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How do you budget your money? (1 Viewer)

Ron-P

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Keep it simple.

We have one checking account and two savings accounts. Each account gets a certain percentage from each paycheck. The checking account is for daily expenses, one savings is for bills and the other is for saving.

We use our CC for all transactions possible. It works great for many reasons. You get a detailed statement so it's easy to track your expenses, purchase security and it also keeps the checking account clean to make it easy to balance. Every week I go online and pay the CC off (from the checking account) so there's never an outstanding balance.

How I came up with what account gets what percent of money? I built a spread sheet in excel of every expense and that is our budget to go by.

Again, keep it simple.
 

Armando Zamora

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Ron...every week? How do you know how much to pay? I thought most CC charges are handled on a monthly basis.
 

Charles J P

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My wife and I use multiple bank accounts, "allowances" for discretionary spending and multiple credit cards. We pay off ALL of our balances every month so the credit cards are just for convenience and of course we earn points.

How it works is, we each get a certain amount of money each month. We have to pay for our lunches out of them so if you want more money to spend on "toys" you can take your lunch etc. What is left, each person can spend on whatever they want without the other person's consent or opinion (within reason). I typically buy DVDs and HT related stuff. My wife buys clothes etc.

One note is that "essential" clothes like your basic work attire, a new pair of jeans once every six to nine months etc. do not have to be bought out of your allowance, but this must be in moderation. If you want more clothes or want "designer" stuff you're going to have to pay for part of it. My wife kows I can get a Van Husen (sp?) dress shirt on sale for $19.99 almost any day so if I want a $60 CK one, I'm going to have to buy it. Etc. One of the reason this all works is because of the accounts.

We have our joint credit card and then we each have our allowance credit card. This is largely for conveneice and because I order stuff off the web so much. We are responsible for the balance of that card and we MUST pay it all off as it impacts our credit score. We owe it to each other to each be financially responsible. If we cant get a home loan because my wife's credit is perfect but I have a $10,000 balance on my "personal" credit card, that's a problem.

We also each have an allowance checking account which is where the allowance gets deposited each month, and where we pay the CC bills from. Groceries, gas, utilites, etc are paid out of joint funds.

ANY service or item that will be an ongoing expense (add a premium cable channel etc.) must be discussed and determined how it impacts the overall financial outlook. Any item over $50 to $100 + that one person thinks is a "household" need must be discussed. Its pretty easy to justify just buying a $50, $60 or even $70 item on a trip to Super Target when getting groceries or something, but if you do it once a week or if you are both doing it, that adds up REALLY fast.

We take advantage of "free" financing from time to time like the no interest for 24 months we got for our living room furniture, however we ALWAYS pay 1/24th every month so that we dont have lump sum do at the end that we dont have. If you cant make that last payment, you owe ALL the interest for the entire financing.

I guess our system is pretty simple, but I also know that we are fortunate enough to be making pretty good money for our age and actual financial needds, however, it is human nature (at least these days it is) to try and spend x% (x being in the 70-90% range) of your income rather than live within your means and save. A friend of mine is always talking about his sister and brother-in-law who have an income twice what he and his wife do but his sister is up to their ears in debt. It would be hard to quantify because cost of living varies so much accross the country, but needless to say, these people could easily be putting away $100k a year in savings and still living comfortably. On top of the fact that they're not doint that, they're also not signed up with they're companies 401k and dont have IRAs or any other form of long term spending.
 

Ron-P

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Aramado, my credit union allows me to make online payments. It takes about 2 days for a charge to show up on my online statement, so every week, whatever balance is there, I pay. I don't wait for the monthly statement to show in my mail box.

I usually go online on Friday's and end up paying off the previous weeks charges.
 

Ron-P

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We used to do this as well but have stopped. If I make a large purchase I still use the CC and pay it off within the 25 day grace period. Even though it's interest free it's still outstanding debt, which I don't like to have.
 

Michael Pineo

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Sep 17, 1998
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I created a spreadsheet that forecasts all of our regular bills for the next 3 months or so. I include estimates for groceries and gas as well. I track our accounts using MS Money and download account activity daily from our bank's website. When I am done with that, I adjust the current balance in the spreadsheet and formulas take care of the rest. This allows me to see what effects spending money now will have over the next few months. That way, I won't assume I can spend $100 because I have $1500 in the bank, because I can see on the spreadsheet that we have a mortgage payment due before my next paycheck.

