Living on Less Than $28,000 A Year: Managing the Money

by Kimberlee Stokes Affiliate Link Disclosure B

Living on Less Than $28,000 A Year: How our family of six survives (and even thrives) on an income that is less than half the national median income, and what the government calls “below the poverty line” (less than $29,990 annually) for our family size.

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Click here to read other posts in this series.


To get things started I’m going to share a money management technique that helps us to stay on track with our budget. There are many ways to manage your finances and many online resources, I am simply sharing what works for us. The key to managing your finances well is to find a system that works for you. (By the way, if it’s not the way I do it, you won’t hurt my feelings.)

(If your eyes just glazed over you may want to wait for the next installment in which I will be talking about something less math-related. :))

First of all, let me say that growing up was financially confusing. I had a father who was a super spender, had more credit cards than photos in his wallet and left us with quite the load of debt when he divorced my mother. My mother on the other hand was super frugal. That woman could do miracles with a dollar bill and she loved to save them. She always had a rainy day fund.

Fast forward to my adult life. I decided the spending route was more fun and ended up in several thousand dollars worth of debt before I was 22 years old. Thankfully I married a man without any debt, but neither of us had any financial training.

Click here to see all Cheapskate Books

After having four children in five and a half years with no real financial plan, I realized we were in trouble. While researching on the internet I stumbled upon The Cheapskate Monthly newsletter (now Debt Proof Living) and immediately signed up for a subscription. Mary Hunt rocked my world with a little concept called the “Freedom Account.”

The Freedom Account is a separate checking or savings account that you set up for irregular expenses. Mary Hunt’s idea is to calculate your irregular expenses (the ones that aren’t monthly) like car insurance, clothing, medical expenses, car maintenance, Christmas, etc. and then divide the amount by 12. That amount is what you should be depositing into the Freedom Account each month (you can divide it further if you are paid weekly or biweekly). She suggests automatic withdrawal from your paycheck so you don’t have time to decide if you are going to spend it on something else.

When it’s time to pay a bill from one of those categories, the money is there in your second account and you don’t have to use credit cards to pay that “surprise” bill. (If we’re honest, we knew that the bill was coming, we just didn’t want to think about it.)

I liked the idea, but because I tend to look at the checkbook balance and spend whatever is there, I had to adapt her plan. Here is what I do:

Each week on pay day, I have a morning money appointment. I write the direct deposit amount from my husband’s check in our checkbook register and subtract our weekly gas and grocery money (I will take the grocery money out in cash before shopping.). (You can see my weekly shopping here and my $100 Budget Weekly Menus here.) [UPDATE: We have increased the budget to $125/week. You can see the new $125 Budget Weekly Menus here.]

I then transfer the remaining money into our second checking account. As an example, let’s say I transfer $376 from each paycheck from now until the end of March.


I note the deposit on my spreadsheet and update each category with the new amount. (You can see a larger view and read all the gory details here.) You can use something like Excel or Quickbooks, but I like a paper and pencil version because I’m just nerdy like that.

If there happens to be extra money (my husband gets some sales commission and has a part time job that he can work a few hours a week when work is available), we have a quick meeting to discuss where the money is going. If there are multiple needs, we prioritize (daughter #1 needs a hair cut, but that will have to wait because daughter #2 just out grew her shoes).

If you look closely at the spreadsheet you will notice that we are only funding the first four categories with this month’s paychecks. As extra money comes in we will add money to the other categories, but right now I don’t sweat it. The priorities are rent, utilities, food, gas and insurance. We don’t have an emergency fund right now {UPDATE Jan. 2013: We now have a $1000 Emergency Fund!}, but if we had an emergency we would take money from the account that has the farthest due date from today, so hopefully we would have time to replenish it before the bill is due.

On paper, it sometimes looks impossible. I will talk more about that in a future post, but let’s just say we realize we are on the edge and we have to trust that until we can increase our income everything will work out.

By using the Freedom Account in this way, we can see exactly what is going on and have a little bit of a backup plan without resorting to credit card use. (We don’t have any by the way.) We truly have to discern what is a need versus what is a want and I’m not always good at that, but I’m getting better. :)



If you are a great money manager and a whiz at Quickbooks, this entire post probably seems ridiculous. But then if you are a great money manager, maybe you aren’t reading this post.

If your current system isn’t working and this idea seems like it might work for you, here’s what you need to do:

1. Take a look at the spreadsheet and explanation here.

2. Set up a separate checking account. We have both of our accounts at the same bank so we can easily transfer the money once our check is deposited.

3. Print out the blank Freedom Account Page here. Fill in a few categories. If you want to just do irregular expenses, make an educated guess as to how much you spend on each category for the year, then divide by 12. That is the monthly amount you need to deposit (divide by 2 for bi-weekly paycheck, 4 for weekly paycheck).

4. Make a pay day appointment with yourself and write it in your calendar.

5. On payday, make the transfer to your Freedom Account (or set it up to transfer automatically).

6. Fill in your spreadsheet (use Quickbooks, an Excel spreadsheet or print my form here). If this is too overwhelming, you could sign up for mint.com, which many readers have recommended.

6. ONLY spend the money from the Freedom Account on the designated categories. (Do not look at the balance of $300 and say,”Oh goody, now I can buy that expensive pair of designer shoes I have been wanting.”)


If this post overwhelmed you, don’t panic. Think about the concept for a little while and decide if you might like to try it. You can also check out my Financial Resources Page here.

