due from the first check and then pay all the rest with the second.
4) I set up a second checking account that I transfer all the bill money to. We do not have a debit card or checks for it, so there is no way for us to accidentally spend it. I use that account number for the online payments and even though the account gets down to like $10, I know there is always enough to cover the bills I have coming out of it.
5) We have 3 different savings accounts through Smarty Pig and ING. I have them take a small amount out weekly instead of a large amount monthly. I know its the same amount in the end - but it somehow makes it seem like less of a big chunk and puts it more in perspective because it’s the same amount I might spend on lunch that day.
6) Finally I keep all of this written down in a ledger so that I know exactly what day everything is paid on and can check it off a list so I know all of that months bills are finished.
I, too, used to shred insignificant receipts once they were entered into Quicken. That was until several months ago, when I noticed that the amount which appeared on-line was greater than the amount on a receipt which I still had! Apparently, the vendor had added a tip, which I’d paid in cash. To dispute the charge, I needed the receipt. So I have changed my practice: I enter the amount into Quicken right away, but do not shred the receipt until the amount appears on the Credit Card Company’s record.
Another thing I do is to set up bills for payment as soon as I receive them. The payment date is not until a few days before it’s due (a fail-safe so I can call it in if it doesn’t get processed). If a hand written check is involved, it goes into a basket on my desk which has birthday cards, etc, arranged by mailing date. I check the basket each morning to see whether there’s anything which needs to go into the mail that day. As you can surmise, I don’t like to pay interest for anything which depreciates…;-)
“One tool I use that I haven’t heard anyone has something similar is a binder we call The Grey Book. It has a page for each debt. At the top it is all contact info (I never have to go searching for an old statement if I need to call or send in a payment) and the rest is a blank spreadsheet. Each time I make a payment I make a note of the date and the new balance.”
This is a good idea - we have something similar but it’s all on the same page. I might start an individual page for each debt. But it is VERY, VERY handy to have all of the info for each place you pay bills to (phone number, complete address, account #, no password though!) so that either one of us can pay the bill or don’t have to search down old statements to find out info.
I use a macro approach. I create a master monthly budget, automatically deducting savings, retirement, and “adult allowance” out of my master checking account. Because any non-essentials come out fo the adult allowance(which I dont track formally, at least), its easy to see exactly where I’m spending the rest of the money.
I’ve started paying bills immediately after I receive them, either through a scheduled payment online or via writing a check instantly.
Someone asked what bills cant be paid electronically earlier in a comment. I would agree, except that the company that handles my car loan has no way to pay the car payment online, and a payment by phone costs $35. So you have to write them a check each month, which is ridiculous, but there you go. Some companies are still stuck in the 1950s.
How did you find the methods and systems that help you manage your money effectively?
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I just created my own Excel spreadsheet. Nothing fancy, very simple but effective in that the sheet fits on my entire computer screen and I can see at a glance exactly where my money’s going. Every receipt goes into my wallet and I enter the info into the spreadsheet daily. Roth and 401 savings are automated and contributed weekly.
What sorts of people do you think they’d work for?
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My way of doing things works for me because I don’t like to be overly controlled and nit picky. People who just want to see the overall big picture probably do the same things I do.
And what options did you reject before picking the processes you use today?
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I rejected every single budgeting program out there. I found all of them to be way OTT in terms of dividing and sub dividing categories. A household bill is a household bill in my book whether it’s a utility or a dental payment or insurance. Personally I found subdivided categories to be too distracting. I keep it very basic, simple and at-a-glance and that is totally the one thing that has gotten me out of financial trouble.
Great post - We also use what #9 alluded to, batching bills within a time period during each month. I have a note on my calendar to pay certain bills at month’s end (credit card, any miscellaeneous), and then the rest are on automatic bill pay. I also move any monies between accounts at the end of month. Pretty simple, but somehow it works for our house.
I found clearcheckbook (a free website) to be very helpful for me. I entered all my recurring bills and “post” them with the paycheck that is paying them. I get paid tomorrow but the program already has subtracted all the bills the check is paying so I know how much I actually have to work with. Some people may not like it since you have to input all transaction by hand, it does not pull from your bank accounts. I generally do the “the bills got paid everything else is fun money.” The biggest action for me was having money direct deposited from my paycheck to savings. Now, I live on what is deposited into my checking, much lower than my actual income but it forces me to live under my means and still save.
This is probably going to sound more complicated than it is, but here goes.
We have two joint checking accounts (Bank of America and ING). Hub’s paycheck is deposited into BoA checking twice a month. My paycheck is deposited into ING every other week. (401K automatically comes out before direct deposit). Both accounts have a monthly budget that is laid out in excel and accounts for pretty much every dollar, although they are pretty broad categories.
BoA account: Nearly all the bills come out of here, and nearly everything except our two main credit cards are paid automatically. We have everything possible set up to autobill to one cc (gym, vet, phone, netflix, cable/internet, some charitable gifts) and those are all covered in the monthly allotment to that credit card’s budget line. Automatic deductions from this account include the mortgage and HOA fee, electric bill and student loan payment (a few days before the due dates). All of our groceries go on one credit card, and all of our gas goes on the other (based on rewards points) and the budgeted dollar amount for each of these is included in the monthly allotment to that credit card as well. The only things that I pay manually each month are the credit cards (after reviewing the statements and moving money as needed) and our monthly giving to our church. We also have a few hundred dollars transferred from here to two online savings accounts; our joint and individual ‘allowances’ are in this account as well and money gets moved as necessary to the appropriate credit card or deducted if we take out cash.
ING Account: This is all of our short and long term savings. We have subaccounts for things like car insurance and maintenance, vacation savings, gifts (holiday, birthday, wedding, etc), estimated tax payments, and a ‘yearly expenses account’ which covers known ‘irregular’ things like car registration, AAA membership, glasses and contact lenses, etc. The appropriate amount of money is automatically transferred to each subaccount the Monday after I get paid. We also have biweekly automatic transfers to our general savings account and to a vanguard account where we are saving for the down payment on our next house (our Roth IRA investments used to come from here as well but we have stopped those for a while and applied the money to our down payment savings instead). We also have a monthly transfer to add to our CD ladder which used to be automatic but I now have to request it each month.
credit cards: We requested to have one billing cycle close at the beginning of the month and one close at the middle of the month; if there are no extra rewards points on one card versus another for a particular purchase we just use the card that will allow us to have the longest ‘float’ between the purchase and the due date. I review the statements once or twice a week and pay the full balance once a month online after transferring any needed funds from short term savings or our allowances. As I mentioned before, a good portion of the bill is already pre-budgeted.