We also have a savings account that we have money automatically deposited into. That really helps, because you don't miss what you don't see.

MikeP
 

Charles J P

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Ron, I agree with you and different things will work for different people. As young (26 years old) professionals with decent income, we've made the decision that we can manage to have the things we want, while still saving for the short term, saving for retirement AND saving for our six month old's college education while still maintaining some short-term debth. We were approved for our mortgage for our second house and our credit scores were outstanding (not just good) so while our debt arrangment could easily get others into trouble, it hasnt for us and if it has lowered our credit score, ours is still better than 90% of our friends and coworkers with similar incomes (I'm speaking statistically here based on our score, not knowing what anyone elses is specifically).
 

Scott Merryfield

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You may want to check into setting up electronic banking through MS Money. I do this with Quicken -- I have several of the major financial institutions we do business with setup to download transactions from the accounts directly into my Quicken account registers. I do this for savings, checking and credit card accounts. My next step is to set it up for our brokerage acccount.

For each of the institutions we do business with, the service is free. My bank also does not charge for electronic bill paying, which I also do via Quicken (no more postage costs to mail bills). I can also use the program to transfer funds between accounts.

Defining categories will help you in tracking where your money goes, as well as capturing tax deductible costs. At tax time, I do not have to sift through endless piles of receipts, since everything has been categorized during the year. I simply print a report with the appropriate categories.

The above setup is a real time saver for me for paying bills, tracking investments and at tax time.
 

Ron-P

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I went and did a 180 so I'm pretty hardcore about not having any outstanding debt, I just don't want it. My wife and I got ourselves into some fairly deep debt many, many years ago.

All we have left to pay off is my wife's Toyota Sienna van. We owe 5k and are making 1k monthly payments. Once the van is paid off we will be 100% debt free and if all goes well, it will stay that way.
 

Joe Szott

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Dave,

We use the automatic bill pay as sort of a 'forced' saving plan. Sure it pays the mortgage, cable bill, etc every month, but we also transfer an amount to savings automatically every month too. I use a Roth IRA for long term savings and it deducts $100 every month from account. Plus I will shuffle money to a savings account (linked to checking) during good times and shuffle it back for lean (like during Xmas.) But mostly I consider all these accounts off-limits and only think of checking as the money we have to use.

It's more a mental thing than anything else. If I look at our checking account and see that it is low, I feel poor and will be frugal. In fact we have lots of savings in different places, but since I won't touch those accounts they don't feel like real wealth (when in fact the opposite will be true someday.) They are there if we need them and are feed automatically every month, but I try to live like they don't exist in the meantime.

Oh yeah, and never go into the red with credit cards. Never, ever - stop spending before that happens. CC debt can kill you financially quicker than anything.
 

Jason Hughes

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I literally write down every transaction I make. If I get home from work and I charged $4.00 at lunch, I write it down on a list and keep a running total of my credit card bill for the month (which I always pay in full).

If I make so much as a $10 withdrawl from the ATM it gets written down that day. If I realize I am spending too much late in the month, I shut everything down, no bar trips, no Best Buy trips, buy only groceries that are on sale, don't eat out, etc.

I actually hand write this stuff, no spreadsheets on a computer. It forces you to pay attention to where you are at instead of plugging and chugging data.
 

MarkHastings

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Everyone laughs that I do everything by hand (considering I practically live by my computer), but when it comes to finance, I don't want to mix it in with my other 'computing time'. This is where things can get mismanaged. Keeping my finances, in balance by doing it manually, forces me to keep a better eye on things.
 

Andrew W

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I like the way Ron-P does it and do the same. Debit cards are bad because a holds, deposits or fraudulent charges against them are immediately removed from you checking account and you have no chance to dispute them. You are broke while your bank is "researching".

My CC account is at my credit union and all the info is live on the website.



With a credit card, if the actual charge doesn't come through in about 10 days, the hold is released.
 

JonZ

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" Debit cards are bad because a holds, deposits or fraudulent charges against them are immediately removed from you checking account and you have no chance to dispute them."

I have 2 checking accounts.My car payment comes out of the account I have my Debit Card for.Other than that I dont keep any money in it, just enough to cover the car payment which I deposit the week before(the bank branch is at my job at work- a 2 minute walk from my office)and a couple extra bucks to keep it above $0.