What tools do you use to help you manage money? Leave a comment and let us know how it works for you. :)


next post in this series: Diapers and Swimming Pools

Click here to read other posts in this series. 

*affiliate links are included in this post


{ 311 comments… read them below or add one }

Kristy June 28, 2012 at 7:12 pm

I think this idea just saved my life.


Kimberlee June 28, 2012 at 7:49 pm

I’m so glad Kristy! :)


Anthony June 28, 2012 at 7:58 pm

Thank you. I have always created a budget, but have never been able to track it in a way that made sense to me. This makes sense to me. Thank you!


Kimberlee June 29, 2012 at 8:56 am

I am so glad Anthony. :)


Amanda June 29, 2012 at 2:39 pm

We are also a homeschooling family of 6 living on a similar amount of money per year.I WANT to have a budget, but I find it nearly impossible with a husband who is self employed and who’s income can vary greatly from month to month. Do you know of a way we can budget?


Kimberlee June 29, 2012 at 3:57 pm

The best way to budget an irregular income is to make a list of what you need to pay in order of priority and apply the money you have to each item on the list one at a time. For example, your list might look like this:

1. food
2. gas for the car
3. power bill
4. water bill
5. rent/mortgage
6. car payment
7. car insurance

Whenever you get money, you pay the 1st thing 1st, so you would buy food to last until your next pay period. Then you would put gas in the car, then set aside money to pay the power bill (we use a separate account for bill and rent money). Just work your way down the list, until you run out of money. Until you have significant savings, I would not eat out or spend any money for anything you don’t absolutely need. Once you get a little bit ahead you will have more freedom. Hope this helps.


Carolyn Heiges July 2, 2012 at 11:40 am

I use something very similar. It works in the same capacity yours does , just looks different. I have my budget worked out for the entire year. I look at how much we will bring in each week and what our bills are each week, what I need to roll over into the next week to make ends meet and if I can put any in savings. Also, I get paid every week, the husband every other, instead of getting slammed with a HUGE mortgage payment and home equity payment, I pay 1/2 of each on the weeks where we have more income, this eliminates the robbing peter to pay paul scenarios, our money is spread out to match what is coming in so there are no weeks with shortages. Through this process we are able to get ahead on our bills and we are almost paid off on the credit cards. Also, we have a joint account for the bills, then we each have our own individual accounts. Each week we get a set amount of money for an “allowance”, that is our gas money and/or eating out at lunch, etc. Right now it’s pretty much just gas money. That way someone isn’t overspending on anything. The Joint account is bills only and you can’t run out of your allowance or you’re up a creek. It takes some discipline, but we are able to make it. We are a family of 4 and spend only $50 a week on groceries. I’m a couponer, but not an extreme couponer.


Lisa September 5, 2013 at 5:19 pm

I do the exact same method…however I resigned teaching at a private christian school to home school and manage by husbands trucking paperwork. I am missing the extra money that we were using to pay down medical bills and credit cards. This means I am really “pinching every penny”. We have been using our cards as a crutch and this has really put us to the limit on our credit cards. Thanks to our wonderful government taxes and fees that you must pay to run your own business our income changes drastically weekly. Thanks be to God that we are barely able to keep our heads above water! I will be more disciplined with using cash when grocery shopping and we are locking up all ccards this week! Thanks for the inspiration. We desperately want to be out of debt! -L-


Kimberlee September 5, 2013 at 7:37 pm

Hi Lisa! You can do it! Good for you for getting rid of the credit cards and living within your means. If you need more encouragement, check out DaveRamsey.com.


Christine July 8, 2012 at 2:01 am

I haven’t had a chance to read all the replies so I’m sorry if someone has already mentioned my idea. We follow the Dave Ramsey plan which is actually similar to your plan. Instead of a separate checking acct,we use ING accts. They are free with no minimum balance. You can have as many as you like. We have several including vacation, christmas, car repair, home repair, etc. You can name them exactly what they are. The only hitch is that you have to request the transfer and it takes three days for it to hit your local checking acct. That’s actually good for big purchases b/c you should have a waiting period before you make a big purchase,imo. For this reason, we keep our emergency fund in our local savings acct and it is only used for emergencies.


Kimberlee July 8, 2012 at 12:00 pm

Great idea to name the accounts for what you are saving for. Thanks Christine!


Shawnee July 8, 2012 at 1:43 pm

Thank you!!! Stumbled apon your website on pinterest! I can not wait to sit with my husband and go thru all this!!!! We are going to be going thru some BIG financial decisions and I’m scared! This just may help us!!! Thank you again!!!!!!


Kimberlee July 8, 2012 at 6:01 pm

You are very welcome Shawnee. Please feel free to ask any questions you may have.


Dawn July 16, 2012 at 7:57 pm

I have only 1 checking account but I do have 2 savings accounts. I have money automatically taken out of my paycheck each month and put into both accounts. One account is linked to my checking so that I can get to it if necessary. The other savings is far more difficult to get to and I don’t play with online. It is difficult to access the money so we don’t touch it except for actual emergencies or big ticket spending – like our son’s college.


Sarah July 17, 2012 at 2:51 pm

I am a calender girl I write everything on my calender. I realize this is old school for most people but works for me. As soon as I get a bill I write it on the calander on the day its due. I know what bills are coming out of what check. Those bills that you dont pay every month in my cause say garbage I know how much it is and I pay it every 3 months I take the amount and divide it by three and ad it to my monthly expenses. I also round up if I know a bill is say $56.73 I round it up to $60 and we dont have direct deposit so I only deposit the money for the bills in the bank and take the rest cash. For me its easier to manage my wekkly money and by rounding up my bills I have extra money in the bank I also round up my deposit. So if I have figured I need say $442.00 a week I deposit $450.00 I know it may not seem like much but it does add up in the long run. At the end of the month whatever is extra I transfer to my savings.


