We were barely getting by. I was working diligently on various plans to eliminate old, “bad” debts from our less financially prudent days. Then, the price of gas climbed from about $1.25 to $4.00 a gallon. Then, the mortgage crisis of 2008 had hit. Suddenly we were in trouble.
I consider us blessed, because I work for a corporation that had the strength to weather the economic storm and I was never subject to a lay-off. Still, business slowed nearly to a halt at times, reducing my weekly income by anywhere between 30-50%. It was only by making severe cuts in our monthly budget, eliminating every unnecessary expense, like dining out, for example, that we eventually managed to get back in balance. Sure, there were a few times when the mortgage crisis began that I had to take on some carpentry and automotive repair jobs for our grocery money, but ultimately, it wasn’t earning more money that brought us the financial stability we currently enjoy, but effective family budgeting and spending less.
Of necessity, we have developed and stick to a family budget system that works. Of course, not all families are the same in terms of their incomes and expenses picture, but I’m sure many of the tools and ideas that we’ve learned to use can work equally as well for others.
Our family budgeting process relies heavily on our ability to always set aside sufficient income to pay our bills and monthly debt payments on time, as well as gradually saving up for large purchases that we can foresee having to make at some point, such as a car, refrigerator, or new roof for the house. We’ve accomplished this by setting up several different bank accounts, each with their own distinct functions, and each receiving an allotted portion of our weekly pay through direct deposit. Currently, we are using six separate accounts in all, listed as follows:
- My primary checking account
- My primary savings account
- My credit union savings account
- My credit union Christmas club account
- My mutual fund account
- Wife’s primary checking account
My credit union savings account automatically receives a deposit every week from my pay that is equal to 1/52 of the total amount we pay in property taxes per year (city, county, and school). There is no debit card with this account. The only way to get that money is to physically go and get it. This is a good thing because it’s far more likely that the money will be there when the tax bills come due. My wife and I both have additional money deposited weekly in this account. This is so that when our cars die in a few years we’ll have the cash to buy their replacements.
My primary savings account (at my bank) is where the money that we need to pay our auto and home owner’s insurance, water/sewer bill, and our medical/dental co-pays. The reason we have a savings account set up for these things is that they are not billed monthly, but quarterly (in the case of the insurance and water bill) and that if we didn’t set aside a bit of money each week to take care these, as well as medical bills as they come along, we likely wouldn’t have any money to pay them, because we would’ve spent it on something that we didn’t need.
My credit union offers a Christmas club account. My wife and I both put a small amount of our paychecks into it every week (so small we don’t even miss it). It’s not possible to withdraw any of this money until after Thanksgiving, by which time there’s more than enough saved up to take care of our gift buying needs — and then some.
My primary checking account is where all the rest of the money I earn each week goes. We have our large monthly payments such as the mortgage, electric & gas, and phone/internet/cable plan scheduled so that these each come due a few days after a paycheck is deposited. Then, as soon as we get my pay, we pay them immediately. Any money that’s left in the checking account afterwards is what is available for us to use for other things that week, like small miscelaneous bills, gas for our cars, groceries, and whatever else we feel we can get away with spending it on.
My wife’s primary checking account is where her paycheck, less her weekly contribution to the credit union for a future used car purchase, is directly deposited. She uses this mostly to pay for her and the kids’ cell phone plan and the rest is for whatever comes along that she or the kids might need money for. Having our own separate checking accounts helps to alleviate a lot of bickering over who spent money on what — and why.
Our mutual fund account receives a very small direct deposit from my checking account every month. This serves both as an emergency savings fund and a long term savings account. We know that our home will be in need of a new roof and a major chimney repair within the next five to ten years, so we’re trying to save up for it ahead of time.
Over the years we’ve developed a strong dislike of credit cards and we generally don’t use them anymore. We’ve come to realize that we shouldn’t spend money we don’t really have. We’ve wasted a lot of good years, debt collectors ringing and badgering all the while, digging our way out from under that mistake… darned if we’ll ever do that again. Besides, sticking to our budget seems to have the effect of our having money available for things that pop up unexpectedly, eliminating the urge to ever pull out a credit card.
Sticking to a budget has paid huge benefits to this family. We’ve made significant reductions in the number and size of debts we have, and are now only a month or two away from paying off our home way ahead of schedule. We’re excited to finally have such a burden removed. With all that extra money available in the budget, we might be able to start fixing up a few things around the house… something we haven’t been able to afford to do for a long time.