If I want to charge something on my debit card I deposit the money to do it. No extra money stays in there for the reasons you mentioned.
 

andrew markworthy

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Computer and PDA programmes are only tools and will only work if you've got your finances in order to begin with.

FWIW, we do the following, which requires about two hours every year to set up, and provided you are suitably disciplined, requires no particular attention for the rest of the year.

(1) Annually (typically when I've received my annual salary rise) my wife and I sit down with the bank statements for the past year and work out what our monthly outgoings are on in absolutely every aspect of our lives. We also survey whether there will be a significant change in our incomings/outgoings both over the next year and in the longer term and whether we need to plan now for this. Generally we are deliberately pessimistic about this.

(2) If everything is in order, then pat on the back, nothing to worry about, and if there is a regular monthly underspend, we put the surplus money into savings. If on the other hand, if there is any overspending, then we examine where we can cut back (this is rare because my annual salary rise typically copes with this).

(3) From the above we work out how much we are going to spending on average each month on essentials - all bills, long-term savings, groceries, etc. Incidentally, in this list we include savings for annual holiday and the cost of buying presents.

(4) From the calculation in (3) we know how much we can spend on luxuries every month with a clear conscience. If we overspend on luxuries in one month or 'need' to buy something big that doesn't come into bank loan territory (e.g. new DVD player) it is on the clear understanding that no more or far fewer luxuries are bought in subsequent months in compensation until the money is in effect 'paid back'.

(5) To allow for the inevitable fluctuations in spending each month, we deliberately keep a float in the current account to allow for the fact that some months we'll inevitably spend more than others. This stops us getting charged for an overdraft. Having said that, we negotiated a very low interest rate with our bank if we go overdrawn by a small(ish) amount.

(6) We have one account for everything, with the exception of long term savings. Other than paying extra into my pension account, the rest goes into accounts solely in my wife's name because she is a non-taxpayer (I'm a Brit and am in the highest tax band, which means that a painful 40% of any interest is taken away in tax).

(7) If we need a big loan for anything, then generally we get this from a bank or similar and then use it to buy what we want. It may be different in the USA, but in the UK this is way cheaper than arranging a loan through the vendor. In fact, we budget that at any one time we will always be paying back a loan. This means that in long term planning we always in effect have a reserve to fall back on.
 

Ryan Wishton

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Dont have enough money to budget really yet (still need to finish school), but I do have a small yet nice savings for someone my age and no debt. So I must have done something right at least.

I saw how having debt was incredibly difficult in family members and friends. Causes fights, destroys relationships, creates pure misery, etc.

I didnt want to deal with that (I hate to be miserable), so I try to be careful and pray. lol. If I can do it, anyone can. I love things. I hope a day comes where I can buy many nice things. I used to spend all my money younger on dumb things. Now, I think twice before buying that DVD or whatever. I still buy stuff, but in moderation. I still have a few problems to work on. Eating out for example. But not as bad as I used to be.

Excellent rule of thumb. Pay cash for any luxury purchase. If you dont have the cash to pay, it means you cant afford it and have to wait. Basically, just pace yourself and use common sense.

Also, allows be able to pay yourself first. This means contributing to retirement accounts, etc., before doing anything else first. This helps you to budget your money more wisely as well. You do need self control though.

I always question why so, so many people have no self control with money? I used to be one to some extent. When you think about it. If everyone was very good with money and bought no unneeded items, the economy with be a bottomless pit of hell. It would destroy it.

P.S. Not smoking is a good way to budget. Damn, that's expensive. I cant believe what some pay every year. Thousands. Easier said than done no doubt.
 

Francois Caron

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The paycheck before the first of the month pays off the mortgage payment, municipal taxes and home insurance. The paycheck I receive in the middle of the month pays off all the bills. What's left over pays for food, clothing, bus pass and the occasional trip to the Casino. ;) Since I have no car, I have no car payments to make, and I get to rent out my parking spot.

I only have one account, a checking account. Most of my banking is done online (paying bills) with the ATM machines used only to withdraw cash and deposit checks. Most of my purchases are actually done with the ATM card, freeing me from ever having to carry large sums of money on me (I rarely have more than $50 in my pocket). I also have one credit card and one department store card ONLY. I don't need more than that even if I do qualify for other cards.
 

Yee-Ming

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Well said. All my HT purchases were paid for in full, since they are arguably a luxury and I couldn't justify debt to pay for any of it. Though on HTF some might disagree it's not a necessity... :D
 

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