I review our checking accounts just about daily and update/reconcile the budget spreadsheet and our BoA checkbook as needed. I open mail every day and put any miscellaneous bills (doctor, magazine subscription, car insurance, etc) with the credit card bill that most closely matches the due date of the miscellaneous bill. All total, it takes less than 5 minutes a day and about 15-20 minutes twice a month to take care of the credit card bills and anything else outstanding. I also update our net worth spreadsheet once a month. I don’t keep receipts unless it’s something ‘returnable’. The only thing I’m kind of lax on is filing/shredding; I tend to let it pile up and then have to spend time going through it all every couple of months.
Some great advice here. While I find that electronic banking and automatic payments are most effective in preventing late fees, it takes away the aspect of knowing what you are paying for. From an early age, my frugal father had always told my siblings and I to pay in cash whenever possible– the hand-to-hand exchange of money seems to make you think harder about whether that purchase was necessary, at least more so than simply swiping a card.
I have a couple of systems.
Regular bills which are the same every month are automated: mortgage, savings, IRA, student loan, donations. As soon as I get paid every month I put these items in my check register, so the money is gone as soon as it arrives.
Bills which are mine, such as my credit card, I pay out of electronic checking. As soon as I receive them, I schedule them; that way I don’t forget, but they don’t go out until close to the due date. I love electronic checking for this reason, that I can schedule something now to pay whenever and I don’t have to think about it any more. Scheduled payments show up in my online register, so I always know what’s pending. I also put these in my pen-and-paper check register as soon as I schedule them; the money is gone.
Remaining household bills are split with my husband; whoever has money when they’re due will pay them. (It varies due to his variable paydays.) As soon as we receive them I put them in my outlook calendar; he doesn’t use electronic checking, so he sometimes forgets stuff, but with outlook I can remind him. If I’m going to pay them I schedule them just like my own stuff and put them in my register.
That sounds way more complicated than it actually is; for us, it’s very simple and works very well.
ETA I tried tracking every penny, and I tried splitting things “fairly” between us, and it drove me crazy. In some ways a joint account would make things simpler, but his irregular paydays and seat-of-his-pants financial style make me seriously tense; it’s easier on my psyche to just do things the way we do.
I use two Excel spreadsheets to manage my money. On the first one I write down my expenses in each category. The second one allows me to make predictions. There are four columns: date, income, expense and balance. I note the paydays, the rent and all other incomes and expenses (fixed and estimated) the day they occur (or should occur). My saving is classified as expense as it is withdrawn from my checking account. All amounts are in place several months in advance and I simply update this spreadsheet everyday or so so the last column represents the balance of my checking account. It’s like a bank statement but it also allows me to make predictions. If I start paying $ 50 / month for cable, what are the consequences on my cash flow? If I go back to school and stop working in August, will I run out of money before December? This helps me to make better decisions. It also makes it difficult to forget a bill because all foreseeable expenses are recorded several months in advance.
I do everything online. Maybe even too much.
In each checking account I keep extra cash to avoid overdraft (total: 3 checkings with 700$).
I use cash for groceries which I take out every weekend and laundry money too (in quarters from the bank).
For regular payments I use recurring e-bills and transfers (get paid twice a month and pay bills once a month), each category has its own savings account which then redirects to the appropriate checking account when due. e.g. 529, cellphone+internet, insurance(s), rent, laundry money …
I use online bank for prepaying myself future expenses (the concept of the freedom account). e.g. movies, birthdays, tax preperation fee, vacations, costco annual fee and accrued interest account/capital gains (employer stock award) for paying taxes next year (some manual work there).
I also use another different online bank for my emergency fund which is divided per categories, COBRA, rent, groceries, utilities, moving expenses (a deposit to be able to afford to move to a cheaper apartment).
for long term goals I keep money in a stock index fund, to avoid too much taxes, to which I contribute each month (e.g. Kids wedding, Long term care self insurance …)
My home downpayment is in a CD.
When I pay with a credit card, I send money to the credit card account as soon as a I get home via e-bil. I use two credit cards, one for recurring payments and one for payments as needed (going out, rent a movie, internet purchase …). The recurring payments card makes it easy to track expenses.
Recurring deductions (insurance, brokerage accounts, 529 …) happen in a designated checking account which makes it easy to keep track of outgoing cash.
One checking account is for incoming payhecks.
Another checking account is for the online bank system - it allows multiple transfers to all the savings accounts (all done via auto transfers delayed to a week after the paycheck comes in).
I should probably mention that I use six different direct deposits from work, although I could probably manage with just one.
I monitor all once a week and via mint emails.
I needed simple. I am on a pension and retired now. I have always found simplicity is best because if I have to enter stuff somewhere constantly and can’t get to it I get discouraged.
When I began looking at how much debt I had, how much I spent, I knew nothing about financial software and had not read any books about how to do this. I got a composition notebook and wrote down all the debts and how much income. I made a part of each page for credit card debt and figured out how to max out those payments. I started looking ahead at how long to pay things off. As I began to automate payments and use the computer to pay accounts I moved entries for my notebook into Wordpad. I don’t mind using the calculator instead of using a spreadsheet. At some point after I started reading here, the Simple Dollar, I Will Teach you…etc, I tried YNAB, Mint, Pear etc. Too fussy for me. I only buy books and groceries other than pair of jeans now and then or a pair of shoes or boots. I use the library a lot. Before going on Amazon I look at my credit card statements online to see how much I have been spending on books and don’t spend if I think it is too much. I don’t see the point in making lots of little funds here and there online or dividing up my savings. I have an IRA and another investment fund and a savings account. I stick all EF and other money into the savings account and when I feel secure (have more than $10,000) I spend on something house-related or on a trip.
I am single and retired, fixed income, and have little patience for fiddling with things. I don’t like the convoluted software and it doesn’t encourage me at all. Some of them make my computer freeze and then it takes twice as long to do the financial stuff.
Quicken has too m any options. All I want to do is put money in, pay bills, and save some and spend a little.