Sarah July 17, 2012 at 3:03 pm

I forgot to mention where I live we only have electricity no gas and I know in the summertime my electricity runs about $215 a month w/my a/c set at 82 I budget this amount every month and my car insurance I pay it for 10 months but budget it for 12. So there are months when I have quit a bit leftover.


Angela April 28, 2013 at 12:59 am

Fyi most electric companies have a program where they will average out your electric bill for the year. Instead of having a $100 bill in Jan and a $200 bill in June, you would have a set payment every month. It really helps to budget.


Jessica July 18, 2012 at 12:17 am

This is a genius idea! I definitely now know how I’m going to separate, manage, and spend my money when I’m married! Thanks for sharing!


Kimberlee July 18, 2012 at 4:50 am

Thanks Jessica. :)


Alyse Bingham August 2, 2012 at 8:22 pm

I am SO, SO glad a friend repinned this on Pinterest!!! I’m not a big spender per se, but I know I’m not a big earner at this point, so this will SO help!!!


Jess August 5, 2012 at 7:52 pm

How do you budget gifts? Seems like each month we are faced with a birthday, wedding or shower gift need.


Kimberlee August 6, 2012 at 9:15 am

I have a post planned about this, but my “go to” plans are: (1) Find items on clearance and store them in a closet where I “shop” when I need something; (2) make something personal (ex: hand painted baby shoes, embroidered blanket or towel for baby shower; romantic picnic basket for wedding couple or devotional book with a nice handwritten card, etc. (3) Go in together with others to purchase a larger gift, for example, you each contribute $10-$20 but buy something more expensive because the total amount of money is larger when combined.

Hope this helps!


Heather August 8, 2012 at 9:16 am

To add to that, I plan for a certain # of birthday parties and weddings each year and plug that into the budget plan for the irregular checking account (I already have a system in place similar to what you mentioned).

Reply Add-on to Jess:

For instance, I already know our close friends’ kid’s birthdays and then we always gets a few invites during the school year, too and there is always at least two weddings each year. And for the close friends you can watch the clearance shelves throughout the year, too.

If we come under budget, then great, otherwise we are already prepared by saving monthly for them.


Rachel August 9, 2012 at 9:09 pm

We do something very similar to you only we use a fold-out checkbook register with all the categories in it. This way, we only have one checking account and always are able to update it when out and check our amount in certain categories. It’s called the Budget Map and you can order online if interested. I love it and it has completely changed the way we handle our finances. My husband has his own that he keeps for certain categories too so it keeps him involved.


Shaunese August 14, 2012 at 4:58 pm

I have a “Never Fall Below Amount”, which appears to be similar to your idea. The concept is never allowing my checking account to fall below $1500. This must be there after all of my bills are paid at all times! It works well for me. I like this approach because if there is ever a payment I forget about or something comes up, I will not have to use credit nor will my payment bounce. I suggest it!


Kimberlee August 14, 2012 at 9:37 pm

That is a super idea Shaunese–my mom does this as well. I unfortunately don’t have the discipline to not spend it when I see it in the account.–LOL!


Karla August 23, 2012 at 1:13 am

Kimberlee, I know what you mean! If I see it in my checking account balance, it’s too tempting to spend. I find it helps if I write it “out” of my balance. Meaning, it’s in my checking account, but I don’t reflect it in the bottom line of my checkbook balance. So if I have $1,599.00 in my checking account, but I don’t want my checking account to fall below $1,500, I just simply write that $1,500 out of my balance so my checkbook total reads as $99. Then I don’t spend more than what my checkbook says I have in the account ($99). But I never have $1,500 in my checkbook backed up….right now, it’s only $30. LOL!


Mea September 9, 2012 at 6:03 pm

I have done this with a fair amount of success- I have deposited tax returns into the checking account, but never wrote them into the check book. I knew the money was there, but I never actually wrote it in, because of the whole “see it, spend it”. Since I couldn’t see it physically there, I didn’t spend it.


Theresa September 2, 2012 at 9:00 am

I am loving this series and your blog!

We use a software program called YNAB~*You Need A Budget*:

I am still trying to figure out what to do when there is no extra $$ to put aside for the *unexpected*. That is the number one problem that throws us off for a few months…dealing with it right now…ugh!

Okay…going to read more!


Barbara September 18, 2012 at 2:57 pm

Theresa, What Kimberlee said was a good start, if you have something unexpected and have no emergency fund yet you’ll have to “unfund” some of your “don’t need it today” categories and pay that bill. Then move the $$ back when your income allows. But, also, for me, It was “scorched earth” for awhile, until we had $1000 in the emergency fund. Then we thankfully went back to normal. We incurred $5500 in medical debt in this 9 month process, so we are making no interest payments on that, but we will have that paid off in Jan. It’s just about not getting scared and keeping your head even when it looks like it’s going to be tough. Once you can roll even a few dollars a month into each “monthly” category it builds up fast and you’ll see a big difference over time. Best to you.


