It fascinates me from time to time who different people manage and track their money, and how some of us have very little clue how to effectively do so. As this probably won’t be a surprise; I’ve got a refined process for managing and tracking my money and it’s one that I’m quite proud of. I’ve had a few friends ask me how I manage my money and my advice has proven quite helpful! I’d love to break down for you how I manage and track my money.
Money in, money out
At a basic level, I get paid twice a month from my job every other Friday. This money is deposited into my checking account, which I have at Bank of America. Any bank with ATM access, local branches and good service should do in my opinion, I just happened to bank with Bank of America. Each month, I have bills to pay: mortgage, utilities, phone bill, charitable giving and then I also have monthly expenses: groceries, entertainment, clothes, restaurants etc.
Giving each dollar a name
I do a good job tracking my income/project expenses. I know how much my family brings in (#DINKs – dual income no kids) each month and have a ‘plan’ for each of those dollar. I save about 25%, give away about 10% and then live off the remaining 65%. A decent chunk of this 65% is preset, meaning it is fixed/steady and doesn’t really change each month. I then allocate the remaining to: groceries, restaurants, gas, travel and other entertainment. Dave Ramsey refers to this as ‘giving each dollar a name’. Of course I don’t 100% stick to this budget each month, but if I spend more on entertainment, I try to spend less on gas or restaurants. Sometimes I go over a bit (gasp) and other months I have a little extra. If I spend less one month, I’ll spend more the next or vice-versa.
Checking vs. Savings
With Bank of America, I have a checking and savings account. As previously mentioned, my paychecks flow into my checking account. Once I get paid, I’ll go ahead and move half (or sometimes a third if I expect higher expenses) of my planned savings into my savings account. I do have a few Capital One and American Express savings accounts where I keep money too – the interest rate is like 10% higher than Bank of America. I then keep the remaining balance in my checking account for the time being and as my expenses add up (mostly via credit cards…I love points!), I have enough in my checking to pay for them. So, the 25% I save goes into my savings account twice each month (normally right after I get paid) and the remaining 75% of my monthly budget stays in my checking account. My monthly expenses go out in the form of checks (electric bill, paying my parents for the phone bill and my charitable contributions to my church) or via my credit cards, which I get a total bill at the end of the month. Since I stick to my spending limits each month (i.e. not spending more than I earn), I don’t have to worry about having enough in my checking account to pay my credit card each month.
It’s no secret that I’m a big fan of credit cards (how I earn $900 annually) and the points that come with them. (Check out: What’s in my wallet to learn which cards I find the most rewarding). About 95% of my monthly spending goes onto my credit cards. It’s awesome getting points and it’s a bit easier for me to manage and keep track of. Because I monitor my spending to make sure I’m not spending more than I earn each month (although sometimes one month will be more expensive than another…but I just spend less the next month), I am confident that I’ll have enough in my checking account to pay it off when the bill comes at the end of the month.
Everybody is a little different, and the real secret to financial success is finding what works for you. This strategy (keeping more in checking) works for me so that’s what I stick to. If you’re looking for a better way to manage your money, consider giving this method a try!
How do you manage your money? Any strategies that you have to share? Feel free to leave some comments below!