I love my budget, it’s the best financial move I made. But I was having a real problem with my envelope system. I would get to the end of my grocery fund and just ‘borrow’ some from the car fund or travel fund. Obviously, cash and I are not a good match in the long run (self control issues). So I decided to budget with bank accounts.
I was making my budget too complicated (or not complicated enough, I’m still not sure). In order to get my mind, and my money on track, I had to come up with a system where everything was accounted for and in it’s place so that I couldn’t borrow from one fun to supplement another.
Bill PAY ACCOUNT
One account is just for bill paying, I keep track of all of my bills for the month and transfer the amount I need directly into that account, then write checks or pay the bills on the phone only from that account. This is also the account that my direct payments come out of, so I make sure that I add up all of my bills at the beginning of each month (or average them if I don’t know the exact amount). This way I know that each bill will be taken care of and I don’t have to stress about remembering when direct pays come out because I know the money is already in the account for the month.
I keep this account just for my emergency fund, it is separated from the others and I have a bit direct deposited each month. Out of sight out of mind. When I first started my emergency fund, it was a catch all for sudden, unexpected expenses. If my car needed a new belt, my kids needed new shoes unexpectedly, etc. Everything that was unplanned came out of my emergency fund. Well, you can imagine that the emergency fund was a very popular type of wallet for unexpected purchases. I realized that I would never be able to save for an emergency until I made this account hard to get at and redefined what an emergency is.
I never buy new. My current vehicle is over 15 years old and runs well. As long as I take care of it, it should last for another 10 years or more. Maintaining a car does cost money, but not as much as buying a burner junker every couple of years would. I know that I will need an oil change every few months, new tires every other year or so, and other miscellaneous preventative measures. I put a little into an account just for that purpose. No more ’emergency’ car fixes since now I can just pay for them out of the ‘car fund’. Any extra goes towards saving for my next car so I can have cash in hand when my car eventually goes belly-up.
Medical bills are no fun, take it from me. I dread getting sick and try to put off the doctor as much as possible when it comes to my own health to avoid the cost. My kids are a different story, one bad night for them and straight to the doctor we go. Then straight to the mail box come the bills. This used to be an emergency situation, but now I am able to at least make decent payments on expensive doctor visits through my medical fund. I put aside a certain amount each month to go towards my medical bills that have accrued in the past and make sure no new ones become outstanding.
Kids sure are expensive! This winter I am planning a family road trip down to Texas. Before I had kids, it would only be a matter of paying for gas. I used to take long road trips all the time and sleep in my car in a Wal-Mart parking lot. Now, I have to plan for motels, frequent stops with a newly potty-trained child, and snacks and meals that are healthy and not just drive-thru food. Any time that I have a little extra I slip it into the travel fund so I can introduce my kids to the different parts of the county.
Christmas seems to sneak up on me every year. I think it does for the majority, that’s why there are signs everywhere for Christmas loans. Seriously, who thinks that is a good idea? “Let’s spend thousands of dollars on Christmas gifts and put ourselves in debt”. Sounds like a recipe for disaster. I like to shop throughout the year for little things as I find them, then I only have to get the big present for my girls each year. I pay in a little each paycheck to a Christmas account so that I have the money to pay cash when it comes time to get the big things.
I have several side hustles. I sell hair jewelry for a direct sale company, I do online surveys, and I secret shop when I have the time. Keeping all these expenses, payments, and other costs separate was a nightmare. I created a checking account for both my direct sale business and my secret shopping. Any expenses that I incur come out of that account and any payment goes back into the account. It makes it unimaginably more easy to keep track of the profits when I can look at the account transactions and have a clear picture of the monies coming and going.
Any daily spending I do (groceries, clothing, gas), I keep in envelopes as cash and when it is gone, it is gone. It is very tempting to just pull out the debit card then and spend anyway, but I remember what each account is for and that I would be stealing from Peter to pay Paul. The money is all allocated when it comes in and has a place.
Since I started this system I have not gone over my budget or stolen from one account for another. I love the fact that I know where everything is, how much is in each account and what the money is allocated for at any given time. It does take some time to set up and make a system for keeping track of it, but once that is done it is simple. I keep a page in my Budget Binder for each of the accounts, with it’s purpose/goal, which bank it is at, and any deposits or withdrawals I make.
Do you keep your accounts separate? What would you add to this list?