Charlia K September 14, 2012 at 11:54 am

I just found your blog yesterday and it has truly inspired me to start becoming more like this. It always has been a goal of mine to be able to be a stay at home wife and mommy. My husband makes about 45k a year but it still is super tough for us to stick to a budget and stick to a plan to save money, meet our goals, and get to where we truly would like to be in life (bigger house, truck paid off, emergency fund, health insurance, life insurance) etc. And although your posts have helped me SO much to come up with good ideas on how to save more money it is still beyond difficult for me to be able to put it all together and have a full blown plan to be able to bring to my husband and say Hey i figured it out this is how we can do it and this is out it’ll work. I’m not sure where to start to get there. if you have any suggestions on building my plan please email me and let me know! thank you!


Kimberlee September 14, 2012 at 9:14 pm

I think the key is to make changes slowly by working on one thing at a time. A great first step is to open a second checking account (read more here: http://thepeacefulmom.com/2012/02/21/living-on-less-than-28000-a-year-managing-the-money/)and to make a weekly menu plan. This article might help some too: http://thepeacefulmom.com/2012/03/16/reader-question-how-do-we-start-changing-our-finances/

My video series might help you get started as well: http://thepeacefulmom.com/how-to-live-on-less-video-series/. Let me know if you have other questions. :)


Ericka W September 14, 2012 at 10:05 pm

PNC is my bank and they have a free online budgeting system that comes with their Virtual Wallet accounts. You can set your budget and it keeps track for you. There’s also a wish list feature that you can allocate your saved funds, which could work like your Freedom Account. You may want to check and see if your bank offers this, as I can’t tell you how much time it saves me!


Barbara September 18, 2012 at 2:51 pm

Obviously a great way to start managing money better is to always have a budget. I do recommend Dave Ramsey or Mary Hunt about how anyone can budget no matter how you receive income. I have been using “YNAB” software (You Need a Budget). It is very inexpensive and you never have to upgrade (the way Quicken does). It is so stinkin’ easy to use and I have found I no longer even look at my check book balance until I reconcile. I look at the budget, see what’s in what category and spend from there. Each category is funded , but not every category is funded monthly. The top essentials are funded first, then (for us right now) everything else goes to debt reduction. So there is no $$ in “gift giving” or “eating out”, but groceries are funded, vet expense or Gasoline categories get $ put into them each month. YNAB makes it super easy to change your figures, be flexible and satisfy that budding nerd within. (this is a budget to zero method, so every dollar has a job)


Crystal October 2, 2012 at 8:40 pm

I have found that for us, doing our budget on a monthly scale helps a lot. I can break down each week on a spread sheet and have a section for income, a section for monthly bills that always occur, necessities (food, gas in the car, etc.), savings and payments to things we are paying off (credit cards, etc.) and then at the very end have the spread sheet (or manually) add it up to make sure all the money is accounted for. This also helps when we have extra money because on things we are paying off or trying to save a specific amount for (Christmas, Birthdays a vacation) we can see how close we are to our goal very quickly, which sometimes makes that decision easy! I know budgeting is not always easy, especially when the income side of things is minute compared to the expenses portion, but knowing how your money is spent is extremely important! Even if you just hoard receipts for a month and then add it all up at the end of the month, I guarantee you would be shocked at where your money went! Happy Budgeting!

P.S. I like your Freedom Accounting method. I think it is great to be able to find stuff like this free online!


Kimberlee October 2, 2012 at 10:19 pm

You are so right Crystal–you really have to know where your money is going. Glad you found the blog. :)


Desiree October 15, 2012 at 8:43 pm

I’ve developed my own custom excel budget that is broken down by week. Having things broken down week by week has been crucial to me understanding and actually sticking to the budget. I do a weekly bill pay and money check-up on paydays. Rather than transferring money to a separate account to pay bills later on in the month, I leave the money in our normal account. This only (and I mean ONLY) works because I pay ABSOLUTELY no attention to the number in my checking account (other than making sure that the amounts from my budget match the amounts in the account). To me, the amount in the account is NOT the amount of money that I have to spend because part of that money will be needed to pay the mortgage at the end of the month. I realize that this definitely doesn’t work for everyone but once I got used to using my budget as a guide to how much money I have, rather than my bank account, I’ve had very few problems with actually sticking to it. Another thing that has helped immensely? Dedicating an entertainment category once a month. It can be a little or as much as your budget allows, but knowing that I have a set amount (taken out in cash at the beginning of the month) keeps me from feeling too restricted but also makes me be smarter about how I spend it because when it is gone, it is gone.


Heather October 16, 2012 at 3:34 pm

I’ve been using You Need a Budget for a couple of years now, sort of like a virtual envelope system, and it has completely turned my whole world and my bank account around. I love it.


Anna October 17, 2012 at 5:00 pm

This is WONDERFUL! We recently had to make a major financial change in our household and I’m quickly learning how to budget everything, as I take over the books. With no more credit cards spending to fall back on, every penny counts and all of these tips have been very helpful. I’m still figuring out our needs and expenses are . . . and what we really CAN live on or live without! We’ve never been big spenders, but all the little things would add up quickly. I can’t say that all the anxieties I’ve been having lately will just poof away, but this all helps a lot. Thank you for your blog. I’ve been inspired and I know it will get easier as time goes by. There really is a light at the end of our financial tunnel.


Kimberlee October 17, 2012 at 11:55 pm

Yes, there is a light at the end of the tunnel. Glad to be a part of your journey. :)


Hannah October 18, 2012 at 12:42 am

I like to use a spread sheet that I found online that is broken down into each pay period. It breaks things down even farther to give your totals of in outs and what you have left over and gives the opportunity to plan using a zero balance. This spread sheet is free and has been quite useful so far.

