Family finances: our modus operandi
Here's how we handle the family finances in our home.
Our Basic Structure
• We keep track of all our spending with a monthly zero-based budget. I'll explain the basics of this type of budget tomorrow, so be looking for it!
• Together, my husband and I decided that I would be the one to manage our finances - which includes making a budget, tracking our spending and our cash, paying our bills, and generally staying "in the know" with where we are. We saw this as a good fit to my job as home manager, and between the two of us, I have more of the personality for it.
1. Planning for the Month
• About a week before the new month, I create a first-draft budget.
• My husband and I have an oh-so-romantic date on our balcony with coffee and dessert, and we look over this budget draft, line by line. Together, we tweak it.
• I edit the first draft, we make sure this new updated budget is solid, and I print it. It goes in my Home Management Notebook.
2. Telling the Money Where To Go
• When we receive our income through direct deposit (our main salary is paid once monthly), our money is automatically sifted into proper accounts - set monthly amounts go into various sinking funds at ING Direct. We've set this up at the bank, so it's automatic - we don't even need to remember to do it.
• We withdraw the cash needed for our various categories where we are cash-only, using the classic envelope system. I'll write how we do this soon.
• Money goes into its respective envelopes (literally, a small zippered pouch, like what you'd use for pencils in grade school).
The only exception to this is our personal money, which goes straight into my husband's and my wallets. This is the money we use for whatever we want, be it a frappuccino or a Squeasy Tea Bag Squeezer. Having a set amount of personal money helps us enjoy living on a budget.
3. Paying For Stuff
• Most of our bills are paid electronically and automatically. This never surprises us, because 1. it's always done on the same day, and 2. we check our bank accounts online almost daily anyway.
• Any time we make a purchase, be it with cash or debit card, we jot a little note on the receipt that labels it as a purchase for a particular category - groceries, clothing, gifts, and the like.
• My husband and I both make a point of emptying our wallets of said receipts when we enter the house, and we toss them into a little bowl by the front entrance.
4. Keeping Track of the Spending
• Once a week, I take these receipts and enter them into our fabulous online budgeting system (which I'll tell you all about soon!). In this program, I tag them with their respective categories, and money is deducted from each budget category. I make sure any cash remaining in the envelopes reflect these numbers.
• Oftentimes, we'll need to tweak our budget - and that's okay. Yes, it's set in stone, but it's more like limestone than granite. We can chip away at it when things change throughout the month. If our weekly dinner out cost $25 instead of the allotted $20, we take five dollars from somewhere - clothing, or groceries, perhaps. But the important thing is to shift money around, not hope money magically appears. If you're short five bucks, then take five bucks from another category. Not from thin air.
• Unless the item is a major purchase, I throw away all receipts at the end of the month. I used to keep them all, as though I would one day need that receipt for a pair of socks I bought in 1997. No longer. It minimizes stress, clutter, and time needed to find important things.
This is about it, in a quick breakdown. It might sound complicated, or really time-consuming, but it's not at all. I'd say the important keys to doing our finances this way are:
1. We agree on all our money decisions together.
2. Every dollar has a name - which is foundational for a zero-based budget.
3. We keep track of it regularly, so that it only takes a little bit of time each week, instead of painfully slow hours once a month.
How do you manage your family's finances? Are you the one who does it, or is it your spouse? What's the hardest part about dealing with money?
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