I am in a lower income bracket and have some ADD issues. Simple is best. My friend who claims she is trying to get her financial act together bought Quicken and then when her computer began to have trouble she used it as an excuse to let everything slide. The recent article about the irresponsible friend really spoke to me about how we have cluttered our lives with stuff and keep buying the latest things. Simple gets the job done. Repeat after me, “I am enough, I have enough, I do enough.”
I use mint.com so I can see everything at a glance and I check it *daily* - part of this is security, because it keys me in immediately if there’s a purchase I didn’t make or somehow forgot about, but it’s also a visual reminder of where my money is. I do use credit cards but pay them off each month - so it’s also a reminder as to how much I’ve already spent!
I set up tentative budgets through mint.com as well, so it sends me an alert if I go over in a particular category. My biggest problem is they’re still guestimates in a few categories where I haven’t figured out exactly what’s a good balance for myself (not just how much, but how frequently they should reset) but I’m figuring it out. It’s also not perfect because if I pay a bill earlier than it expects, even by a just a couple of days, it can sometimes freak out (ALERT!: You paid twice as much on your mortgage this month as you normally do!)
I set up automatic transfers from my checking account into my savings account. I have it set up for every week, even though I get paid every other week - the little bonus savings on a five Friday week is nice.
I pay every single one of my bills online, either directly or through my bank’s billpay system.
I pretty much have to handle any ‘unusual’ bill that’s not a regular, recurring expense as soon as I receive it - either pay directly then or setup a future payment online.
But the biggest thing is the checking everything regularly. When I was weakest financially, it was when I was pretending it (credit cards, bills, account balances) didn’t actually exist. It made it too easy to overspend and have to scramble or miss a due date and deal with a late fee. And the GUILT.
My method is automation based on Ramit’s flow chart found here:
http://www.iwillteachyoutoberich.com/automate-your-personal-finances/
My paycheck is direct deposited into a local account, with about 4% for 401(k) already taken out.
We basically have 2 major bills per month:
1) Mortgage - withdrawn automatically on the 1st
2) Chase Visa - all daily spending as well as cell phone and internet bills are charged here. It is paid via ING checking that schedule the day the bill arrives. I also set up an equal transfer from ING savings to checking on the day before the bill is paid, to maximize interest earned.
Any other bills like subscriptions, water, sewer, electric are paid electronically - I either schedule the payment the day the bill arrives (whether snail or email) or it is automatically withdrawn.
Transfers to savings and retirement are manual, although I could probably automate this as well based on the predictability of most of our monthly bills.
I also set up a cash-flow spreadsheet by month to break down which bills are due during each pay cycle, but this is basically redundant since I also use Quicken to track everything.
We usually review spending monthly and net worth quarterly to gauge our progress.
JD,
How do you organize your receipts? Do you add them to the transaction in Quicken or do you have some sort of filing system on your computer? I’ve been struggling with a good way to organize the receipts now that I’m trying to store them electronically.
Thanks!
I use three critical pieces in keeping myself straight….Microsoft Money, online banking (multiple banks, but USAA to pay bills and was using yodlee for a snapshot of everything too, but USAA just implemented something similar) and multiple accounts for different goals.
my husband and i get paid on opposite bi-weekly schedules so i actually take what our expected annual income is, divide by twelve and use a monthly calculation to use for budgeting and to keep track. i try and keep saving and expenses along the lines of the Balanced Money Formula JD had talked about at one point. not there yet, but close.
at the start of each month money is auto-transferred from accounts to where it needs to start (its slightly convoluted because our paychecks go to different banks from our previous lives so its gets shuffled to the appropriate starting pots…three checking - one for bills, one for his spending and one for my spending). then once its consolidated, i have some auto transfers back out to different savings goals (about 10 different accounts) and the rest remains in the checking accounts to pay bills/spend.
i’m similar to the person above who mentioned batching. i’ve moved almost all by bills to where they can be paid once a month in a group and any odd ones that come in (ie medical, HOA dues, etc) get paid at the same time). i pay bills online but do not auto pay for the same control reasons mentioned above. all my transactions in microsoft money are manual and i try to do those about once a week after collecting receipts in my wallet. and my husband has finally gotten in the habit of putting his receipts next to my computer.
i need to get better about investment review though. by the time i get through my monthly exercise i don’t have the brainpower to catch up in that area.
@ Kevin M, #57:
I am very jealous of those who can say they have two major bills per month! That’s awesome. Simplicity is something to strive for as far as I’m concerned.
Income: Bi-weekly, 28 paychecks, $42,000 gross. And I live in Cook County, IL. Good thing I like my roommate.
Savings: 401k (15%), FSA, and $200 from each pay check into my online savings account.
Budgeting: I budget based on 26 paychecks. The other two paychecks are used to cover planned expenses (vehicle stickers, insurance, etc., which are itemized in an excel list) and gifts (also itemized). Note: This required me to set these as savings goals for one year in order to get ahead so that I had the required money to start the year. Since saving is taken care of I can budget all remaining money however I want as long as the bills are paid. Budget is setup monthly in excel. Specific categories were impossible for me so I have the obvious things, fixed expenses, gas, groceries, eating out, etc., and then two catch all categories of Necessary Purchases and Free Spending. Extra money at the end of the month is rolled into savings to be put toward fun things like travel which encourages me to be under budget.
Tracking: If you haven’t guessed yet. I use a custom excel sheet an enter transactions manually based on my online banking. Tried Money and Quicken but could never make the stupid things track correctly since I used my Credit Card for everything.
Bills: Everything that can be is automated with my Credit Card. This lets me automate payments and argue payments if needed. Daily transactions are on my CC as well with the exception of my cash allowance every month that I don’t have to track. I moved my bill date so that I could pay the entire last month’s expenses on the 1st of the month and start again from 0.
My wife and I kind of use a unique system. We struggled for the first few years of marriage. We were young and clueless. We were living paycheck to paycheck and still always coming up short. We had always combined our money, but one never knew what the other was spending money on. So come bill paying time, we were always short. We decided to go the 2 checking account route. Not that our money is separated, it’s just now protected. We have one checking account linked to our debit card that we use for every day spending. We have a second account that we use to pay bills out of. We always know what is there, and there is never the temptation of spending it. Within the non-linked account, using Excel, I keep additional money (budget items like car repair, medical bill money, auto insurance, and savings). It has worked well for us, and I have shared my spreadsheet with a lot of people to help them out. I think the biggest bit of advice we ever got was to get a month ahead. So basically the paychecks that come in the entire month of May were used to pay bills and live the entire month of June. This way you start the month with your set budget, and you have all the cash you need to pay your bills up front. It has been a life saver.
