My Favorite Money Management Tips

I don’t budget. Please don’t faint. I found that budgeting in its strictest form left me feeling frustrated and boxed in. I had to spend money on these certain things and not others. What kind of way to live is that? Well, for some, a fantastic way. But for me? Not so much.

Instead I created a system that allowed me to pay all my bills in full and on time, but then have my discretionary spending at my disposal without feeling boxed in. I spend less overall this way, and it works for us.

But how do I make sure I meet all my goals and pay my bills? By doing that first and using the Two As system—Automate and Average.

Automate

This is probably personal finance peeps favorite words. The more passive your goals are, the less decision fatigue you face, and boom, one day you wake up and you’re rich! Okay, maybe not rich, but one day you wake up and you’re not in the negatives anymore. Or you have money to buy a house. Or take a vacation. All fun things. And all without thinking about it.

Retirement

One of my goals this year was to put 15% of my salary into a Roth 401(k) and 15% of my husband’s into a 401(k). Instead of manually doing that, which would be a pain, not to mention the decision fatigue we’d inevitably face, we have our payroll people automatically skim that money off the top and put it in our account. 

Boom, every week (we get paid on alternating weeks), 15% of our money is put in an investment account to grow! We’ve watched those savings increase from nothing to more than $10K between the two of us. My hubby is set to have $10K by the end of the year, and if the market does well, I’ll have $5K. That’s a quarter of our living expenses for a year, before taxes. Thirty to forty more years of this, and we’ll be golden! 

Emergency Fund

I also do the same with my emergency fund. We also want to be depositing $500/month into it in order to hit our savings goal. It’s audacious, I know. This means $125 out of my paycheck gets auto deposited into Ally and $125 out my husband’s paycheck into our short term emergency fund. Once that short term emergency fund crosses $2,000, we move $1,000 into Ally and start building it all over again. It’s an easy way to grow wealth. And it’s what helps us make those $2,000 jumps in our net worth! 

Average

The other tool I use is averaging out my expenses. Averaging is amazing. I do it for two things, to pull money out for bills, and to estimate how much we need in our account at any given time. It works rather well, and it helps keep us from overspending.

Bill Money

I track our bills on a spreadsheet so I know exactly when everything is due. It’s a way for me to see exactly what our money looks like at any given point in time. Right now, it looks like this:

You’ll notice that I’ve also included how much we need to be putting away every month to make sure we have enough in our account. That’s because we’re paid on weird alternating schedules. The per week roughly translates into per paycheck. So every time we’re paid, we move that much money (although, I round it to 450 for easy math) into our bills account for later use. 

Day to Day

We do something similar for our day to day money. I know that we live on roughly $600/month outside of bills on 30 day months. Months with 31 days we spend a little bit more. This money encompasses everything from gas to pets to food to dates to anything else (except money we spend via our adventure fund). And it all translates to $20/day. This number is essential to know in order to figure out how much we need in our checking account. 

I got the idea for a money a day budget from Liz over at Rose Colored Water, because of her $12/day challenge she did a while back. There’s no way we could shrink our budget that small, but I feel happy with our $20 a day. It’s tight enough we feel it when we try to lifestyle creep, but loose enough I don’t feel suffocated. 

What do I do with that knowledge though?

After I deposit the $450 from our paycheck into our bills account, I count the remaining days until our next paycheck and multiply that number by 20. For example, if hubby is paid on the 6th, and I’m paid on the 12th, then that’s six days between paychecks, and the money we need in our account is 6*$20=$120. Anything surplus to this goes into our emergency fund account. Generally it’s $30-$50 extra, so not a lot. But every little bit helps. 

Then I have the averaged dollar cost for the daily expenses set and ready to go. I know we have enough for gas and groceries. If at all possible, we have a no spend day the day we get our paycheck to avoid paycheck bliss. 

Paycheck Bliss. Noun. The moment your checking account balance hops up and you have the sudden urge to buy all the things, usually a nice dinner. 

After that first day, my emotions tend to calm down a bit, and I can move on with my life without over spending. Then, when I check the account, it doesn’t look like we’re rolling in dough. It looks like we’re doing okay. And that okay helps me calm down a bit. 

Conclusion

Automating and averaging are tools that I leverage to make sure that I don’t overspend. They’re practical and important. It’s not always perfect. And I have overdrawal protection set up just in case. I feel pretty set in my day to day spending. 

The only time that this doesn’t work is when there is scheduled maintenance on a vehicle. Currently, this is pulled from the emergency fund. But I’m hoping to have a sinking fund that I fund using averaging and automating as well. But baby steps. I can’t set up a sinking fund until the emergency account is fully funded. 

Automating and averaging help me get there, and they help me maintain goals that are important to me–like paying my bills on time.