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How I Do It

February 20th, 2009 at 11:48 pm

I was talking to my sister today about how I budget and pay bills and find money to send towards our home equity loan.

We get two paychecks a month on the 1st and the 15th. They are virtually equal.

I first pay all bills and investments that are due during that time frame. Many of these are automatic, but I record them all in the checkbook.

Second, I mentally pull $700 from the remaining checkbook balance. This $700 is for auto fuel and groceries. We use it to pay clothing, kids lunches...whatever comes up during that pay period. Sometimes this isn't enough. I'll explain that later.

Finally, the remaining amount after bills, investments and our $700 is the amount I should have available to send in to our home equity loan.

This is the basic plan each pay period. We have a second checking account that holds our escrow funds (see my page on the right about that) and a small cushion of cash. This small cushion is not more than $500. Right now it is actually $250!

So, if the $700 runs out we attempt to curb spending or dip into the cushion in our 2nd checking account. We also can dip further into our emergency fund for large car repairs, ect. If we do borrow from the EF it gets paid back with the extra funds we get the following pay period, or as many pay periods as it takes.

If we know of expenses in the future, we simply put the cash aside ahead of time. For example, I expect to purchase a new sink for our kitchen at some point. When the time comes I will reduce the extra principal payment to the home equity loan by the amount I need for the sink.

So, clear as mud? Does that make sense? I hope it helps someone out there. It works for us. I already have a handle on most of our spending so that helps keeps things working smoothly.

Feel free to ask questions!



10 Responses to “How I Do It”

  1. D Says:
    1235175230

    Too funny,,,,that is the exact plan we use---except our money amount is currently at 650 a paycheck. We take that out and what ever is left after bills goes straight to debt. We call it our LINE. We pay bills, pull out the 650 and call it our line. After we do the bills we know the line is 650 for our budget so I always ask--whats above the line---meaning what do we have left over that we can sock away at debt or our EF fund. It really has simplified budgeting for us. I no longer nit pick about it and I don't feel guilty when I make a purchase of some frivolous item like a new shirt for myself or that new rug for the living room.

    Simple is better!

  2. Analise Says:
    1235181488

    You have set up a successful system... the escrow account is a great idea. I do the same thing, but I call it the "reserve" account and make a prorated monthly deposit to it, as if it were a bill.

  3. Amber Says:
    1235188250

    I think it is great what your doing. I get paid twice a month the 16th and the 30th and really like it. It actually helps me to save

  4. creditcardfree Says:
    1235188486

    Analise, yes I make the escrow payment everytime we get paid. It is on an automatic transfer from one checking account to the other. I've been doing this for years! It works great.

  5. D Says:
    1235230884

    Just out of curiosity...what amount do you prefer to keep your EF amount at...we are thinking ours should be at it least 2000. Now that our credit cards are gone we are trying to build it up to 2000..we are a little over 1000 now. After it is up there we plan to tackle our next debt which is my husbands car debt of 7000. So what amount do you like to keep your at?

  6. creditcardfree Says:
    1235231223

    D, ours is actually at about $10,000. We've built it up over time and it has been at that level for several years. I think whatever you are comfortable with is the most important thing. I think your plan sounds great!

  7. swanson719 Says:
    1235232202

    CCFree - what do you keep your EF in? We're working up the $10,000 but keep it in a money market mutual fund. But I like your budgeting plan - tho you don't mention any investments. Do you contribute to Roths at all?

  8. creditcardfree Says:
    1235233297

    Swanson, our EF is in a money market account at fnbodirect. Sadly, the rates keep falling. We contribute 4% of basic pay to TSP and max out our Roths by contributing monthy. Our roth investments are subtracted from our paycheck on the 15th...just like a bill would be. Our Roths are with Vanguard and are on automatic deduction. Our total retirement savings is 15% of our gross income.

  9. matt Says:
    1245109948

    so you pay certain bills out of each check?...like the phone bill from the 1st pay, etc...?....my wife and I get paid this way

  10. creditcardfree Says:
    1245111079

    matt, yes. Specifically, I pay the mortgage, phone/internet, flute rental and water bills from the first paycheck. The second check I pay our auto loan payment, netflix, roth contributions, HEL payment, and newspaper. Also, each pay period I make an escrow contribution to our 2nd checking account. See my sidebar about the escrow.

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