Feb 2, 2010

The Third of 3 Little Budget Secrets (Carole)

The final budgeting secret is to SWEEP!  Huh??

Let me explain.  After you’ve finished paying all your regular monthly bills, and also transferred the money to your savings account to cover your occasional bills that you’re saving up for -- then take ALL THE REST of the money in your checking account (except what the bank demands you keep in the account to keep it open) and SWEEP it into your savings account. 

Add one more sub-account in your lovely savings account and call it your Rainy Day Fund.  This “swept” money goes in this fund.   The money in this new fund accomplishes two important goals in keeping you on your budget:

  1. It removes the money from your checking account where it is EASY to spend, and tucks it away in your savings account where it is HARDER to spend.  And. . .
  2. It gradually grows a fat cushion between you and a financial emergency. 
Most financial experts recommend that you work toward having at least $1,000 in this Rainy Day Fund.  But keep going.  The ultimate goal would be to have about 6 months worth of household EXPENSES (not gross income) saved in there.  That ends up being quite a few thousand dollars!   This money is not to buy a new blender or TV or a new car.  It is to pay the bill when the washing machine suddenly dies, or when your car engine blows up or you lose your job.  Those small or large money emergencies that kill your budget! 

Make the $1,000 your first goal, and then work toward having one month’s worth of expenses, then two months and so on.  You will feel safer than you have ever felt before.

So, SWEEP your checking account --it’s the easiest way to keep your monthly budget healthy and safe.  

4 comments:

Packrat said...

May I post about your blog (with link) on my blog? You all have such wonderful ideas; I would like to share. Thanks, Sue

Emily said...

I know none of you ladies are in this position currently but I'd love some insight and pointers on budgeting as a young family going to grad school. We're living on student loans that come in twice a year. I've tried a few things but so far haven't found a system that seems to work out exactly right. Any ideas?

Carole said...

Emily: Far far away, and long long ago, I too was a young wife and mother with a husband in graduate school. Actually, it doesn't seem that long ago.

Although we didn't live on our student loans (I was able to work for our first 2 years, and then we lived on our savings for the 3rd year after Janssen was born-- and might I add we spent NOTHING for those 3 years -- but that's a fertile topic for a future post) I do understand where you're coming from with your question.

My suggestion is to take your total projected yearly income from these 2 student loan installments, and divide the total amount by 12. This is how much you have to live on each month. Base your monthly budget on this amount -- and stick to it! Because you probably have no other choice :) Stash the excess money in a savings account where you won't touch it. Make it as difficult as possible to get to it quickly. "Pay" yourself (into your checking account) every month from this savings account and live like all frugal people -- on a budget and within your means.

Graduate school is only temporary. You can do what you have to do for a few years to get through with minimal debt. You can do this!!

Treat it like a game -- you'll find it's actually pretty fun! There's just nothing like having money left over at the end of the month. It's a fiscal high!

Tristen said...

I am loving your blog ladies!! Ryan and I are in the middle of reading Dave Ramsey's book Total Money Makeover but I am getting many great ideas from you all! Thanks!