Part Six in Our Series on Budgeting to Reflect Your Values
There are a lot of different budgeting methods. I bet you’ve heard of some of them. If you've found one that works for you, great! Stick to it. I’m going to outline some of my favorites. I do all of these and find that they work well together.
1. Set up different bank accounts.
Ever heard of the envelope system? This is kind of like it, except you don’t have to carry cash or envelopes. Simply create spending accounts linked with a debit card for different expenses. So, for instance, you might go to your bank and establish the following accounts (these are the ones we use at my house):
- Checking Account - All of our pay goes in, and all our necessary expenses go out. This includes automatic investments we set up to things like our savings
account, retirement savings, and fun money account.
- Fun Money Account - We’re not into segmenting our fun money into a bunch of different categories (out to eat, clothes, etc). Instead, we decide together how much each of us gets as "fun money" each month, which is basically money we can do whatever we want with, but when it’s gone, it’s gone. If you save some from this month, great! It rolls over into next month. We have three fun money accounts: one for me, one for my husband, and a “Joint Fun Money” we use when we’re out together.
- Travel Fund - We put a little money aside every month so when we want to travel, the money is there.
- Home Improvements - Secretly, my husband and I would like our own HGTV show for home improvements. Like for travel, we set aside some money every month so when we decide to rip apart the bathroom, the money is there for us to put it back together.
- Emergency Fund/Savings Account - We set up automatic deductions to go to our savings every month.
This may feel intimidating, but I promise it’s not that hard. It makes spending the way you want so much easier. Go to your bank, and ask them to create "sub-accounts," and ask for a debit card for each account - if you bank online you should be able to label your accounts and see them all on the same screen.
Get debit cards that are easy to recognize and keep track of. For instance, our fun money debit card has a sunset on it. Why, you ask? If we’re using this card, it’s because we’re doing something fun together. Together = Romance = Sunsets.
2. Automate and pay yourself first.
If it can be setup as an automatic recurring payment, do it. Set up automatic payments for your loans, your house payment, energy bill, giving, savings, retirement savings, anything and everything that is a fixed, monthly expense. Working toward your goals should be automated as well. So, if you’re saving for an emergency or a house, set up an automatic payment to transfer it to your savings account.
I recommend selecting dates that are 2-3 days after your normal pay dates (so if you get paid the 1st and 15th, set your automatic payments up for the 3rd and 17th) - the money is less likely to disappear in two days than two weeks. Once all your automatic payments come out of your account, what you have left in your checking account should be what you have for the month for necessary but non-fixed expenses (groceries, gas, etc).