To say we’ve had a lot of change over the past two years is an understatement. We bought a house, added a child, added a new driver, got a puppy, discovered our older dachshund has some chronic health issues (lots of vet bills), have one child starting college this fall and two starting different preschools and to top it off my husband just started a new job with a completely different type of pay schedule. Needless to say our budget has undergone so many changes over the past couple of years I am having a hard time reaching a new normal. As soon as I get everything calculated and rearranged something new pops up and I have to do it all over again and it is getting a more than a little frustrating. I am determined this time, with the new pay schedule to figure things out once and for all (or at least until another major change ha ha!). My goal is to find a system that works for us and has lots of flexibility for those months when everything seems to happen at once.
I started doing my research on a new way of budgeting a few months ago. I looked at several websites, talked with my posse of like minded budget gurus, read some of my favorite budget books and a few new ones, and browsed Pinterest boards to see what was trending because just like diet fads, budgeting methods seem to follow trends too. What spoke to me the most was adopting a more frugal lifestyle and building up our “buffer” for those months that seem to have every expense on earth scheduled. I have used Quicken to track my expenses for over a decade and it has been the best resource I have tried. This year the “Savings Goals” tool has become my absolute favorite. It has really helped me stash away money for big expenses in my regular checking account without having to stash it in several different accounts for each category as many budgeting gurus suggest. Keeping track of multiple accounts can get challenging and simplifying budgeting makes it way easier to stay on track!
The way the savings goals work is you “move” the money into a separate account so it is not available in your checking/savings account. It is a great way to keep track of how much money you have available in your account for any given expense. In the past I would try to accomplish this in a spreadsheet but that got complicated with trying to remember which amounts I had moved around. For example lets say you have some money set aside for home improvements. Let’s say you have $2000.00 total and you have some minor home improvements you want to complete that will cost about $1000.00 but will take you a few months to complete. You would transfer the $2000.00 into the Home Improvement savings goal in Quicken so it would not show up in your checking account register but if you look at your balance at your bank online it will still be there. Let’s say the first weekend you tackle the pantry needing to be fixed (here’s our pantry story) but you only have time to buy paint and that costs $60. The next weekend you go out and buy shelves, bins and the accompanying hardware and that costs another $150. So your total for the pantry project is $210. You could either “move” the money from your Home Improvement savings goal to your checking account after each transaction or after the next time you balance your checkbook. There is no need to worry about being short in your checking account or remembering to transfer money from savings to cover it because the money is already there. Once you move the money your balance in your Home Improvement account would be $2000.00 – 210.00 for a total of $1790.00.
Let me tell you, it is amazing! I am a total budget to the penny kind of girl and I don’t like leaving unnecessary money in the checking account in case I forget which money that particular amount is to be used for (believe me with the craziness going on in our house it is bound to happen every once in a while) but now I have it separated out without having to transfer anything in my actual bank account. I don’t really have to think about it beyond I have about X amount saved for projects around the house. I have set up several different categories this way including a buffer, money for our twice yearly car insurance payments, home improvements and for vet bills. And the major bonus is that if something unexpected comes up like an emergency vet visit when you have exhausted your “vet bills” account you can avoid the worry of paying for the visit and shuffle money between the categories to cover it.
The best way to use this tool is to automatically transfer money into your categories at regular intervals. I put money in the buffer every pay check and the rest of the categories monthly after our second pay check of the month. This will make saving the money for your categories a habit and after a couple of months you won’t even notice that you are “missing” the money from your checking account. It is really important that if you use this method to focus on the balance in your checking account register in Quicken and not what your bank says you have otherwise you will be tempted to over spend.
The absolutely most important part of this method is that it eliminates the need for you to put anything on a credit card that you don’t immediately pay off.
Let me repeat that. If you have enough money in your checking account to cover both expected and unexpected expenses you will never need to put money on your credit cards that you are not able to pay off immediately. The best uses of credit cards are to rack up points/miles for a discount on services you already use, for an extended warranty, fraud protection (although some debit cards offer something like this) and to build up your cashback bonuses. Any interest you pay on credit cards will immediately void the value of any rewards you receive from the credit cards. 1% cashback is way less than paying 10% in interest and the credit card companies come out on top any time you are paying interest.
I have been really happy with our new budget so far! Automatically transferring the money has really saved a lot of the guesswork out of the budget and now it takes me about half the time to balance everything every couple of weeks or so. Stay tuned for my next installment where I cover some of the methods we have used to be more frugal around the house!
Happy budgeting everyone!