- A spending plan and tracking system needs to be clear and relatively easy to maintain. If not, it will do you little good.
- We use a budget and 4 different systems detailed below for managing our finances. It was work to set up, but with it, we don’t have to worry about receipts or carefully tracking expenditures; the system basically allocates and controls.
- We have a household budget and a household checking account that most of our money goes through (and two small individual accounts for the money we individually manage).
- The budget is based on my income only (not my wife’s in our case as she is not contributing toward the household expenses; her income goes toward home improvement and other things as she wishes).
- The budget says where the income will go and in what amounts: a) what stays in our household checking account for regular bills, b) to envelopes, c) to our CapitalOne360 accounts, and d) to our personal accounts. See below for more on each of these.
- Household checking account:.
We pay regular bills from this household checking account. The House, utilities, gas, cell phones, internet, regular giving, etc. etc. Some of these items we put on our credit card and then pay off each month.
2. Envelopes (cash)
We use the envelope system for certain categories, esp. discretionary spending categories: personal allowance, clothing allowance, grocery, Christmas, other gifts, pets, family fun, dates, more.
I now put my personal allowance, clothing, etc. in my personal bank account. But my wife continues to use the envelope for hers.
3. CapitalOne360 savings accounts (https://www.capitalone.com/bank/savings-accounts/online-savings-account/)
These are our “big envelopes.” These accounts are free, earning a small amount of interest, and are linked to our checking account. We have monthly transfers set up to automatically go from our checking into these accounts, some during the first half of the month, others during the second half of the month. We move money back to our checking as needed to reimburse ourselves for expenses from these categories, although it takes a few days.
We use them in two ways: 1) for savings for bigger, long-term items like auto repair/replacement and home improvement and 2) as a mechanism to take irregular expenses and make them part of the regular budget.
Our CapitalOne360 accounts include: emergency fund, propone/property tax, vacation, special giving, auto (repair/maintenance), and home improvement {and formally, college and weddings).
See monthly reconciliation below for more on transfers from these accounts to our checking account to cover bills.
4. Our personal checking accounts.
We each have a personal checking account. I have a monthly transfer from the checking account for my clothing, personal money, and such. I also manage my travel reimbursements in this account. My wife runs her business in her account. If we needed some of her income for our household needs (which we do not), I would imagine it would be included in the budget and there would be a monthly transfer from my wife’s to the Household account.
- Credit cards
- We do two one joint credit cards.
- We only charge what is in the budget or will be reimbursed from some source. So we use it for gas, phone/internet, home improvement purposes, auto expenses, cell phones.
- We pay it off in full every month.
- Monthly reconciliation.
- Early in the month, I take the past month’s bank statement and our credit card statement and figure out which transfers need to go from CapitalOne360 accounts to checking to reimburse the account for these expenditures and to be able to pay the credit card payment.
- General comments:
- We do not keep many receipts. The envelopes and CapitalOne360 accounts constrain how much we spend in each category.
- The system sounds complex but it works well once set up. Your system may need to be simpler.
- My income is pretty steady which makes it easier. For variable incomes, you need to figure out how many you can count on and build you budget around that and use any extra to pay off debt, put in emergency savings, etc.
- I do all of my tracking in an Excel spreadsheet, particularly for tracking the CapitalOne360 accounts and our checking account and can help you with setting yours up if needed.