You can find the template at this link and several other useful ones all free. The one I use is the GLBL BUDGET.



Christine October 25, 2012 at 11:21 pm

Before I read this post, I had no idea about a freedom account. My husband used to use mvelopes but it was part of our regular account and didn’t work for much more than seeing where our money was going, not really where it needed to be going. I love this. I used an extra account I had for another purpose. I love spreadsheets so I bought excel geek’s freedom account spreadsheet; an investment of $10 that has or already paid for itself. Thank you times a million.


Kimberlee October 26, 2012 at 7:16 am

I am so glad that it’s working for you Christine!


MissAngel November 4, 2012 at 1:24 pm

I am 22 years old, and have moved into my first apartment and started my first quarter of University simultaneously. I get no financial aid and thus have to work part time as well as going to school full time. Unfortunately, not many high paying jobs want to work around a college student’s schedule, so I am stuck with slightly above minimum wage. It’s been really hard trying to manage my money around rent and other bills. Not to mention the fact that I make just enough that I don’t qualify for food stamps. Anyways, I’m babbling. I just wanted to say: You are my hero!


Kimberlee November 4, 2012 at 2:02 pm

I’m sorry you are having a difficult time, but glad that I can encourage you a little. Is it possible for you to get a roommate to help with the rent and utilities? Just a thought. :)


Sabrina November 11, 2012 at 8:58 pm

See if you can get on payment plans for bills like utilities. Some gas and electric companies can calculate what your useages will be in a year and divide the cost over a year so that there are no surprise every month on what your bill will be and it makes it easier to budget those payments. I personally do this and love it.


Sabrina November 11, 2012 at 8:52 pm

I do something I feel is very similar. I decided it was to easy to spend my paycheck if I tried to “save” money for payments with it sitting in my checking account. So, I opened a second checking account at a different credit union and split up my direct deposit. I sat down wrote out a list of my bills and figured out how much I would need from each check to meet my monthly obligations. I get paid every two weeks so I divided the amount by two and that is how much went in every paycheck. Now that I am married and we have two incomes to work with. I again evaluated what our monthly bills were. Now my paychecks go to the “bills” checking account and my husbands goes to the “household” checking account. I have ACH payments set up for some bills and other I have bi-weekly payments automatically set up through the online billpay service the credit union offers. We use the “household” checking account for daily and weekly expenses that come up, such as; groceries, gas, eating out, and extras that may pop up.


Paige December 8, 2012 at 8:54 am

Great ideas! I set up a second checking account, but did so with another bank. I did this because I was constantly looking at what was available when checking my regular account. This may not help everyone but it did for me. I had a hard time saving money once I was in college and this worked. Thank you again for sharing your ideas with us!


Shayna December 17, 2012 at 8:41 pm

I use a similar application for my bills. I used to work at the Credit Union we use so I created many accounts. We have three savings accounts (mine, his, and kids) then we have three checking accounts (mine, his, and bills). When my husband gets paid the money comes into the “bills” account. This account only has checks attached to it so there is no simple way to get to this money. This is also the account that all our automatic drafts come out of (car insurance, cell phone, etc.). From there I can move money to my checking and his checking account that we have a debit card for. We were sharing a debit card account but he tends to spend and not tell me so we just split it so I could better manage the spending. So far this has been the way we have done things for years and it works out great. There is always money in the bills account and if we use all the money in our personal accounts then oh well. The problem we have found is that he is not involved in any of the financial issues and all the stress comes to me so I get overwhelmed very often and sometimes just say the heck with it all and ignore everything. This ends up biting me in the butt. I don’t know how I can keep myself motivated!! I am so glad I found your blog!! It gives me more hope that I can get back on track and work down our debt. Our monthly usage seems to be about the same as yours or maybe a little less to work with. Thank you so much for posting!! It gives me hope that it can be done with hard work and consistency!


Kimberlee December 17, 2012 at 11:48 pm

I’m so glad you feel encouraged Shayna! You can do it! :)


Missi December 28, 2012 at 10:20 am

Wonderful ideas. I’m glad I found this site as we roll into the new year. The question I have is what part of the country do you live in? Cost of living varies greatly from one part of the country to another and would like to be able to convert some of your ideas to where I live. (I apologize if this was answered somewhere and I missed it.)


Kimberlee December 28, 2012 at 12:00 pm

Hi Missi–welcome! We are in the Southeast. Prices do vary, but in our area we have high housing and utility costs, and our food costs are higher than some areas (especially the midwest). Every area has its challenges. The key is to find areas where you can cut back in order to spend that money on things that matter more to you.


Kerry January 8, 2013 at 6:33 pm

Hi Kimberlee!

Can you help me understand how to get started on the first month? if you have to pay the bills because they are due for that month, do you just have to put as much as possible in the freedom account to save for the following months? I amnot sure I understand how to get going.. or for another example, say I want to start using a freedom account today, I can out 1/12th of my car insurance in each month, but the bill is due on July.. know what I mean? I am energized by reading about this..but I dont quite understand the whole thing yet I dont think!

And I think now is obviously the perfect time to start saving for holiday shopping isnt it?!


