I believe in paying attention to your money. I think that how you care for it and what you
spend it on make a difference—not only for your own piece of mind, but also in
the context of the universe and energy and whatnot. Money ignored is money that won’t be around
for long. So here’s an incredibly long
and detailed four-part series about how I manage my money. To see the entire series look for the tag
“Money.”
I devote time to tracking
my money
My money management system is overkill. I know this. But it brings me comfort to keep
an eye on my cash. Please keep in mind
that if you develop a system to regularly manage your finances, it need not be
this complex.
I keep track of my accounts two ways: the analog method and the digital
method. I still have checkbooks and
savings account registers which I fill in with pencil and use a calculator to
do the addition and subtraction for me.
My early pledge to always figure my checkbook transactions in my brain
led to many hours of fixing addition and subtraction errors before I decided to
depend on technology to keep my sanity in this area.
I also use a computer program to keep track of the activity
on my accounts, but also to tally my budget and keep track of how much money I
have in each spending category. My
software program of choice for many years was “Microsoft Money” which came free
on a computer I bought in 2001. I used
this in conjunction with a spreadsheet from the Simple Dollar to keep track of
my budget spending amounts. This changed
when Microsoft decided to not continue updating the Money program and I bought
YNAB (You Need a Budget, pronounced “Why Nab”).
YNAB keeps track of my daily spending, helps me adjust my budget each
month, as well as keeps track of category spending levels. It’s a really amazing program and I highly
recommend it. It was a bit of an
investment ($60.00) but has saved me time and is easy to use.
Here’s what my money tracking looks like.
Ideally, I check in (hah!) daily with my checking and
savings accounts and update them. Actually
this happens about one to three times per week.
First, I check my electronic statement from my bank and update the
pen-and-paper checking account and update all the math in the register. I used to use a physical calculator to do
this once upon a time, but then eventually realized that there was a calculator
on my computer and I use it instead.
Lately, I’ve set up an Excel spreadsheet to do the math for me because I
find I make fewer mistakes if can see a string of entries and what I have typed
in for the number. I also use this time
to check off anything that has cleared the bank. I don’t check it off using the official
column where you check off items used for monthly statements, instead I make a
checkmark on the line that divides the transaction description line and the
payment amount. This helps me keep track
of how much money is actually in the account.
It also lets me know when I’ve entered something in the wrong checkbook,
or paid cash for something and written it down in the checking account. When everything around the item has been
pre-checked off, and that one still has not, I start thinking more deeply about
how the transaction was transacted. This part takes five minutes if I’ve kept
up with the accounts or it can take longer if I’ve been neglecting my baking tasks.
After that is done, I do any transfers necessary. I have two checking accounts and a savings
account and the boyfriend and I have two checking accounts so there are usually
transfers to do. The reason I (and we)
have two checking accounts is because of Mary Hunt. Hunt advocates for a regular checking account
for all the regular purchases you pay monthly (Groceries, student loan
payments, mortgage) and then a Freedom account where you regularly transfer
monthly amounts of money for things that you don’t pay monthly, but come more
intermittently. Think car insurance, vacation expenses and—in Portland—the
Water/Sewer bill which only happens every three months, for some unknown reason. We used to keep track of these amounts on a
spreadsheet or ledger and then pay the bills when they intermittently arrive. Having two checking accounts keeps a person
from the psychological mistake of thinking, “Oh, I suddenly have an extra
$200.00, I can buy that overcoat I’ve been wanting) and then spending your car
insurance payment on said coat, leaving you scrambling for money when the
insurance bill arrives. I’ve also found
that having two checking accounts means fewer errors in computation. However, the budget/money management software
I currently use manages the category spending amounts so well that it eliminates
the need for more than one checking account.
But we soldier on with two.
The transfers I do between my own accounts are generally one
big transfer at the beginning of the month to move my Freedom money over from
checking. I’m paid once per month which
is tough until you get used to it, and then it seems normal. The advantage of once-per-month pay is that
what is there at the beginning of the month needs to last until the last day of
the month whether the month is 28, 30 or 31 days. It’s also handy because most people are
taught to budget monthly and the money arrives with the beginning (or end) of
the month.
Our joint checking accounts do not have debit cards attached
to them. When we set them up we opted to
opt out of that technology as the things the joint checking pays for all work
well with checks and I didn’t want the extra confusion of us both having debit
cards or us trying to manage one debit card together. You will hear more of
these categories in the last segment of the series when I talk about how we
manage our money jointly. Transfers
between joint accounts and my own happen most often when we go out to dinner
and I use my debit card to pay for the dinner.
In that case, the dinner gets charged to the account “Money Loaned—For
Home” and I make a note in another spreadsheet of transfers to do.
I’ve found that for some reason, making transfers is my
biggest stumbling block in keeping the checking account running smoothly. I have to force myself to do it and I’m not
sure why. Perhaps it is because I am
miserly to my core, with hints of a spendthrift who pops out now and then, and I
don’t like to see any money leaving my account.
Plus, there is room for error. I might transfer from the wrong account
into the wrong account leaving me with more transfers to make to put things
right. When it’s time to transfer, I
take a deep breath and give myself a good mental push.
After that, I type the information from my paper and pencil
ledger in to YNAB, my money management program.
After entering each transaction, I compare register balances to ensure
my math is correct. This helps
tremendously to catch computation errors and it’s the main reason I keep both a
paper and pencil record and an electronic record. Once that is done and all computer account
totals match paper account totals I am done.
If I’m keeping up on a regular basis, this daily routine takes fifteen
minutes or less. If I’ve fallen behind it takes longer. Sometimes I devote a bigger chunk of time to
catch up, other times I set a timer for 15 minutes and work several days in a
row.
