Finances. They seem to have a life of their own. I’ve never been good with money- I’ve tried but I’ve always failed. It’s just one of those things that I’m still working on.
So, I realized that I am probably not the only person who has trouble keeping it straight and I thought perhaps it might make sense to share our financial journey and what I think has helped the most, the mistakes I’ve made, and the direction I’m trying to take us now.
I realize that is a lot of “I’s”. That’s because finances are my responsibility in our family and after twenty years, I finally feel like I’m not a total failure in this department. My husband has been patient and has at least been comfortable not having to deal with it.
When we first married, I went from literally not having the money to buy myself food to a substantial savings account, a mortgage, and a consistent income. We made a lot of stupid decisions from trading in a car we were upside down on for a cheap piece of junk, to going into deep debt for siding that didn’t hold up past 10 years and so on. I struggled to make sure everyone was paid on time. It was rarely a matter of no money, and when it was, it was because I was stupid and didn’t know how to manage it.
Sometime after ten to twelve years, I got smart and completely revamped our finances. It started with a few basic steps. (I’ll explain these things in further detail later)
- All of our income went to direct deposit into 3 separate bank accounts.
- All of our utilities went onto a level payment plan if offered.
- All of our bills went to auto-draft.
These were the first three steps to a brighter future for us.
Step One- Our Direct Deposit. These three accounts are utilized as follows:
- Fixed Bills- Everything that gets paid monthly and isn’t an option. From this account we pay our mortgage, natural gas, electric, telephone, water, trash, car insurance and life insurance. Rarely do the amounts fluctuate much so it’s easy to keep track.
- Living Expenses- The bulk of my husband’s check comes here. This account covers food, gasoline, clothing, gifts, dentist visits, savings (yes, I’ll explain that in a minute) and even things like my BOMC and Rhapsody. This account is where our Debit Mastercard is linked.
- Sludge- Originally this was Kevin’s allowance account. It worked great because when he was out of money, it wouldn’t let him withdraw and he knew he was ok. Then one day the bank changed policy but didn’t tell us. Kevin withdrew and two days later I got an overdraft. I was so confused. How did the ATM let us take out money we didn’t have. Then I got another one before I could call about the first. I was alarmed! They were giving us 20 dollars from our “account” and charging us 22 dollars overdraft for the privilege of being able to take out money we didn’t have! I went into the office to discuss this with them. I was sure their computers were messing up. Nope. This was their new policy. When I told them I didn’t get a notice of a new policy, they told me that hey hadn’t SENT notice of it! They were doing it as a “courtesy” and didn’t feel obligated to inform us. After that, this account became the “sludge” account. Generally it’s used to save dollars for household things and such without us noticing we’re doing it since we don’t have checks OR an ATM for it. When we need it, we just transfer it to “Living Expenses” and use it. However, occasionally the Fixed Expenses account will be used from Paypal (it’s one of our linked accounts) and puts us below what we need for upcoming bills. So, we also transfer it over to Fixed Expenses when that happens.
Step Two- Level Payment Plans.
We contacted SCE, PG&E, and Verizon looking for level payment plans.
- SCE is the same price all year with a settlement balance at the end of the year either that we owe or that they owe us, depending on how they projected our usage. It’s never been much more than one month’s bill at the end.
- PG&E revises it quarterly. The funny thing is, we then actually pay more for gas in the summer when we use less, than we do in winter when we use more. It’s kind of comical but the difference is really only a matter of 20-30 dollars a month that it goes up or down.
- Verizon isn’t a true level payment but it is close. I have a Plan (Freedom something) that combines my internet, unlimited long-distance, and baseline expenses. This means my bill fluctuates 3 dollars or so a month max. Not sure why but for some reason it does. But, there is no more 25 dollars this month and 80 next now just on phone depending on if I died to self and called someone that month.
Step Three- Auto Draft
It’s my friend. I have never been late with any of these bills for the past 8 years and it’s because of auto-draft. Every month, on about the same day, the money is debited from my account and the bill is paid. No checks to write, no stamps to buy, no bills to lose, no bills lost due to our faithful USPS, nothing. Paid in full. Every month. Like clockwork. It’s beautiful. For the dubious, I’ve never had anything taken out that shouldn’t have been, nothing gone unpaid, no glitches period. Ever. The mortgage, life insurance, car insurance, water bill, utilities, everything paid for me. I sit back and reap the rewards of feeling diligent, a credit report that doens’t have dings out the wazoo for late mortgage payments or shut off utilites (do they put utilities on credit reports?)
The next step didn’t come for another year or so. I opened an ING Direct account. I highly recommend it. I started with 100 dollars coming from our Fixed Expenses account every payday. (Every other week.) I set it up for auto debit and all was well. Then I bumped it up more… and now it comes out every week and I keep trying to see how much more I can pull from our check without us noticing the pinch.
We’ve been able to take vacations, do needed home repairs, replace defective appliances, buy CHRISTMAS PRESENTS if we feel like it… all without a drop of credit because we just got smart about how to make savings work for us. I’d never had anything work before but this is perfect.
- The money is auto-drafted for me. I don’t have to move it myself.
- The money is readily available but not easily accessible. If I withdraw 500 today, I can’t spend it until Wed or Thurs because it takes that long to get to my main checking account. Obviously you need a cushion in your regular checking for minor emergencies but so far it has never taken us longer to get the money than we needed. So far.
- If we have a lean week and need the money, I can simply stop that week’s debit. I’m not locked into it if I don’t want it. I like that flexibility and HAVE used it a time or two.
- They have competitive interest rates and it’s FUN to watch that interest build.
The Future: Non-budget Budgeting
I’ve worked hard for years to create and maintain a budget. I can make beautiful ones but like schedules and similar things, they tend to fall by the wayside faster than I made them. Today on HK, however, Dell described her financial “budgeting” and I cheered. It’s what I’ve wanted to do for hears but felt like it was cheating. I’ll have to let you know how it goes.
Dell’s plan is to face each month and make decisions based upon that month’s needs. This will work for me. Planning and saving 243 dollars a month for household improvement means that I can fix my walls, doors, and windows forever while I still need a couch. I won’t have six months of that stored in a savings account somewhere waiting for me to use it on new bedroom furniture. However, I can take a paycheck and go do it this month, maybe pulling a smidge from savings and bumping the per month amount for a few months to “pay it back.” This allows me to be my own “credit card” and I pay myself with money my checking doesn’t have but my savings DOES have. I pay myself back and voila!
I also want to incorporate an idea I had for a friend years ago. I want to have a delayed spending plan. I want to spend last months money, this month. This isn’t necessary perhaps, but it does let me make decisions this month based upon what I know of last month which is, in my opinion, helpful in deciding about more frivolous things. Do we really want to go out of town this month after last month’s car repair bill? If we wait a month, we’ll lower the impact ono a single month’s spending which is good for balance.
I’ll let you know how it goes. Just thought I might be able to encourage someone else that it can be done. Before I started these steps, I was often late with utility bills, paid late charges on the mortgage and what not, and only because I’d forget. The money was there, my brain wasn’t. Then I realized that companies would be my brain for me. At no extra charge. In the long run I think I must save at least
- $25.00 a year on checks
- $10.00 a year on stamps
- $100.00 a year or more on late charges.
I don’t know about you, but for less work, 150-250 dollars is a lot of money that can be spent on more exciting things like nice dinners out, books at the home school convention, and/or chocolate. I recommend Sees.