I use MINT to track everything. Additionally, I use Schwab high yield checking and bill pay. Fixed bills are scheduled to pay automatically. I pay all bills possible by my cash back credit card and the rest from checking. I get paid twice a month. On each pay day I schedule the variable bills through bill pay and once a month pay off the credit card. All payments to Roth IRA, Savings (Ally Bank) and 401k happening automatically. Then I adjust things as necessary. Oh, I also schedule my mortgage payments after each paycheck. The mortgage lenders try to charge you to set up a schedule like this (dont do it!). They have to take your money and post it. By paying 1/2 your mortgage 15 days early you are reducing the interest and it evens out my largest bill over both paychecks.
I have always been financially interested, and my inherent nature is to save. Where I learned about habits and tools was when my (now) DH and I moved in together and bought a house. Suddenly, his disorganization was an issue to my financial life, so I spent a lot of thought on systems and habits that would help him. What we did:
• Automated as much as possible. Direct deposit of his paycheck was the first step.
• Set up separate accounts with different purposes: joint checking, individual savings, IRA accounts at Schwab (they were close and inexpensive; we’re now with Fidelity) and long term savings.
• We decided to pay bills once per month, so we contacted our credit card companies and utilities, and worked to get due dates between the 10th and 15th of the month. This was very helpful, since “bill night” was a drag for a very long time when money was tight.
• I set up a rudimentary “piling” system for DH. Instead of files (since we didn’t have a desk or an office) I set up paper lunch bags, in one of his empty bureau drawers. His receipts went into differently labeled lunch bags – receipts, cars, DMV, paycheck stubs, CCd statements, etc. He found this EASY to use, especially since he unloaded his pockets each night as he got ready for bed – the proximity to his “files” meant he actually USED them.
Many of those “lunch bag categories” are ones we still use today, with our (real) desk and (real) files.
• We set goals. I wanted him to max out his IRA each year, so we set up auto withdrawals from our joint account for each of us. $200 per month, January-October, for a $2K IRA contribution (this was the max then). This was HUGE in getting him to contribute, since he wrote only one check each month to the joint account, and then investing was “done.” If he’d had to write a separate check to Schwab, it would not have happened most months.
With this schedule, we had an extra $400 each November for our anniversary, already budgeted, and ditto for December.
• We made a “wish list” for house repairs and upgrades. Over the past decade, as we’ve earned more money, we’ve accomplished almost all of them (still waiting on a new furnace), and paid cash for them.
We’ve learned and grown through the years, and we are now more computerized. I have an Excel spreadsheet for each month, targeting our spending, saving, and investing. I also use clearcheckbook.com as on online account register to check our spending patterns – I can pull up two years of transactions at any time, and since it’s web-based, Mac or PC doesn’t matter for data entry. I also use mycheckfree.com as a central site for online billpay, which is free and intuitive.
The underlying principal of all of this is to make the priorities like savings, house upgrades, and retirement FIRST - and by living in “enforced scarcity”, it means we don’t succumb to too much lifestyle inflation.
We like the Warren formula of 50% needs, 30% wants and 20% savings. But we inverted the last two - 30% savings for us, and 20% wants. It works well at relieving and consumption guilt when we book a trip, or upgrade our car.
Our current plan is to get 10 months of expenses in savings. We’re almost there.
I found Jane Bryant Quinn’s “Making the Most of Your Money” to be very helpful in defining the things we should be thinking about, at various stages of our financial lives. As a result, we’ve stayed on top of insurance, life insurance, disability insurance, good mortgage terms, a savings plan, and an investment plan. She helps translate the “big picture” into “action items” and that really helped.
My husband and I stick to the KISS rule (keep it simple stupid).
- We automate all of our bills.
- We use YNAB to tracking our spending and our budget (they came out with a version for Mac)
- On our shared google calendar every Tuesday it says “Update YNAB”
- We update on Tuesdays beacuse that is when our main bank (chase) has updated the records from the weekend.
- We set up the monthly budget on the first Tuesday
- We live one month behind (spend last month’s income this month)
Our system is very simple and gets the job done quickly.
Other little things we do:
- All receipts are put in a little tray on the desk
- Cash spent gets emailed to ourselves so we remember where it went (we spend very little cash)
- We often write on receipts which category it goes into so we don’t have to think twice when putting it in the check register on YNAB
I have to say that I personally have an aversion to graphs and charts, but something I do do is that I spend every dollar of my monthly income on paper before I actually spend it.
My monthly income is direct-deposited on the 1st and on the 2nd, I have 6 automatic transfers taken out, going to savings, retirement, birthdays and Christmas, property taxes etc. - basically for my financial goals - areas of my life that are important to me and that I value, and for irregular expenses divided by 12 and saved monthly.
I pay my bills online, but it’s not automatic. I have to type in the amount and the date. I like it this way though because if there is a discrepancy on a bill, I have control over that. Usually a week before the bills are due, I put in the amount of the fixed bills and date them for the 2nd, or whatever the first weekday is of the month, and for the nonfixed ones, like the utility bill, I put it in front of the computer when it arrives to alert me to pay it later if I don’t do it immediately. When I travel, I like to prepay all my bills in advance, and just pay a little extra for the utility bill.
And then I prefer using cash for food, gas, entertainment and fun and take the funds out weekly from the ATM. With my system, I don’t deal with receipts at all, and have an aversion to them as well. The only time I save a receipt is if I might need to return the item later.
A few weeks ago I thought I would change things up a little and use my debit card for living expenses, so I kept an index card, folded in half, and each time I put in my pin number, I jotted down the amount on the index card, to be deducted then or later - but this is too much of a hassle for me, I’ve learned, so will go back to w/drawing the cash weekly. That way I don’t have to look at or be concerned with my checking account for the rest of the month.
I have one credit card and I use it only to purchase things online, mostly for airplane tickets, hotel, car rental, and I pay it off a few days after each purchase, just as soon as it leaves my online pending account. Some people use their charge cards for everything, and while that might work for them, I figured out that I was spending way more doing that, even though I never carried a balance, and my saving goals were suffering.
oooh this is going to be interesting! I don’t have time to read the comments, so I’ll share what I do right now, and will read the rest later.