Kimberlee January 9, 2013 at 10:18 am

Hi Kerry! There are several options. Here’s what we did: when our next paycheck arrived, we paid anything that was due before the next paycheck, left grocery and gas money in the primary account and moved anything leftover into the second account. There wasn’t much at first, but we put it into the first category on the spreadsheet which for us was rent. We did the same thing with each following paycheck until we were able to pay the rent completely from the second account. After that we took 1/4 of the rent amount, utility amount, etc. from each paycheck and put it into the account. Does that make sense?

If you don’t have any leftover money in your first paycheck, you can use these ideas to get some extra money: http://thepeacefulmom.com/2012/04/04/5-easy-ways-to-get-extra-cash/. The comments have lots of helpful ideas too.


Kerry January 11, 2013 at 7:31 pm

Yes this makes a lot of sense, thank you for taking the time!

I make more than 28,000 a year but I am a single mom and send my two kids to Catholic School (live in an urban setting and our public schools are scary). The added expense makes it really tight and I feel like I am neglecting other aspects of my life (emergency fund, home repairs, etc) and I am recovering from credit disaster (from the marriage/divorce) so I can not (nor do I want to) rely on credit cards for an emergency.

I just want to be able to feel secure and not in a state of panic that the hot water heater/furnace/car/you name it will break and I wont be able to fix it. I want some financial freedom!! :) You really have shown me a good plan for this! Thanks so much!!!


Kimberlee January 12, 2013 at 5:45 am

You are very welcome Kerry. I hope it works well for you. :)


Stephanie January 16, 2013 at 10:17 pm

My family does something very similar. We have 3 boys, and my husband and I both work full-time jobs. My husband is a paramedic and works 24 hour shifts. He frequently has to eat out. Needless to say, when we were both using the same account, it was extremely hard to keep up with and we found ourselves periodically bouncing checks and when bill-time rolled around, we were short. Our “plan” has evolved a couple of times. We have more bank accounts than I care to admit, but they are all free accounts and it works for us! We have a set amount we budget in one account to cover the bills; another set amount we budget for incidentals and groceries; then we each have an account to cover our gas, lunches, etc. Additionally, we have a set amount that goes into a savings account, which we don’t use unless it’s an emergency.. Having this many accounts may sound somewhat extreme and complicated, but on the contrary, it has made things much simpler for us, now having minimal issues with bill-paying (except for the occasional utility bill that is higher than the norm), groceries, etc… Thank you for taking the time to offer this out to help other people!!!


Kimberlee January 17, 2013 at 11:15 am

You think like I do Stephanie–separate accounts helps keep the money dedicated to what it was intended for. It’s not for everybody, but the important thing is to find what works for you and to stick to it and it sounds like you are. :)


Heather January 27, 2013 at 10:17 am

I am a single mom to 2 boys, ages 5 & 11. Including the money I get for child support, I make $2158 per month. My budget is basically a “future checkbook” in an Excel spreadsheet. I have a column for ever month, for at least a year ahead. There is a total running balance column. I just put in pay dates, due dates, can even go to the month of August and add how mucj I want to spend on their birthday party. So when I make a change in May, so my auto insurance goes up, or I decide to ride the bus instead of spending money on gas that week, I can see to the penny how it will affect my budget for the remainder of the year.

So budgeting isn’y my problem, but finding ways to save money will be a great help! Thanks for sharing, I can’t wait to read more :)


Leigh January 29, 2013 at 12:07 am

We are in this financial situation as weel(living on one income) and have 2 boys. So finding a way to budget for things that come up with them( new shoes, birthdays, clothes that get destroyed during a random ninja fight) has been very difficult. Im so glad a came acroos this webiste. I definately will be trying the “freedom account”. Its exactly what I’ve been looking for.


Kimberlee January 29, 2013 at 12:09 am

Welcome Leigh! So glad I could help. :)


Kristina January 31, 2013 at 5:15 pm

This is great!. My husband and I were really bad about spending whatever we wanted until we decided to buy a house. Of course when we bought our house our monthly bills increased about $600.00. Before we purchased the house we seemed to have little to no money at the end of each month but for some reason we are now able to put one paycheck a month into the savings account. We realized that we use to go out to eat once a week to an expensive restaurant, eat fast food when I was too lazy to cook after a long day at work, and I have a son so of course I bought him a ton of toys and things he just did not need. I realized that it is possible for me to save money and those days I’m too lazy to cook well i get over it and whip together some spaghetti or something. At this point I could probably go back to being a stay at home mom and we would be fine, but I like working (sometimes lol). With the money we have managed to save I have started a small business because one day I want to be my own boss and I want to be able to be home when my son gets home from school so I can help with homework. When I read your blog I didnt know if it would help me or not but it does make me want to try to be even more frugal than what we are. I am 24 years old and I am proud to say that the only debt I have is my mortgage…..now I just need to figure out how to hurry and pay that :)


Nikki February 6, 2013 at 2:59 pm

Thank you for sharing Kimberlee and other ‘posters’.
In addition to tracking accounts in’s and outs, I have a Bill Map – this shows when each bill is due over a 12 month period. It is just a table with moths across the top and bill names down the side with a tick in the grid where the bill is due.
It doesn’t ‘do’ anything, but is a visual of the fact that June and January a full months with Professional Licensing fees, union fees (June) and home insurances, car club and return to school expenses (January).


Amanda February 26, 2013 at 2:45 am

I have been doing this since 2008!! My husband rolls his eyes at me and says I need a plan…. This IS my plan, this is how I save for car insurance. Our situation is much like yours in that He had ZERO debt when we got together (we recently just bought a house, so now he has that debt) but I have a student loan, a credit card, a timeshare I split with my Mom, and my car…. It totals about 30,000 not including our house… But that’s all mine, not his… My car is close to being paid off, 3 months and its done… I couldn’t do it without this extra savings account.


