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. [Read other posts in this series here.]
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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.
[Click here to read about the FREE checking account we use which earns money and is recommended by Dave Ramsey.]
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.
PRACTICAL APPLICATION
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. Perkstreet has free checking accounts (read more here) that are easy to set up and you can get cash back for debit card purchases.
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
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{ 287 comments… read them below or add one }
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I think this idea just saved my life.
I’m so glad Kristy!
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!
I am so glad Anthony.
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?
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
etc.
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.
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.
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.
Great idea to name the accounts for what you are saving for. Thanks Christine!
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!!!!!!
You are very welcome Shawnee. Please feel free to ask any questions you may have.
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.
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.
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.
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.
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!
Thanks Jessica.
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!!!
How do you budget gifts? Seems like each month we are faced with a birthday, wedding or shower gift need.
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!
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.
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.
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!
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!
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!
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.
I am loving this series and your blog!
We use a software program called YNAB~*You Need A Budget*:
http://www.youneedabudget.com/
I am still trying to figure out what to do when there is no extra $$ to put aside for the *unexpected*. That is the number one problem that throws us off for a few months…dealing with it right now…ugh!
Okay…going to read more!
Theresa, What Kimberlee said was a good start, if you have something unexpected and have no emergency fund yet you’ll have to “unfund” some of your “don’t need it today” categories and pay that bill. Then move the $$ 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.
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!
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.
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!
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)
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!
You are so right Crystal–you really have to know where your money is going. Glad you found the blog.
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.
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.
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.
Yes, there is a light at the end of the tunnel. Glad to be a part of your journey.
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.
http://christianpf.com/10-free-household-budget-spreadsheets/
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.
I am so glad that it’s working for you Christine!
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!
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.
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.
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.
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!
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!
I’m so glad you feel encouraged Shayna! You can do it!
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.)
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.
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?!
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.
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!!!
You are very welcome Kerry. I hope it works well for you.
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!!!
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.
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
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.
Thanks!!!!!
Welcome Leigh! So glad I could help.
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
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).
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.
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.
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.
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!
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
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