The short answer:
I have chosen NOT to automate everything. That way I have to check in and shift money around at least twice a month (when I get paid).
The long answer:
Some things happen automatically: 16% of my income goes to my 401(k) (with a 4% company match, though I won’t be fully vested for a couple more years). I consider this sufficient retirement savings; I would like to have a Roth IRA for future tax reasons, but consider it more important to get the maximum amount of free money I can from my employer.
When I get paid, my check is directly deposited to one of my checking accounts. I then transfer the following percentages:
to my bills checking account: 40%
to my short-term savings account: 10%
to my travel savings account: 10%
to my misc other spending savings account: 20%
to my mad money savings account: 2%
that leaves about 18% in my day-to-day spending account.
I have no debt (as of April 30. woo!), so my bills account covers rent, insurance, landline/internet, electricity and cell phone, with a little bit of padding.
My short-term savings is my easy-access emergency fund. Whenever it hits 1k, I move half of it out - I was using it to pay down my debt, and will be saving it toward a new bed, and THEN will resume building my real e-fund.
Travel is important to me, with family on the East coast, my best friend in Canada, and some very close friends in the Portland area - plus I want to be able to take long weekends where I live, and of course there’s a whole big world to see as well! I don’t buy airplane tickets unless I have the cash to cover it (barring emergencies).
Misc other spending is charity, car repairs, clothing - any bigger non-regular expenses.
Mad money is just that - unspecified. I recently used much of it when I went to New Zealand. I sometimes use it to pay for expensive dinners. I may well use it toward my new bed. Any time I get a bonus or some other found money, it goes here or into my travel account.
My day-to-day spending is really food - groceries and eating out, coffee, some entertainment. I usually wind up pulling some money out of my misc other spending account, but it works for me. Feeling a little broke keeps my spending under control!
So I have all those accounts, and preset amounts to transfer. I COULD automate, but I prefer to do it manually when I get paid. Then I write myself a little report (it’s an email, actually) where I add up my balances and debts (if any) and write notes for my goals and anticipated expenses. It’s dorky but it works for me, and I now have three years’ worth of these emails, which is very interesting!
Two of my bills are paid automatically - rent and insurance. Two of them notify me electronically when I have a new bill - landline/internet and electricity. Only my cell phone bill comes to me in the mail, and it only varies by a couple of bucks per month, so I probably COULD automate that if I wanted. That is probably the closest thing I have to a point of failure, but so far I’ve paid it on time every month. I use USAA for my banking and love their interface and bill paying options.
I also track all my spending, but haven’t been as diligent lately as I ought to be. I keep my receipts in my (small!) wallet until I log the expenses. All in all I’m in good shape; I really only need a more specific plan for “now what?” now that I’m out of debt. I think the next steps are: save for and buy new bed; get efund from 3-4 months’ expenses to more like 6. Then save for a car, then save for a house downpayment (which I don’t expect to use, but hey, an extra 20k lying around isn’t a bad thing).
LOL @ Tyler K. That is extreme simplicity!
I have a spending plan rather than a budget. I get paid twice monthly by direct deposit. Pretax, contributions go to my 401(k) and HSA, and my company pays my health insurance. I also purchase term life insurance for DH through my firm. So that’s all done with the paycheck.
I have set up an automatic transfer to savings that happens one day after each payday. My term life insurance is through my bank, so that premium is automatically drawn from my account once a month. I update my checking-account register with these automatic transactions each payday.
I have two credit cards, and make a payment to each online at each payday. If I have used the active card, I make a note in my check register so I can adjust my payment accordingly; otherwise, I send a set amount per my debt-reduction item in my spending plan.
I have two other bills, car/renter’s insurance and our landline phone. I pay the car insurance in full every six months. The phone bill is paid online as soon as I receive it.
I use my debit card for almost everything else, and check my bank accounts online once a week. Simple and reliable.
For me, mint.com I check it every morning now to make sure everything is as it should be. All my bills are auto-pay and i check the emails for the bills when they come in. I dump my receipts wherever is convenient (nightstand etc) and whenever i get around to cleaning I just thumb through and make sure I remember seeing it in mint. I have direct-deposit and auto-withdrawal for everything into a rewards checking. I also have a credit card set to auto-deduct the balance when its due.
That covers my day-to-day living quite well, but I have a spreadsheet that keeps track of my mortgage (changeable amortization schedule). I also have a “short term financial planner. It specifies my non-required savings into different categories and lets me know the floor for my bank account. I have a variable amount of savings in, and I can adjust per pay period where it “theoretically goes”. Principal payments on the mortgage, roth ira, efund, car fund, and big purchases. Since I keep all my liquid funds in my rewards checking, I need this spreadsheet to let me know the lower limit of my balance. Everything above that is spending money.
omg! all these “easy” methods seem soo complicated to me - what does that say about me? lol - I open my mail every day and put all the bills in a folder, throw out the trash and put the junk mail on my nightstand for when there is nothing good on tv - twice a month (when I get paid) I pay the bills based on the due dates. then enter what I’ve paid for that pay-period in a excel spreadsheet - the spreadsheet has (2) pages - the one for my monthly budget and another I use to keep track of old debt I’m paying off. my savings & retirement are auto deposited from my paycheck so I never see it. oh, and IF I have anything left after the bills that’s my fun money - that’s it, pretty simple.
this is perhaps the most primitive way to keep track of things… but a couple of years ago i went out and bought an accounting notebook and a calculator, put income in one column and spending in the other, and just started writing everything down! i have my (variable freelance) income and projected spending/savings laid out a few months in advance, and i check things off as the money goes in or out. i know i could get more information (statistics etc) from a computer program, and could spare myself the trouble of adding everything up with the calculator… but i sort of enjoy it!
I’m different from most people in that I don’t rely on paper statements to know when to pay my bills. Because what if I’m out of town? What if the bill gets lost in the mail? What if the dog eats the mail? Either way I’m still responsible for getting it paid.
I use 2 applications on my Macbook Pro to control everything.
The first is called Chronicle. This apps mission in life is bills. It takes 10 min to enter all your recurring bills. It then reminds you when a bill is due and I pay it right then (online). It even syncs with my calendars on my Mac, iPhone, and iPad. So if I’m away from my computer I’ll get a reminder on my iphone. I’ve never missed a payment because of this simple app.
