Everyday Financial System

An everyday system, TM, is a simple, commonsense solution to an everyday problem, grounded by a pun or metaphor. Propose/discuss new systems here.
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Everyday Financial System

Post by annafirtree » Mon Dec 19, 2011 3:49 am

This is a financial system that I've been doing that works really well, so I'd like to share it.

Each time you get a paycheck:
  • 1. Put into a "bills" checking account however much you need to set aside for all the bills that you know will be coming up.

    2. Put aside into savings however much you plan to save.

    3. Whatever is left, transfer into a separate checking account. For couples who share money, each person needs their own checking account; divide the available money up between them according to the proportion of the expenses that each of them is usually responsible for.
And that's it. However much is in your checking account is how much you get to spend on anything, from groceries to a new TV.

I made some spreadsheets, as aids to this system, which should be available (free) here:
For Weekly Paychecks
For Every-other-week Paychecks
For Monthly Paychecks
They will calculate for you how much you should have set aside in your bills account and how much is left to transfer to personal account(s). They should work for one, two, or three people. I tried to make them as user-friendly as possible, although if you have tips for making them more so, let me know (especially for the weekly and monthly ones, since I've only used the biweekly spreadsheet myself). The spreadsheet needs to be updated each time we get a paycheck; this usually takes me maybe 5 minutes, more if I'm being indecisive about how much to set aside for things I want to save up for.

Here's some of what is so elegant about this system:

1. It minimizes tracking. You don't have to keep track of how much you have left to spend in multiple categories. You don't have to remember bills in your head to make sure there's enough in the account to cover them, because they all come out of the bills account. You don't have to know exactly what your spouse has already spent or is planning to spend on something, because that will come out of their account, not yours. If your bills are automatically withdrawn from your account, or automatically paid with Bill Pay (as we do), you don't even have to remember to pay them.

Instead, you just check your bank balance when you need to know how much you have left. All you have to remember is anything you yourself might have bought that hasn't posted to your account yet. Most purchases post within a business day or two, if not immediately, and most people are capable of remembering purchases that long.*

2. You can do everything digitally/online. This is a major advantage for those who dislike cash-in-hand budgets either because (a) those don't allow you to purchase things online; or (b) you don't want large amounts of cash either lying around or on your person.
(For those who do like cash-in-hand, you can still use the bills account and the spreadsheets, and simply withdraw the money in cash instead of depositing it into personal accounts.)

3. When you're out, you're out. Everything in the bills account is set aside for something, so what's in your personal account is all there is. It puts a natural limit on your spending; if you spend too much on something, there won't be enough left to cover something else. You'll have to go without, or at the very least take money out of a savings account to cover it, which has the psychological impact of forcing you to admit you failed.

* One exception to this that I've found is back-ordered amazon purchases, which don't bill until they ship, so that's something to keep an eye out for.

** In the interest of full disclosure, I first got the idea from the #6 "take" on this 7-Quick-Takes post, although the spreadsheets are entirely my own creation.

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Post by annafirtree » Tue Dec 20, 2011 7:51 pm

"Only Spend What You've Got".... is that a snappy enough name for this system?

Some additional thoughts:

- With this system, you don't have to constantly record your purchases.
- The spreadsheets are set up so that what stays in your bills account is (a) all the regular monthly bills that come out during that paycycle; (b) a certain amount set aside for future paycycles with large bills, in order to even things out over the course of the month; (c) any irregular bills that you input; and (d) a safety buffer.

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Post by reinhard » Thu Dec 22, 2011 3:40 pm

Hi Anna,

Thank you for sharing this and sorry it took me a few days to digest it -- looks like a very elegant and useful system indeed!

I'd have some trouble applying it personally because pretty much everything I spend goes through a single credit card. I do this both to make tracking easier (they do it for me) and because it gives a very appealing 2% cash back into my daughter's college savings fund. I'm an instinctive miser with a terror of debt, so this works for me. But I can imagine that for many people your system of segregated accounts could be very useful (and ultimately save you a lot more than my 2%).


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Post by annafirtree » Sat Dec 24, 2011 4:08 am

reinhard wrote:looks like a very elegant and useful system indeed!