Anna March 24, 2013 at 9:12 am

This is a really great idea, but we’ve actually taken it further.

Here’s what we do;

My husband is the one who makes the money, however I get about $800 for going to school (we don’t live in the US, so we actually get paid for going to school & our healthcare is free, but we pay for dentist, glasses, etc ourselves.)
He makes about $6000 a month, so we have about $6800 a month.

Each month we put $1100 into a “freedom account”. This money is for insurance (car & lifeinsurance), our car payment, daycare, rent (rent is included utilities, tv & internet), ACT, etc. All the bills that we have both monthly and bi-monthly. The bills that we pay only once a year (insurance, ACT) we divide by 12.
So every month when we get paid, we automatically put $1100 into the other account and everything gets paid for, so we never end up not being able to pay for something. Such a “stress-reliever”.

For the past two years we have been buying Christmas presents through out the year. The first year, in january, we made a budget – how much we could/wanted to spend on each gift & stockingstuffers. Then we added it up, and divided it by 12, and spent that amount on presents each month plus we put that amount into a savings account for the next year.
The next year we did the exact same thing, but then we had the money to buy the presents for, so we didn’t have to put the money aside twice.

This year we’ve taken it further. In december of 12 we went over every birthday through out the year, figured out how much money we wanted to spend on birthday presents, and we Now put twice that amount into our savingsaccount (same as te Christmas money go into), and next year we Will have the money already.

For food and gas, we have a seperate account. We put $900 into the account, and then we each have a debit card that we use when we buy food and gas. We can only spend as much as we put into that account. It wont go through If there are no money to withdraw from.

At the end of each month I divide our receits. We have multiple categories – 1. Food 2. Gas 3. Clothes + shoes 4. Toys 5. Gifts 6. Haircuts 7. Fun (movies, candy, restaurants, parks, etc).

Then we put half of our income into a savings account. If we want to spend that money we have to notify the bank 6 months in advance or else we have to pay a certain ammount of each dollar we withdraw.

Whatever is left we put into another account, and that money goes towards haircuts, clothes, shoes, toys, the dentist (we each go twice a year, and pay $350 each time. Our daughter has free dentist until she’s 18), new tires or anything else for the car, schoolsupplies, going to the movies or restaurants, etc. We usually put about $1400 into that account a month.

I have an app on my phone where I can log onto my bank at any time, and see how much there is on any of our accounts. Each month I print out a copy of every Bill that’s been paid and sign it, and we have a file system for all of our bills, accounts, budgets, receits, etc.

This Got so long, and seems really confusing, but it’s really not and works so Well.


Katie April 25, 2013 at 9:44 am

We (a young couple in our early twenties) live in NYC, and I LOVE reading your blog. We are surrounded by people who prioritize double-income 80-hour work weeks and measure worth by who designed your shoes, and as a frugal southerner who focuses more on putting money away, I’ve always felt a bit left out. You write so eloquently about the importance of spending time with family, and it is so reassuring to know that I’m not alone in refusing to build my life around making as much money as possible.

We may not have any designer shoes, but I’m paying off my student loans in three years and saving for retirement and kids! Thank you for reminding me what is important.


Kimberlee April 25, 2013 at 3:53 pm

Hi Katie! Thank you so much for taking the time to comment. I imagine that it is very difficult to feel left out, but be assured that you are taking care of the important things! Hang in there! :)


Ashraf May 15, 2013 at 4:27 am

I am using something similar and different at the same time. My payroll account is just for paying bills and nothing else (phone, electricity, mobile etc). Then I withdraw certain amount for the monthly home expenses. I divide the withdrawn into 4 equal amounts and insert each amount into an envelope (that will be the weekly expenses for each week). Next I transfer the rest for irregular expenses like school fees & insurance for my family


eloisa June 13, 2013 at 2:07 pm

What state do u live in because u have rent for 250 a month. Here in miami an efficency cost 600.00 a month. I keep trying to find website that can help but even the price of food is very diffrent here.


Kimberlee June 13, 2013 at 2:52 pm

Hi Eloisa. Yes, different areas of the country are different but we live in an area with high food and rent prices. Our rent is actually $1050 a month, not $250. $260 is what we save weekly to be able to pay the rent at the end of the month when it is due.

As far as your situation, you could check to see if someone has a garage apartment or guest house they want to rent out, or try a roommate situation.


Jen July 18, 2013 at 2:52 pm

Your living on less series is a true inspiration. My husband is a (for 18 days now) former soldier with the German air force. We are living in Germany, and our expenses are fixed. My husband is like your father though… we have 2 children and must budget everything.. on the equivalent of $2800 a month (keep in mind, Walmart and Walmart clothes -inexpensive- don’t exist in Germany) so budgeting has become my way of keeping us out of the red. Your series has already provided me with many many more ideas that I may be able to build our savings and live more comfortably. Thank you so much!


Mia October 3, 2013 at 6:31 pm

Hello! I’ve just discovered your site and have been reading it with great interest!
I want and need to budget better. So far we’ve gone through our records and listed our recurring expenses such as rent, utilities, etc but what I find very difficult is how to budget for clothes. We very rarely go out clothes shopping and rely a lot on thrift stores, ebay and hand-me-downs and I also sew a lot of our clothes. the problem is that I struggle to figure out how much to budget bc – say – I don’t know when any of my four kids will have a growth spurt or when DH’s shoe get s a great big hole and a new pair is needed.
Would anyone have any ideas pls?
thank you in advance!


