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About 9 years ago while driving home from work I happened to stumble upon a radio program that caught my interest. A young girl had called in with a problem and I listened as the radio host patiently and practically walked her through the problem and led her to an answer that seemed pretty basic and simple. He called her out on any excuses she tried to come up with for not achieving the solution to her problem and reaching her end goal. That was the first time I heard of The Dave Ramsey Show and the man who has been at the top, down to the bottom and right back up again. After listening for a while I bought his book “The Total Money Makeover”.
Being a systematic person I love following a program. Reading his book and listening to the debt free screams on the radio got me really excited. To get my husband on board we went to one of the live events, he’s not much of a reader. He reluctantly came along but was just as excited as me and ready to get started when we left. You can read Our Total Money Makeover Story here.
The basic premise of The Total Money Makeover is following the 7 Baby Steps:
- $1,000 Emergency Fund
- Pay off all debt using Debt snowball
- 3-6 months expenses in savings
- Save 15% for Retirement
- Save for Kids College
- Pay Off the House
- Build Wealth & Give
Here’s What’s Working with our Money
We’ve got two checking accounts and three savings accounts. Why so many, you ask? It helps us automatically save, one less thing for me to think about. I’ll explain each one below.
We have two joint-checking accounts. My paycheck goes into one (main account) and my husband’s goes into the other (2nd account). Everyday expenses come out of the main account and the second account pays the mortgage and any money left over goes toward saving (or paying off- I like to say we’re on the Dave Ramsey lite program) for big purchases, vacations, etc. Having the two accounts helps us limit our spending and save more.
A majority of our emergency fund is in a money market account which we never touch unless it’s an actual emergency. A small portion of our emergency fund is in a savings account for easy access in case of small emergencies.
I recently opened another savings account to put a portion of the money we used to spend on childcare toward vacations. I have that money auto-drafted from our account on a weekly basis like we used to pay for childcare.
We have another savings account marked for Christmas & our annual community dues. These are two things that we know are coming every year so why not prepare for them. We have money auto-drafted from the main account and part of my husband’s pay-check direct deposited into it as well. To figure out how much you need to be saving figure out your goal. In our case we’ve got the annual community dues, let’s say $400 plus our Christmas budget, let’s say $2000 in the same account. Take that number and divide it by how often the auto draft or direct deposit will be made, let’s say 24 times for a semi-monthly pay period.
Set-up an auto deposit through your direct deposit or auto-draft through your bank and you automatically save without even thinking about it. You won’t even miss the money and it’s so nice not to worry about where I’m going to get money for Christmas shopping. When I start my Christmas shopping I just transfer the money into my main account and shop away, within the budget of course!
Speaking of budgeting. I love spreadsheets and keeping track of things so the budget is my job. While Dave suggests a monthly budget I found that sometimes that doesn’t work out too well for us since we are both paid semi-monthly. I’ll admit there were times we ran out of money just because the rest of the month’s money hadn’t come in yet. So instead I’ve created semi-monthly budget sheets that correlate with paychecks.
There are two sheets per pay period. One sheet has the expected and actual budget for that pay period. The second sheet has a cashflow list so we can see where our money is going. I log-in to my on-line bank account every Friday and enter each item into it’s category. There are sites out there like Mint.com that will do this for you. So far I’ve only seen it available for monthly tracking and I like to track our spending per pay period so we don’t run out of money mid-month before the next pay check. It’s also a good way for me to watch for fraudulent activity on the account. I use the budget sheet to check in on how we’re doing with our spending. At the end of the pay period I enter the totals from the cashflow sheet into the actual column on the budget sheet. I’ve created a difference column to see how far off we were. The balance line should be the amount of money in the main bank account before the next paycheck. If the numbers are off I can do a double to check to see what I missed or if the bank has made a mistake.
Along with the pay period budget and cashflow tabs I also have tabs for Christmas and vacation. The Christmas tab lists all the people we buy gifts for, the budget for that person, and the items purchased. The vacation tab lists all expenses for our vacations.
My methods and all the different accounts may seem a bit crazy, but hey, it’s working here. What are some of the things you’ve come up with to better manage your money?