And yeah, I can see taking the 2% cash back option, for the naturally frugal. I'm curious if you have any feedback about the spreadsheets or the "Only Spend What You Got" name, but if you don't have time for that, that's fine.

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Post by sangrail » Tue May 01, 2012 12:53 am

I have a similar system.

Rent and predictable expenses go into a household account (I have housemates, so everyone puts in a fixed amount for the rent, power & phone - yes, there is a small amount of excess/padding. This is *essential* with housemates, as it covers missed payments, and a certain amount of increased winter heating etc).
Almost all these bills are automated, with an AP or direct debit (and only 'almost' because I haven't printed & sent the phone direct debit - to the ToDo list!).

I also like the simplicity / 'Everyday System's'-ness of the 50/30/20 budget (http://money.msn.com/how-to-budget/how- ... eston.aspx), which serves as an approximate guide/goal of what to save, and how much you can afford.
Yes, I know it's really hard, and not practical for everyone to get their expenses down to 50% of your income, but what it says is, if you can't then no, you actually can't afford to move to a slightly nicer house or rental.
I was so, so proud of myself when I finally hit that mythical rent is less than a quarter of my income.
And y'know what? Yes, I live in a shithole, in a tiny room.
And y'know what? All my friends are in credit card debt and I am NOT! Booyah!
I have a savings account and the security of knowing I can deal with any sudden crap that hits me, and that is worth more to me than a takeout latte.

Anyway, my plan:
My monthly pay goes in, and I choose to divert *33%* to savings & debt repayment, 25% to my household account, and anything left at the end of the month goes into savings. Or I can spend it, guilt free.

This is the sort of thing where people do well with custom plans though.

Alternate No-Budget System:
I know someone else who found budgets constraining, and their game is, they have an automated bank 'sweep', where anything left when their next payday rolls around, is swept into their savings. Apparently they treat it like a game, as to how much they can keep in that account, without ever feeling like they've lost anything, because it doesn't go into their savings until they have a whole new pay packet to play with.

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Post by pd3 » Wed May 23, 2012 11:26 pm

thanks for sharing!

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Post by Over43 » Tue Jun 05, 2012 4:17 pm

Thank you for sharing. My wife and I have a house payment, and a credit card payment (which we are about to pay off). But it seems we always have the wolf at the door.

I am going to take a look at this somemore.
Bacon is the gateway meat. - Anthony Bourdain
You pale in comparison to Fox Mulder. - The Smoking Man

I made myself be hungry, then I would get hungrier. - Frank Zane Mr. Olympia '77, '78, '79

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Balanced Money

Post by callmemink » Wed Oct 31, 2012 3:04 am

There is a personal finance book that more or less works on this premise:

All Your Worth: The Ultimate Lifetime Money Plan by Elizabeth Warren

Spend up to 50% on needs, save 20%, and the 30% or more that is left is yours to spend on wants - anything!

It sure has been easier than a detailed budget, tracking every cent. I know that once my needs and savings are accounted for, I don't need to overthink the other purchases I make. Easy!

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Post by Williac » Sat Nov 10, 2012 8:15 pm

Thanks for sharing annafirtree I was actually logged onto the forum to look for just such a system and your post was at the top!!

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Post by Mika_Onida » Mon Dec 03, 2012 4:48 am

I'm soon starting a new job and the pay schedule is twice monthly instead of every two weeks so I knew I'd need some help adjusting to this new budget. I used to try to leave half my bill money from the first pay and pay all the bills when the second came in and if there was a third (once or twice a year) it was like a jackpot and I blew it on silly stuff.

The monthly spreadsheet seems like it will do me well. I can just forget about the bills and transfer the spending money to it's own account. Awesome.

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Post by RAWCOOKIE » Mon Jun 29, 2015 4:58 pm

Thanks for the 50/30/20 info - I can't do the three account - actually, why can't I? I was looking through the Everyday Systems threads to see if there was anything about budgeting, and I found this. I'm now reading about the 50/30/20 systems. I've tried strict budgeting before, but I have always slipped off the rails because it's too hard for me. But that post about getting the rent down, living in one room, and having money in savings kind of hit home for me. I use about 80% of my income on my rent and bills - doesn't take much working out to see that there's not much left!
I love Everyday Systems :3

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