So far during Budget Month we’ve been mainly chatting about ways to make your house a home on a budget. What we haven’t talked about is how to organise the money itself.
Now, this is a bit of a sticky topic, so take this post in a ‘here’s what works for us’ way rather than ‘here’s what everyone should do’.
The Man and I manage our money in the following accounts:
- Transaction account: This is where all our income goes and from where we transfer money to other accounts and pay for all our everyday expenses using a debit card.
- Billing account: After each payday we transfer enough funds to cover all our bills for that period, including the house payment, insurance and utilities. (All online, no debit/credit card.)
- Savings account: For short-term, long-term and ongoing savings goals (more on that below). (Ours is actually offset on our mortgage but a separate online account will do the trick too.)
If you’re not into micromanaging (we are – ha!), I reckon simply setting up billing and savings accounts with automatic transfers is the one thing you can do that will make a big difference. It’s a weight off knowing that our bills (including those pesky big ones such as annual car insurance) are always covered and you’re working towards savings goals without having to think about it.
For some people a single savings fund is sufficient, but we like to break it down into smaller funds (see comment above re: micromanaging).
We have these ongoing savings funds:
- Emergency fund: Currently for things like busted appliances and unexpected major car repairs but ideally it would be large enough to cover more serious emergencies such as a medical crisis or job layoff.
- Christmas fund: We put aside a very small amount each week but by year’s end it will help with the costs of gifts and family occasions.
- Domestic travel fund: For weekend getaways and interstate holidays (usually a couple a year).
- Overseas travel fund: For big trips such as our US/Europe adventure last summer. Currently saving for New Zealand this spring and Hawaii next year – woot!!
- Car fund: We’ve actually just got a new car leased through The Man’s employment but neither of us ever had a car loan for our previous cars.
- House fund: For furniture and home improvement projects that aren’t covered by our regular decorating and maintenance budget.
- General fund: For purchases that are bigger than the regular budget, but aren’t big enough to justify their own fund (such as replacing my dying GHD).
At any given time we also have a handful of specific goals we’re saving for, some short-term (hello, bathroom renovation) and some longer term (dream house… sigh!).
Again, what you choose to save for and how specific you want to get is up to your own goals, but at the very least I would suggest an emergency fund plus a separate general savings account for things like holidays and furniture.
The dreaded B-word! Not sexy, I know, but still important.
To manage our budget we use:
- Xero: Online budgeting software.
- Evernote: A paperless way to keep track of receipts for cash transactions and tax deductions.
I admit we fell off the budgeting bandwagon after completely losing patience with our previous system (Quicken). But since we started up again with Xero (which I was already using for my business finances and loving) we’ve been much more in control. It’s not necessarily about spending any less, it’s more about knowing whether we can/can’t make a purchase rather than totally guessing.
We used to have uber specific categories in our budget which made things way more complicated and time consuming than it needed to be. We’ve now done away with all the subcategories which has streamlined the process a lot.
95% of the transactions we do are electronic, which makes it a lot easier to keep track of than using cash. Especially since I am so hopeless at processing receipts and jotting down cash purchases. So by no means am I perfect but overall we have figured out a pretty good system that works for us.
So there you have it. That’s our method of keeping the wolf from the door.
What are your best budget tips or burning questions? Share in the comments!