For all the heavy lifting (bank transactions and paychecks) I use Moneywell. It uses the envelope budgeting method. But instead of envelopes it uses buckets (which are different categories of expenses). When I get a paycheck I distribute the money into the various buckets. Once the money runs out for the bucket then I know I can’t spend anymore money for that particular expense. And it automatically downloads the transactions from my bank. Simple and easy.
I don’t track my spending on a spreadsheet but I know where my money goes. I have online banking, I get direct deposit. I login everyday to check my account. I’ve tried Excel and budgeting before and its just not for me.
I have a mental list of what I need to pay each month. I realized I had spent too much money eating out in the past, so I cut that down. Its easy for me to keep track of my bills through online banking.
When I use my debit card, its easier for me to use a calculator and see how much I spent where. I realized I had spent $500 on eating out. That was insane so I’m glad I used my check card and not cash so I can keep track of my spending that way.
Well it works for way, I realize its a weird system but it works and keeps me organized. I don’t have many bills: rent, electricity, car insurance, food. That’s pretty much it. Now I try to eat and just eat out on the weekends.
I don’t have cabe, no tivo, no other monthly services. I guess its easier than most for me to track my spending because its just me.
I do spend on wants such as: itunes, going out to the movies, e-books, so its not like I’m deprived. I’m well aware of how I spend on my wants.
I just started using YNAB in February of this year and honestly it has changed my life. I am sleeping better. I am in control for the first time ever. I am no longer tooling along hoping to goodness I have money left before the month runs out. It is simple to use (I am not in any way affiliated with YNAB - -just a very happy customer) — I recommend it highly. I am paying down debt, and have managed to get a handle and control on my spending. I have a lot of debt to pay off but I WILL get there and in the meantime I can see where I’m spending money and what I’m spending it on - I think twice now before I buy something that isn’t budgeted for. It’s been an amazing change in my life.
I have a lot automated: direct deposit of paycheck, automatic elctronic allocations to various accounts, my mortgage payment paid automatically, my phone, Internet, cable TV and Netflix bills all go onto a credit card or debit card, other bills are paperless and I get emails when the statement is available online. These bills I pay online from my checking account as soon as they come in. I can do this from home or at work since I pay electronically. If I do it at work, I make notes in my planner to then remember to record the spending later.
Usually every Saturday, I enter items into my electronic check register in Quicken which has varous accounts and then track spending by different categories I have set up in Excel spreadsheets. Then I also use the Sat time to reconcile checking accounts, tranfer money around and pay other misc bills that are not paid online. If I get any paper checks, like refunds or rent for my extra parking space, I record those and mail the deposits.
I also review credit card bills first before paying them for to catch errors and fraud. Because of fraud, I have had to change credit card numbers about 4- 5 times in the last 10 years.
I started tracking spending to figure out how much I was going to need for living expenses in retirement. This is my second year of tracking. Before that I did not really know how much I was spending on food, or gifts for relatives or personal travel. These are all areas where I can use more discretion on spending and potentially saving money. I have big spending categories of Housing, Food, Car, Medical, Personal Discretionary and Others Discretionary. Then I have subcategories in each of those spreadsheets that I can record each expense in along with a column for the date and a column recording exactly where or for what I spent the money.
If I pay things right away, I can also do the recording and tracking later if I have to skip a Saturday. This works for me because I have plenty of float in my checking accounts.
I have a small basket hanging in the kitchen. When I come in with the mail I sort through it right away. Often I’ve already thrown all the junk in the recycling before I’ve even entered the house. All bills get opened, junk from inside them gets tossed, the actual bill gets tucked in the return envelope so the amount and due date is showing, then it gets put in the basket. The basket is small. Every time I am in the kitchen I can see if there are bills to be paid or not based on if there’s anything sticking out of the basket. They don’t get lost this way. The basket is flat on one side so it hangs nicely on the wall. If I used a more typical basket that sits on a counter I might be tempted to pile other things on top!
loving reading all these suggestions, which i find very helpful. realize this seems like a relatively small side question, in relation to the much more important goal of effective money management, but i’m wondering what paper bills some of you keep, which ones you shred and trash? wherever possible, i opt for electronic billing to cut down on the paper bills and tree waste but this isn’t always available. luckily, all of my bills can be paid online, and once paid a bill, i’ll write down the date paid and amount (if not in full) on the paper notice, then file it away in a categorized accordian folder but i’m thinking that some of the paper bills i’m holding onto aren’t all that necessary. Anything tax-related I’ll keep, but is it necessary to hold onto gas and electric bills? Bank statements? I tend to think more clearly and feel more in control when I’ve removed clutter from my physical surroundings but I don’t want to throw out papers that I might need in the event of an audit or financial emergency.
I’m surprised at how many people on here are saying things like, “I only have two major bills” or “I pay my bills and then other stuff like water, power…”
Personally, I still consider those bills! While my water bill may not be ‘major’ but it will still give me an overdraft if I don’t pay attention. And my electric bill will always be ‘major’ to me. That’s $150 a month!
Nothing negative - I just thought it was interesting to see what people thought of as ‘bills’ and ‘other stuff’.
Our system may seem a bit complex but it works really well for us.
1) I have a few spreadsheets which I auto generate at the start of every year. They list all known income and expenditures in date order. This way whenever we get paid I just go in and pay all the bills due between that paycheck and the next
2) We have 3 separate checking accounts. One for bills (mortgage, cable, sewer, etc), one for budget items (groceries, eating out, fun money, etc) and one for our debt snowball loans (student loan and car). The first two accounts get a certain amount per paycheck (our company lets us split the direct deposit any number of ways we want) and the loan account gets what is left. So I pay what is currently owed on CC’s from the budget account, and pay whatever the amounts due on our loans are between the current paycheck and the next paycheck. Then anything left in the “loan” account i know can go to our next loan in our snowball. So that account balance is pretty much always zero.
3) We have a bunch of savings accounts at ING for various purposes and our paychecks have a certain amount go to a checking account at ING each paycheck then the next day there are auto transfers from that to each of our savings accounts.
4) We track/categorise all our spending in Mint, this works well for us because we put anything we can on a CC to get rewards. Our current card of choice is a Upromise card that gives us 1% or more of each purchase and we use that money to help pay off my husbands student loan
We don’t currently have an IRA but we both contribute pre-tax to a 401k and after our debt is all paid off we start and IRA.