Kimberlee October 3, 2013 at 11:06 pm

Hi Mia! I suggest budgeting a certain amount like $30/mo. And putting it into an envelope or separate account. The amount can accrue until you need it, and you will be able to see after a few months if you need to budget more on a regular basis. Hopefully that helps.


Nicole October 11, 2013 at 10:06 pm

My first thought was, “I hope her family size is very close to mine” and it is! Hurray!!! Our household size is down to 7 now since 2 of our children have begun life on their own and are able to provide for themselves. If we can live on under $35,000 per year we will be doing great as this is half of our annual income. Thank you for sharing!


Kimberlee October 14, 2013 at 11:02 am

Welcome Nicole! It takes a lot of sacrifice and planning, but it can be done. It’s great that you can choose to live on less rather than being forced to. Good for you for taking control of your finances!


Chelsea November 26, 2013 at 6:54 pm

I will echo what others here have said – YNAB (youneedabudget.com) was my lifesaver once I got my first job. I’m a huge fan of a lot of Dave Ramsey’s financial principles, but YNAB is just what works best for me. :)


Shelly February 4, 2014 at 6:40 pm

I started using Mary Hunt’s system in 2006. It is a miracle system. I wish I had used it years before. I love Freedom accounts and the cash system, because they seem to give you more freedom to spend when you choose to, and you know when you can’t spend! I just started reading your blog for inspiration. Good job.


Kimberlee February 4, 2014 at 7:59 pm

Freedom is exactly the point, right? Welcome to The Peaceful Mom and thanks for the encouragement Shelly! :)


Rebecca February 17, 2014 at 8:37 pm

My money management system is 2 parts- I keep an excel sheet as well. First, I round everything up to the next dollar when I’m paying with a card so that the change creates a cushion. Second, I record all of my bills, buy groceries, and set aside gas money when I get paid. The remainder goes into a savings account.


Kimberlee February 17, 2014 at 10:05 pm

I have heard of the “round up” method, but never tried it Rebecca. How often do you reconcile your account and see how much you actually have?


Rebecca February 18, 2014 at 8:03 am

The change stays in my checking account until around December. Usually by then it’s added up to a few hundred dollars which more often than not I split between Christmas shopping and saving. I have friends who have coin jars that they put their change into all year to use for Christmas shopping, so it’s the same idea. I’m a student, not married and no kids, so budgeting for one is a lot simpler than budgeting for a family. I save as much as possible because student loans are looming around the corner. From what I understand, some banks have a savings system that will also do this for you, it will automatically put the change in your savings account and you can also pick if you want to round up to the next dollar, five dollars, etc.


Rebecca February 18, 2014 at 8:20 am

I should clarify, I check my account every pay day, but any round up money, any grocery or gas money that didn’t get used from the last paycheck gets ignored and left in my checking account. I only work with my incoming paycheck and leave the rest until December. I’ve never overdrawn an account as a result of doing this and it lends quite a bit to my savings account. If I constantly relied on checking my account I’m sure I would just end up spending that extra money.


Kimberlee February 18, 2014 at 9:29 am

That is a really great idea Rebecca – any way that you can “trick” yourself into saving is awesome!


Kristin March 24, 2014 at 4:10 am

Kimberlee, I just came across your blog via Pinterest. I’m “slow” when it comes to math and I’m having a hard time understanding your spreadsheet. What are the two numbers on either side of each slash mark /? Is that how much you’ve put towards that particular category on the left of the slash and what’s still left to pay on the right of the slash? Please interpret for me. Thanks!


Kimberlee Stokes March 24, 2014 at 8:14 am

Hi Kristin! Welcome! The number on the left is the amount that I am adding or subtracting and the amount to the right is the current balance in that category. It may be easier for you to use Excel or an online program. This is what works for us. Let me know if you have other questions. :)


Malika April 21, 2014 at 2:26 pm

While I absolutely love your family plan. And I appreciate you sharing it with me. How would you suggest applying some of this to a young person in their 20′s, no kids and no car? I bus everywhere and I have a fulltime job. I’m just curious what your thoughts are on this. Again. Thanks!


Kimberlee Stokes April 22, 2014 at 9:20 am

Hi Malika! I will give you the same advice I give my son who is about to turn 19: (1) Keep your expenses low so that you can save the highest possible percentage of your pay; (2) Stay out of debt (pay cash for your car rather than getting a loan and avoid credit cards like the plague); and (3) Plan every paycheck. It is important to use some of your money for fun, but entertainment and non-necessity spending should be a very small percentage of your budget. Don’t squander your future on impulsive decisions and spending on items that are temporary. Making wise decisions now will give you the financial freedom to follow your dreams in the future. You can do it!


Anastasiya April 22, 2014 at 1:35 pm

We are on Mint.com but I’ve honestly never thought about saving for expenses we can foresee! I think I’m going to create at least three new categories: tabs, Christmas, and car insurance!


Dary Rodz August 24, 2014 at 10:09 am

I cannot help but wonder what type of house or apartment can you get by 250.00. It does not sound realistic unless you have some type of government help.


Kimberlee Stokes August 24, 2014 at 3:37 pm

$250 is the weekly amount we save to pay $1000 a month. $250 a month would be sweet! :)


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