Essay: Patricia’s Money Philosophy Series. Part IV of IV: Tracking & Involving Others.

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.