How We Budget, Part 1: Account Flow
Posted on February 12, 2008 by Him and tagged bills, budget, finances
This month the Money Blog Network is hosting a group writing project with the theme of budgets. We've had a few posts in waiting to go on this very topic for a while now, so we thought this was the perfect time to unleash them. We hope that our budgeting systems makes sense and others can learn a little from it.
We think we've finally straightened out our budgeting situation for 2008. We've posted before on how our budgeting wasn't adequate and how we've tried to change it. Well, those changes didn't work, so we've worked on another budgeting system, one that's been working for us for a little while now.
The first step of creating our budget was to figure out where all of our dollars go. In the last few years, our money situation has started to get a little complicated. In order to maximize our dollars, we've setup an elaborate cash/account flow scheme. We do this in order to maximize rewards, keep our individual credit scores relatively high, and to account for every dollar that comes into our hands. Check out our cash flow in the diagram below. You can click it to see a larger version.
Whoa, looks complicated, no? Well, it is. It took us a while to figure out how to do this, but after a few years we think we've finally gotten it down. This is admittedly a little more simplified in that I didn't put our fun money savings accounts on the graphic.
I've thought about summarizing the graphic, but it seems pretty self-explanatory to me. If you have any questions about the way we do thing, please ask away in the comments.
Tomorrow's post will more simply detail how we budget our money each month.
Comments/Trackbacks
Trackback URL: http://www.makelovenotdebt.com/MT/mlnd-trackbacks.cgi/1205
Fabulously Broke | Feb 12, 2008
Catherine: I'd suggest splitting EVERYTHING fairly or else someone is gonna feel gypped.
In the joint account, put your half of the decided budget of rent/utils/food/whatever and your own personal acct is your spending money and personal things that he doesn't pay for (as well as eating out budgets so you can treat each other)
To the post: Looks quite complicated until you examine it. Looks like the way I do mine :)
I'm glad you have a system in place. We based our joint deposits on our income. We figure the percentage and then follow it.
It's worked for us and it relieves a lot of stress.
My wife and I split most of our bills and finances in a similar fashion though we make sure that both of us are contributing equally to the joint items. It helps to have our own accounts for our own spending (that way there are no fights about too much spending on shoes or gadgets)
Cami | Feb 12, 2008
What a great site, thanks for sharing this information. Will check back for the next part. Keep up the great work!
I haven't been reading your blog very long, so perhaps a long-term reader would know the answer (or perhaps I am misreading your flowchart), but you put your phone and internet bills on your credit cards? You put laundry on your credit cards?
Him | Feb 12, 2008 | Reply to Caitlin
This post gives more detail on what goes on our credit cards and how we deal with them.
...although laundry is definitely paid out of our joint checking account, NOT our credit cards...that is quite an error...
Caitlin | Feb 12, 2008 | Reply to Him
Thank you for the explanation link!
Haha @ laundry -I was wondering where you'd found these fancy washing machines that took credit cards! ^_~
Hi - your setup is not complicated at all. This is our setup, too. I tried to explain it to my BFF once and she couldn't get it. The big thing for us is we each need and should have some money that is our own, no questions asked. We also have a CC each that is for our individual fun, we each pay for out of our individual accounts and we agreed not to get out of control. All accounts are linked in one spot so everything is transparent. It took a long time to get here, but it works for us - married 11+ years and no money fights.
MVP | Feb 16, 2008
Whew, as long as you guys understand it...
Of course, I'm not sure outsiders would get our system either, although I find it pretty simple. But for those wondering how to divvy up their paychecks with a spouse, I'm a strong proponent of having a joint account, from which all the couple's bills are paid, savings and retirement accounts are funded and an equal amount of personal spending money is taken out for each person. I personally don't agree with separate his and hers accounts for managing the family finances (specifically when a couple is married) because I think that erodes the spirit of unity that's essential to a harmonious marriage. When a couple is married, they're supposed to be one, not he'll pay his bills, she'll pay hers...You have joint goals and dreams, and you unite and commit to reaching them - otherwise, why be married?.
I've lingered over the "budget" talk for a while now. I've tried doing an excel sheet budget and failed, quicken and failed. My biggest problem is actually sticking to a budget!
Maria | Feb 20, 2008
I previously lived in an apartment building that didn't have coin laundry - it used a smart card (just like those coffee cards and the like) that you reloaded with money, either from Credit Card, ATM, or check (that you sent to the company, so I never used this). Max was $30.00. It was great, in that you didn't have to worry about coins for laundry, but it wasn't so great on the occasion where you forgot to reload the card & the office, where the pay machine was located, was closed. Thankfully, this only happened to me once or twice (pre-planning as each time you use it, it tells you how much is left), and I lived next door to the maintenance guy. Although, I never abused this, I did ask him once to open the office so I could reload the card. Very nice of him to do so.
The great part of using a credit card = rewards points or mileage. I pay 99% of my bills and what not with my miles reward card. Each month I pay the bill in full...no carry forward balance, each month I receive reward miles. I highly recommend this to maximize the benefits of a rewards card, but ONLY IF the individual is disciplined enough to pay the card in full each month.
erykah | Mar 14, 2008
where do you divvy personal credit cards from prior marriage and still have? I have one that is low low credit limit..husband has 4 or so larger quantities..where would the payments go? whats best?
Catherine | Feb 12, 2008
How do you decide how much you each put towards your personal checking accounts and how much goes into your joint? I will be merging finances with my boyfriend within the next 2 years and have been thinking about doing something similar to your chart, however, our salaries are very different from each other, so I'm not sure what would be "fair".
Reply to this comment