Monday, February 15, 2010

Of Budgets and (not) spreadsheets

I have been the primary keeper of the family budget since we got married.  If you know us, this doesn’t come as a huge surprise.  Andy tends to be more of a “free spirit” ready to buy whatever with a quick glance at the bottom line.  Usually whatever he finds out someone else needs :)  I tend to process and overprocess most decisions before making them and spin in circles for a while before acting or spending.  And I’m better at looking at a calendar and remembering important dates (like when the bills are due).  So I’ve been the one in charge of our finances.  It’s never been a problem, but I think we’ve come up with a solution to our non-problem that fits both of us better than our current system.

First, we have tried the spreadsheet budget where you track every expense and make sure you don’t overspend.  It works, but it’s exhausting and I always forget to do it from about the 8th-18th of the month and rush to add up all my receipts and figure things out in the end.  It’s time consuming and aggravating.  I get irritated and can’t find receipts and it’s often a mess.  I try to stay on top of it, but I’m not anal-retentive enough to track everything well.  We’ve done a modified envelope system…but we forget the envelopes…or have really awkward restaurant situations when we try to pay with cash (I do like using cash for groceries—if I only take 60 dollars to the store, I can only spend 60 dollars…or whatever I take).  So we’ve adopted a new approach, based on this system:

The 60 percent solution—basically, 60 percent of your income goes to dedicated expenses: mortgage, car payment, bills, tithe, charitable contributions, grocery/household, etc.  All of the things you have to buy in a given month.  Given our current salaries, those expenses fit comfortably within that 60 percent.  That money is in our local checking account at the bank.  I pay the bills and go on my way.

The remaining 40 percent go into four separate categories.

10 percent goes into short-term savings for everyday savings needs, the things you expect will pop up and dip into savings: doctors bills, car repairs, home repairs, appliances, vacations, etc.  It’s in our local bank savings account.

10 percent goes into long-term savings.  We opened an online account with a bank that has a higher savings rate to make a bit more bang for our buck.  It’s still easily accessible in case of an emergency, but it will take a few days to access.

10 percent is our “fun” money.  We can use it for clothes, movies, show tickets, eating out, whatever.  I like having a separate amount dedicated to this because  I always feel guilty about spending money for “fun” things.  To help alleviate that a bit, we opened an online checking account with the same online bank that also has a higher interest yield.  We have a separate account, and a separate debit card, for “fun” purchases—so as long as we watch our expenses there, we can spend that money on whatever and not have to worry about it affecting our bills and such.  We may not spend all of it every month, but that just means we can have a LOT of fun every so often (ha!).

The last 10 percent is retirement savings.  I have a small portion of my paycheck in a dedicated 403B, but we (will be very soon—hopefully before the end of the month) will have 10 percent of our monthly income directed into a Roth IRA for retirement. 

This seems like a lot as I type it out, and we’ve only just begun down this road, but I do think it’s going to simplify things a little.  Instead of tracking and hiding and whatnot, we’ll just have a few separate accounts to keep track of—but each of them serves a purpose, and I like having everything separated out into categories.  I’ll let you know how this new plan works out.


Anonymous said...

hmmm....How will I manage this next year with a net negative income? You have to love school (and the loans that come with it)...


Anonymous said...

The going around in circles before buying is a Jackson trait and spending like mad is a Hunnicutt trait. Just remember you may have to rob peter to pay paul.

Aunt Cris & Grandma