How do you do it? I've got lines in my budget for vacation and Christmas, and (very small) amounts for things like "photography". But how do I really make it work? Do I move that money out of the main account until I acutally want to spend it? (This seems to risk running afoul of the transaction limits for savings accounts.)

For example, if I've budgeted $20/month for photography, and I want to buy a lighting setup that costs $130... what's the best way to handle this? Or rather, what's worked for you?

The option I've looked at is setting up two Electric Orange accounts with ING for our "fun money" (one for each of us) and each month transfering a fixed amount into each account. This account would be for anything... books, camera equipment, dining out, etc. The other option is to get cash out and use the envelope system. However I'm generally wary of cash (it's too easy to spend without thinking or recording).

Suggestions?

I use ING. I love that you can create sub-accounts there for your individual budget line items. You can transfer IN as many times as you want, it's only transferring OUT that is limited to 6/month. So theoretically you could transfer your $20/month to your photography account and have a separate 'fun money' account. Then if you want to buy your lighting set-up you can see how much you have in your photography account and it if isn't enough, decide to wait a couple more months or supplement that amount from your fun money. It depends on how you want to set it up.

I'm a big fan of couples having individual 'fun money' accounts to spend as they please, no questions asked. Makes it hard for your partner to complain about you 'wasting' $x on whatever your hobby of choice is when it's your play money.

Personally, I do lazy accounting. My bills and savings goals are automatically funded the day i get paid and whatever is left is what I get to spend. As longs as my bills are paid and my goals are being met it doesn't matter to me whether I spend $200 on a dinner out or $200 on a haircut. I tried doing the detailed budget thing but it just doesn't work for me.

Here's the way I've been saving lately, which has been working GREAT. Not everyone may be able to do things this way, however.

At my work, I can setup direct deposit to go to however many accounts I want. So, for example, I can set it up so that 85% of my pay goes to my main checking, 10% goes to one savings account, and 5% goes to another savings account.

Well, with ING you can open up as many savings accounts as you want and label them however you please. In my case, I've got 2 savings accounts right now: One is labeled "Emergency Fund" (which gets 10% of my pay), and the other is labeled "Travel Fund" (which gets 5% of my pay).

Since I have these setup to come directly out of my paychecks I don't ever see the money and am used to not having it to spend.

I've been trying this for a few months with great success, and I am planning on opening more savings accounts for recurring things I'll have to budget for, such as Gifts, car repair, etc. Then I'll just go back and setup my direct deposit to put a certain percentage into each account every month. Automatic budgeting =

How do you set up sub accounts? This is EXACTLY what I need. I currently have 4 online savings accounts so that I can keep my money separate for different reasons. Otherwise it all gets lumped together and sometimes money gets spent for the wrong things.

CTBoss,

When you are logged into your ING account, click on open new account. It will ask you if it's joint or single and on the next screen give you the option of giving it a nickname and ask you how (and with how much) you want to fund it. From then on when you log in on the first screen you'll see a list of your accounts and their balances. You set up the auto transfers just the way you normally would. This should be much easier to manage than 4 separate accounts.

Let me know if you need a referral.

Good luck!
pf101

Well... that theory is shot down. I apparently don't qualify for an ING Electric Orange account due to low credit score. I'll have to find another alternative.

I keep my savings in an undifferentiated lump (from the bank perspective) in an ING Orange savings account. I have a spreadsheet where I subdivide the ING account into as many virtual accounts as I need, one line per account/function. To keep money from getting lost, I have formulas that take the balance against the accounts and any time the sanity check cell is not zero, I need to check my numbers.

I have lines for: Emergency fund, car payment fund, roof repair fund, car insurance fund (my goal is to pay next years insurance in one go to save installment fees), dental expenses, medical expenses, car repair fund, property tax buffer, lots of other things, and a couple of lines for fun stuff. I may have to work until I die, but I'm going to spend time with my friends along the way.

One advantage of this is that I can re-allocate money at need among the virtual accounts without triggering any regulatory limits. The only time money comes out is when I actually need to spend it on something. I will probably set up something fancier when I get larger amounts saved up.

I use the "lazy accounting" system like pf101. I don't try to predict the individual expense categories, but have a hard spending limit for each pay period.

What I do for "fun" money is withdraw cash each pay period, and account the money as spent when I withdraw it, not when I spend it (I don't track cash purchases). This ensures I don't exceed my hard spending limit it a particular pay period (and, therefore, not for a month, a quarter, or a year). I stash it all as cash and use it when the expense comes up. This works for me, but the same accounting system could work with different sub-accounts also (as long as those sub-accounts are not counted as savings!).

I keep a small secondary savings account at my credit union as a vacation/gift fund. It basically works out to $200 for a summer trip, and $200 for Christmas gifts. Which covers the total expense of neither, but gives me cash to carry, and certainly cuts down on credit card charges.

Since the account rarely has more than $200 in it, I'm not worried about foregone interest.

Like MikeVx I se an undifferentiated ING savings account and a spreadsheet. In my case it's a Googel Docs spreadsheet so my wie and I can share it. I have the amounts I have reserved forcertaint hings as line items - some is reserved for emergency, some is reserved or vacation. The spread sheet has a formula that gives me the bottom line of how much is left over for other stuff that we want to spend it on -- big stuff usually.

We also do lay accounting, where all retirement and savings and such are deducted from checking automatically and what's left is available for small stuff like eating out and small items.