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Tuesday, October 23, 2012

Our budget in a nutshell

My managerial skills seem to take a vacation over the weekends. I just go with the flow of the family.

But on Mondays, I get back to structure. I tie up all the loose ends from the weekend. I make sure all the laundry gets delivered to its owners. I tidy up the kitchen and family room. I look ahead to everything going on during the coming week. And I do all the household paperwork.

By paperwork, I mean that I handle the receipts, bills and budgets. I take all the receipts from the previous week and enter them into my ledger. I pay all the bills that have come in during the previous week. Then I file the papers that need to be saved for future tax purposes, and toss the rest.

(One area I haven't completely made the transition to is online and/or scheduled bill payment. I've got a couple scheduled for online or phone payments, but I'm still working the rest. I have a difficult time going from paper to screen. I prefer to have the paper in my hand.)

If the Monday happens to be the last Monday of the month, I also write up my budget for the coming month. Since our income can vary a bit from one month to the next, we do a combination of two things. We base our next month's budget on the previous month's income, and we carry a surplus forward, to borrow from, as needed.

This surplus that we carry forward from month to month, is our back-up fund. It covers unexpected dips in income. This is not the same as our emergency fund, which covers larger losses in income. But instead this back-up fund covers things like a temporary inability to work as many hours in a month, or paperwork that wasn't filed on time for proper payment. It helps keep our spending on an even keel, regardless of the exact dollar amount of our income.

The greater emergency fund is one we've been building over the past 4 years. When the stock market tanked, around 2008, we felt that wake-up call to build a locally-accessible account. Should we find ourselves with no income whatsoever, this is the fund we'd tap first.

We add to it every month, even if it's just a couple of dollars. This amount is worked into the budget before the month begins. It's not an after-the-fact, what's left over category. This is a fund we keep in a CD at a local bank. It's accessible with minimum wait, in contrast to trying to cash out other investments to use for emergencies. It is still not nearly what all the experts recommend for an emergency cushion. But we're working on it.

It can take years to build a good emergency cushion. We didn't start nearly soon enough. But now that we can see how important it is, we are making it a priority.

How about you? Do you have a system for bill paying, budgeting and saving for emergencies? What was it that kicked you into gear to start up an emergency fund? Do you use online bill-pay? How did you overcome the feeling that you "needed" to see bills on paper?


  1. I save 5% of my income in an emergency fund and it's slowly building up. I also save 5% in an account specifically for a home deposit and 5% for fun money. Eventually when I get a real job, I'll save more but this is all I can manage for the moment, and every little bit counts :)

    1. Hi Economies,
      That is so great that you're saving now, even though as you say, you'll eventually have a "real job", and you'll be able to save even more.

      I think one mistake a lot of students (grad and undergrad) make is to think that they "can't save" because their income isn't a real career income. So they live like they have no future expenses. This comes back to bite them, when wanting to buy a condo or house, they have several years of saving still ahead of them.

      So kudos to you for saving now!

  2. we built up our emergency fund by having the money automatically deducted from our paychecks. If you never see the money, it's much easier to save it. Now we use this method to build up an "escrow" fund for once a year expenses we have such as insurance, taxes and small emergencies such as needing a new appliance after an unexpected break.

    Also, we pay almost all of our bills online and I prefer it to paper. However, it did take a transition period. I prefer paying all of them through the bank instead of through each bill's website. It keeps the information more consolidated.

    1. Hi live and learn,
      Totally agree with having moneys deducted from either a paycheck or or your account, on a scheduled basis. What you don't see, you don't miss.

  3. I think most of have struggled to switch from paper to electronic versions of many things, and paying bills is one of them I now much prefer that approach as I can pay all the bills through one website -- the bank.

    Saving for anything is a struggle for many too, and definitely taking the savings off the top is the best approach. However, with all the travel I do for work, I've had to resort to paying it by the "what's left over" approach some months of the year (and then pay the money when I get reimbursed for expenses). Our savings/emergency accounts are totally separate from our day-to-day accounts and are considered "untouchable" unless we absolutely need the money. Thankfully, such a situation has never arisen as yet.

    1. Hi Jayne,
      we feel the same way about our emergency funds being "untouchable". It was made all too clear during this recent recession that anyone can find themselves unemployed, and that it could take a year and a half or more to find a similar position to what one had held.

  4. I'm still working on making out a formal budget. I would appreciate more in-depth information on how you make out your budget and what you include. Thanks.

    1. Hi Janice,
      In thinking about your request, I believe that my info would be better suited for a follow-up post, as I don't think I could do an adequate job in the comments section. So, I've got the beginning of a post drafted already, and I'll get it posted in the next week. : ) Hope that's okay.

  5. I probably have the strangest way of saving.I added up my expenses, added in a little extra for those little things, I take out of the bank enough to cover that amount and don't touch the rest of it. It helps now that I gave up the car and rent, it means there aren't as many unexpected expenses.

    1. Hi Lois,
      It sounds like you've found a way to save that works for you. I think that's great! There isn't one definitive way to do these sort of things.

      I think you're probably right about unexpected expenses and car ownership. One of our cars is older and there's no telling what could break down next!

  6. I didn't switch to electronic bill pay all at once. My bank accepts payment for some of my bills, and others have to go through the company's own web site, or a separate bill-pay site. For savings, I have one account for all savings, and if necessary, I borrow against long-term savings for something short-term. For example, I am saving for a new roof in 5 years, and if I needed a new washing machine, I would borrow against the roof savings.

    1. Hi Anexacting,
      I have the same situation with our bank. We can pay some bills through the bank, others through the company's site. I prefer to put our bills on our Visa card, if possible, as we earn rewards points. Good luck with your savings plan!


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