Monthly, I have some other things to do. At the end of the month, right after I am
paid, I make sure all my transactions for the month are entered in the
register, and I count my cash to see what I haven’t correctly recorded this
month. I have chosen to keep track of my
cash as if it was a checking account, and reconciling the difference at the end
of the month. This means I count my change
every month. I realize that most people
would find that a bit much, but I have always loved stacking and rolling coins
and because it gives me great comfort I do it monthly. I’m usually off in my cash account by a few
dollars, but I put those into the Cash register in the category “missing money”
and then subtract the amount from my Random Fun Things to Do category. I only keep track of cash in my electronic
software, I’m not quite so obsessive to also use a paper register.
Once the cash is reconciled and the checking accounts are
updated, I look at a report in the budget software that tells me my income and
expenses amount. These numbers get
transferred to a separate spreadsheet which has income and expenses, as well as
account balances at the end of the month.
Looking at this spreadsheet I can see my account balance total for the
month as well as the monthly difference between income and expenses, which
ideally would be a positive number, indicating a bit of savings each month, but
is not. This is mostly because of some
big-spending months (the time around Christmas for instance, or, when I am
taking college courses, when tuition is due) when I am spending down categories
in which I have budgeted larger amounts.
Businesses avoid these fluctuations by depreciating things, but my budget
is already complex enough.
I’ve involved my
partner
When the boyfriend and I moved in together the first thing
we did was open up a joint checking account.
People who know me and my feminist self, are sometimes surprised that I
have a joint checking account with my partner, but I agree with Suze Orman and
she thinks having a joint checking account is a good idea. Here’s why.
We both have retained our own money that we may spend however we please. We pay our joint expenses into an account
once per month which makes it easy to pay our bills. It also allows us to adjust what we pay based
who makes more money.
Right now, Matt and I are pretty even in salary. He pays 53% of our total joint expenses into
our account and I pay 47%. However,
figuring your total joint expenses and dividing the total by percentage is one
of the better pieces of advice for couples I’ve seen. What if suddenly one of us gets a high-paying
job and is making much more than the partner?
Would it be fair for someone making $100,000 per year pay 50% of joint
expenses when the other partner is making $25,000 per year? No. So
if the couple’s joint expenses were $1,000 per month (probably not likely, but
I’m using this example for the ease of the math) and each were paying an equal
percentage of their own salary into their joint account, the person making
$100,000 would pay $750.00 per month and the other person would pay $250.00 per
month. Both are contributing equally to
the joint living expenses and each partner still has their own money for their
own expenses.
The second thing that happened is that we established what
our joint expenses would be. The current
categories are:
Food—we currently buy our own groceries, but this pays for
our fruit delivery and for about one meal out together per month.
Mortgage, land lease fee—Because we bought our house through
a land trust, we pay a small amount each month for the land our house sits on,
as well as a maintenance reserve.
Electric
Internet
Phone—Matt has a cell phone, which he pays for himself, but
we both still use the landline so this is still a joint expense. It’s also part of our internet expense as we
get our internet through a local provider who also contracts with our phone
company.
Supplies—the things in the house we both use including soap,
detergent, toilet paper etc.
Water/sewer—Portland combines these two expenses into one
bill, for better or worse.
Furniture/decoration—the category appeared when we bought a
house. We’re set on the furniture, and this
is mostly toward decoration at this point.
Garbage—we both make the garbage and so we both pay it.
Insurance, Life—This is another category which appeared with
the house. When we bought it, we took
out a joint term life policy for $200,000 so if one of us dies we can pay off
the balance and have some money left over as a cushion. This is a pretty small amount for a life
insurance policy, but our mortgage was not very much, we both work outside the
home and we have no children. If any of
those things were different our policy would be much more.
Insurance, House—back when we rented, this was renters
insurance.
Yard—a nominal amount is paid each month for expenses
related to the yard. This includes new
plants, or straw to put down. Someday it
might include gravel for the paths in the yard or bricks for a paved walk down
the side yard.
Alarm—this category appeared after our house was broken into. We budgeted to pay for the alarm,
but never actually got around to activating the alarm system and so the money
eventually went to buy our new washer and dryer.
Vacation—for our joint vacations, this account is
underfunded, but perhaps will expand as we continue to work and ideally, get
raises.
Dates—for joint dates such as plays and the like.
Cleaning—each month we combine our money into a $50.00
pot. During the month we keep track of
the chores we do to keep the house running and at the end of the month we tally
our efforts and then pay out an amount to each of us based on the points split.
It is both of our goals to get back more money than we put in. I then use this money to fund my Random Fun
Things to Do category.
Floater
Another category of our budget is what I have termed
“floater” which is our joint savings account for the house. Various sources recommend homeowners save
various amounts per year for big maintenance projects such as a new roof or
painting the house. Our current
“floater” amount saved is just under 10% of our total combined expenses. This way we have joint savings and I have
individual savings.
We meet regularly to
pay our bills.
This was an idea from various sources such as Steven Covey,
Suze Ormond and my friend Kelly. Matt
and I meet most Sunday evenings to check in with each other about the state of
our relationship, plan time together and to manage the household expenses. I think it’s especially important to do this
if one partner would entirely be in the dark about finances and what bills
should be paid if the other partner became incapacitated. We have a regular agenda which means that we
regularly pay into our joint account, the bills are paid in a timely manner and
both of us share in this task. I’m
confident that if I were to be hit by a bus Matt could carry on with the
finances side until I rejoined him.
So that’s my financial system. It has evolved over the years and will
continue to evolve and change as needs arise.
For many, my process is labyrinthine and complex and overwhelming, but I
believe that everyone can develop a financial system that works for them. Your money deserves your attention and care
and you will feel peace of mind.
