In which I outline how we are dealing with the shift in our joint finances (#23) and lay some love at the feet of the automatic transfer.
I have updated our joint finances so that we are saving more money for the things we care about. The hubs recently got a job after years of graduate school, making us a two-salary household. Our goal is that I will stop working to stay home with kids when we have them, so setting up our joint finances took a bit more than simply updating our paycheck information into the wonderful google spreadsheet that I set up during my first 101 project. I will be updating that spreadsheet to reflect our new breakdowns, so that we can enter in changed paycheck information and update our savings without having to recalculate.
The last time I set out to manage our money, I used a formula that I learned in college. Our joint net pay was broken down thusly:
- 60% – fixed monthly expenses (rent, cell phones, etc.)
- 10% – fixed irregular expenses (quarterly car insurance, new work clothes, car maintenance, etc.)
- 10% – long-term savings (buying new cars, a house, etc.)
- 10% – retirement (I had a 401k, but we funded the hubs’ IRA)
- 10% – fun
That system worked pretty well, but isn’t going to work for us right now. We are planning to primarily live off of the hubs’ paychecks, while using mine to supplement saving for a wide variety of goals. Eventually, I’d like to get back to a 60-10-10-10-10 division, but our monthly expenses make a big dent in his paycheck.
Instead, I followed these steps:
- Totaled our monthly expenses – This included rent, electric, water, cell phones, netflix, internet bills, as well as estimates for gasoline, food, and dry cleaning.
- Subtracted our monthly expenses from the hubs’s paycheck (knowing that our health insurance premiums have already been withheld).
- Divided the amount that was left over for the two areas we NEEDED to save for – long-term savings and irregular fixed expenses.
- Checked the pay schedule and set up automatic transfers of money to ING accounts dedicated to each of these goals a few days after payday.
So, even if I were to lose my job tomorrow, we’ll be able to cover all our monthly and irregular expenses while still saving a bit for big expenses in the future.
Meanwhile, I’ve not neglected my paycheck. I set up a few more ING accounts and appropriate nicknames to save for the following areas:
- IRAs for both of us (in addition to contributing to our 401ks to get the employer matching)
- Baby fund
- Stay at Home Mom fund
- Big Fun (this is new, planning to use it for big-ticket items for both of us)
- Gift Funds for both of us (we haven’t given each other big gifts, but this will allow us to have a bit of money separation when we start to)
- Six Months Cushion (we need to build up more of a reserve than we have on hand now)
- Long-term savings
Whew! That’s quite a list, isn’t it? Both the hubs and I were lucky enough to come out of school with no debt, student loan or otherwise. We are very lucky to be able to plan ahead without paying for anything behind us, and it has allowed us to focus on our lives together. We worked hard and deserve some of the credit, but a lot of the credit goes to the planning of our parents. We’d love to be able to provide the same opportunity to our kids someday.
Our baby fund is a start to that. Hopefully we’ll be able to put away some money for the day-to-day costs of starting a family, and we’ll use some of that money for college funds when the time comes around. The Stay at Home Mom fund will hopefully ease the transition if I’m able to stop working for a few years. For the same reasons, we’ll be maxing out our IRAs (once I open mine) in addition to contributing to our employers’ 401k equivalents. Hopefully this will create a good nest egg in case we can’t put away as much in the future.
And we’re saving for all these goals the only way I know how — the money will automatically be pulled from our account into the appropriate ING accounts twice a month after my paychecks. The automatic transfers allow us to spend without having a traditional budget. We’ll watch our spending, of course, but I don’t want to track all our expenses.
Here’s how I get around that:
- Fixed monthly expenses are paid with the web bill pay or debit card associated with our main checking account
- Fixed irregular expenses are paid with our credit card. We’ll transfer money from the ING account to pay that bill. At a glance, I’ll be able to tell if we’re getting a bit too crazy on those items.
- Fun expenses will be paid for in cash, a measure of which we’ll pull out at the beginning of the month. The cash will be in three equal amounts: one for me, one for the hubs, and one for dates and other joint outings or expenses.
- Savings are pulled automatically, so we’ll never accidentally spend money we’d intended to save.
So our joint finances are up to date and ready to support us in the present and future. I’m sure that I’ll be tweaking the distributions of our savings as time goes on, but I think this is a good, clean start. Any money management system that takes more time to set up than it does to maintain is aces in my book.