While this system may seem complex I normally spend about and hour at the start of the year getting spreadsheets all set up, then i spend about 1/2 hour to an hour (depending on how much playing I do on our loan forecast spreadsheet) every other Tues or Weds. Since we get paid on Thursday I use Tues or Weds to do receipt categorising and set up payments through bill pay for Friday (day after payday).
I know some people prefer auto pay for bills but I like knowing I have scheduled and it is going every two weeks.
JD- Would it be worthwhile sifting through these comments and summarizing what people do?
Also- seems like a lot of people use excel spreadsheets. I’m guess there are a ton of them out on the web, but perhaps readers of GRS would like to share and post them (minus data of course). How about an excel money tracking spreadsheet challenge?
Have used Quicken for years for accounts and especially love it for my checking account and FLEX spending account as you can print reports. But as a person who uses the cash envelope system my newest greatest thing is “SPEND” application on my Ipod Touch. Its a great easy way to keep track of everyday cash spending. Have categories like groceries, entertainment, gas, etc. VERY easy to use and quick and helps me keep my envelopes balanced. Still hard to believe it only cost .99 cents.
@ Rachel - when I (and I think a lot of other people) say ‘bills’ we are talking about a paper bill or an expense we have to manually pay. For example, as I said in my post (#52) we have a credit card ‘bill’ that I receive in the mail and have to log in to the cc website and pay every month. It contains, among other things, our ‘expenses’ for our phone and cable/internet. I don’t consider those ‘bills’ anymore because they’re already contained in the credit card statement.
@ Ian - that’s a neat idea. I would be willing to share my spreadsheet.
First of all, great post. Giving specifics is a great way to help others! I use a free iPhone app called ‘Accounts’ to enter in ALL of my transactions, and it’s great because it’s always with me, even if I don’t have a purse with me. It can ‘graph’ your spending habits and has all kinds of categories for your transactions. I also have a small notebook with which I map out four months’ budgets in advance. I probably should use something electronic, but there is something I like about an old-school, ruled paper notebook. And plus as an editor I’m glued to a computer screen all day. Anyway, this helps me stay on track with my budget. I also keep a full running tally of my credit card debt, totalling it up every month when I’ve made all of my payments. It was really scary to add up all my debt and see it face to face, but now I KNOW the number I’m working on and it’s a small victory every few months when I’ve realized I’ve made, say $3,000 in progress. Good luck with all your personal finance goals, people! I’m in the thick of it paying down my large debt, but someday (in three years, I’ve calculated), it will be over.
Two parts, Money Processing and Other Processes
1) Money Processing
The core of my system is automatic bill pay with ING. It sends out checks automatically when they’re due.
When money comes in (paychecks every 2 weeks or consulting checks) I go through the following list:
1) Make sure than the ING checking account has more than enough money to pay all the bills due for the next two weeks.
2) Make sure that the Credit Card is paid off
3) Add to the overflow account dujour. At the moment this is our Emergency fund, but it is usually extra payments to our highest interest debt (a student loan).
2) Other Processing
Retirement savings is a 401k contribution taken from my paycheck.
All bills are automated with the irregular ones estimated high — when the monthly bill comes I adjust the scheduled payment.
One-off bills are entered into ING the day I get them.
Once a month or so I log into Mint, re-categorize any spending that it put in the wrong place and see if my spending is where I want it or if I need to adjust something.
I put everything I possibly can on my credit card so that I don’t have to track receipts.
1. I have the bills divided into 2 categories. There are certain ones that get paid with the first paycheck of the month, and the others are paid with the second. I pay these bills either on payday or when they arrive. Any paper copies are then filed.
2. On payday, I write a check for a set amount of cash. That is spending money for me, for my husband, our joint entertainment (like eating out together or going to the movies), clothing, and gifts. We always know how much we have to spend for certain things.
3. Only I carry a debit card. (My husband was bad about losing receipts or telling me he’d bought something, and it screwed up the accounting, so he carries only cash and a credit card.) When I purchase groceries or whatever, I stick the receipt in my wallet. Every few days I’ll sit down with all those receipts and record them. Then the receipts go into a box.
4. The checking account is set-up so that a set amount of money goes into our ING savings account on paydays. Easy savings that are a slight pain to access. I also have a savings account that is with my regular bank and is linked to my checking account. I have immediate access to this set of savings. I often move extra cash over there so that I can access it easily for unexpected expenses, such as an emergency visit to the vet for my sick cat.
6. I frequently monitor all accounts.
I am a naturally organized person, so I’ve never had a problem with keeping up with bills or receipts. The only thing I automate is my savings. I like the control of physically entering the numbers for paying all bills. For me, automation makes me lazy and careless.
@Rachel (#81) - I assume your comment was responding to mine about the 2 major bills, so let me explain.
Those 2 bills account for about 85% of our monthly cash outflow. But, we always keep enough extra ($500 or so) in our main checking account to cover the total of the other smaller bills and anything that pops up that requires an ATM withdrawal. (I don’t carry cash.)
Echoing what Courtney said, some expenses are already included on our Visa bill. I wish our other utilities would take credit cards but they charge a fee to do so.
I am self-employed and my income varies dramatically. If posssible, I pay my bills as soon as they arrive. If not, I pay them as quickly as I can. I take out $200 every Friday for groceries, gas, pet food, and incidentals. Whatever’s left over goes into savings.
That’s my system.
I arrived at it by tracking my spending for a month and realizing that using my debit card I frittered away money here and there on totally useless things. Using cash, I spend way less, and I always have some money left to put into savings. $200 seems to me like a very generous allowance, and if I want to buy some foolish thing that costs $199, that’s fine, as long as there’s food in the house for me and the pets.
I’ve been using this system for about two years and it’s worked great for me.
Before computer age I used a small notebook and each page was a month where the heading would be Name, Amount due, Amount paid Date/Due and the bills would go in that notebook. I kept easy track of what was paid that way and then came computers so Quicken I used for a while but pay most bills online now.
I have tried some free budgeting software, but I haven’t found anything that beats my own Excel spreadsheet. I like Excel because it allows me to customize my spreadsheet to my own specifications. I leave my budget spreadsheet open on my computer at all times, and whenever I make a purchase, I try to enter it immediately, and then I put the receipt in an envelope (I have one for each month). If I don’t have time, I put the receipt on my desk by the keyboard and enter it later. It only takes a few seconds, and I think it’s much easier to enter each purchase right away rather than wait until the receipts pile up. It also helps that I just don’t buy much, so I don’t have much to enter!
I used to worry a lot about missing a bill, so I set up a tab on my spreadsheet that lists all my recurring bills at a glance (mortgage, car payment, utilities, credit cards), and I type in the date of the most recent payment. I set conditional formatting to turn the cell red if it’s been more than a month since my last payment of any bill (or more than 3 months for quarterly bills). I have automatic bill pay on almost everything, but this still serves as a reminder to enter the payments on my budget spreadsheet, and also to double-check the statements for errors or fraudulent charges. I guess this wouldn’t help for something unusual like a medical bill, so in that case, I would probably pay it right away.
The Simple Dollar is doing a series on a book called Getting Things Done, which is about a system for getting organized. Some people might find it useful if they haven’t found a system that works for them yet.
JD,
Why don’t you use Quicken’s OneStep update feature? If your financial institutions support it (most major ones do), you can store your online login information in Quicken and Quicken automatically downloads your transactions with a click of a button. You can even download up-to-date values for your 401k and IRA accounts.
Reasons to switch:
1) No more storing receipts on your person and dumping them out when you get home (particularly annoying when you’re on a long trip away from home).
2) Before I switched to using Quicken update, I would often fall into a “transaction debt” hole where I neglect to enter my transactions for weeks at a time. The task becomes more and more daunting with every passing day that I neglect it. This is no longer a problem with Quicken update.
3) Saves a lot of time and worry. If you’re looking to automate your personal finance processes, why not automate this one as well?
4) Eliminates human error on your part.
5) It’s so convenient that you wouldn’t mind doing it every day. Errors sometimes occur with Quicken update where Quicken misses a transaction and your institution’s reported ending balance does not match the one calculated by Quicken. Performing the update everyday allows one to easily fix errors when they occur because you only have to look through the last day’s transactions to find the problem.
@Kevin M
That makes a lot more sense if you include it with your credit card bill. It just seemed odd that so many people had just one or two bills. When I count all of ours individually we end up with like 15 - but I am also someone who considers my food budget and gas allowance a ‘bill’.
Before when I wasn’t so financially smart, I use to use my debit and credit card without checking the balances to see if they’re correct nor did I really know where my money was going. I did everything nonchalantly.
Then I started reading a lot of inspiring PF blogs and wanted to jump on the bandwagon. I bought Quicken and started using that. That triggered the whole ‘What Works For You’ movement with me. Eventually I quit Quicken and now I do mint to see where my money goes and a little notebook for reconciling my debit purchases. I no longer use my CC. I still in CC debt and have an excel worksheet to show my progress and that’s about it.
I like the comment about good habits. I prefer my life to be simple. The regular bills I have are automatically paid every month. I don’t even have to think about them. And I don’t use the bill pay on my checking account. I just set them up through the company’s system. I’m in a heavy savings mode right now to buy a nice used car and a house outright, so I make big deposits into my savings account every week. I could automate them, but I don’t because I like the feeling of seeing this money going into savings. I don’t believe in debt and there’s plenty of nice houses and condos out there for less than $75,000, even in cities like Boston, so there’s no excuse for being in debt for a home. I also give myself extra money that is not designated for anything. I can spend it on whatever I want. That’s really important. I think a lot of people, especially when they’re paying off debt, start to scrimp so much that they’re denying that part of themselves that needs some freedom.
I have an excel spreadsheet that has all my balances for credit cards, loans and targeted savings accounts. It also lists any other bills each month that don’t vary: rent, phone, etc. This spreadsheet has a line for each month and the balance after each month’s payment, so I can see with my current payment plans how soon each credit card will be paid off, and how soon afterwards I can travel to Italy!
I get paid 2x a month, and when I get paid I sit down and look at my spreadsheet. On the 1st I pay rent, my student loan, my credit cards, and contribute to my gifts, vacation, emergency fund, and medical targeted savings accounts. On the 15th I pay utilities, another loan, my car payment and insurance, and my Christmas and Car Maintenance savings accounts. After each period’s payments are made, I am left with $250 in my account to use on groceries, dining out, other, etc and can use that however I want - if I want to go to a $100 dinner, I might have to eat ramen for the next 14 days, but that’s my choice.
My ING targeted savings accounts have really helped me avoid surprise bills because most “surprises” fall into a category that I’m saving for, like car maintenance or medical. So if I get a bill from the doctor, I just transfer money from that savings account to checking, and pay it.
Not the most glamorous of systems but it works for me!
@ Kevin M :
I, too, was frustrated that my utility companies would charge for paying w/a credit card.
Then I discovered (by searching on their site) that I could pay both my cable and my cell phone bills for free w/a credit card as long as I signed up online and scheduled my cc payment through their website (which is usually listed on the statement).
They would only charge a fee if you required a ‘chat’ w/an online representative or if you called and paid on the phone, again requiring assistance from a representative.
Maybe this is the case for some of your utility companies, too.
I was able to do this w/auto ins., life ins., cable, cell, trash disposal;
Still can’t pay the mortgage or the power bills w/a cc, though.
I can be rather eloquent, so I’m going to try and keep it short.
My various methods can be summed up as “do it right away” and “delay it”.
For writing down receipts or paying bills it’s “do it right away” When I come home, entering the receipt on my computer (or, before, in my binder) was something that went with putting the groceries away. As for my bills, the second I get them in the mail, I log in to pay them.
Giving me a fixed day to do it never worked for me, I find that I can forget too easily if I don’t do it right away.
When it’s a purchase, though… Then, delay, delay, delay. 30 day list, not being allowed to purchase something at the store if it wasn’t on my list, things like that allow me to delay a purchase, and while I have a better memory for these things (go figure) it does prevent a lot of compulsive buys.
So buy doing it right away for important stuff, and NOT doing it right away for non-important stuff, I solve much of my problems. And it becomes a reflex, just like putting food away as soon as you get home.
J.D. - I follow the Ramit school of thought - my finances are automated to the point where I just don’t have to think about them unless I make a big ticket purchase. Credit cards, mortgage (including my extra payment), utilities, HOA fees, everything. I highly recommend giving it a try.