Two Checking Accounts?

If both you and your signot (significant other) are taking dips out of the same account, how do you know if you're staying within your budget? What if he spends the money that was earmarked for the car payment??!!

We all know it's easy to become stressed about money and figuring out the best way to manage it can be a challenge. What's even harder? When you are co-mingling your finances with someone else. Chances are that one of you spends a bit more than the other- whether its on clothes, or on groceries; but what if the roles reverse one day, does the other person know the limit?

My last post talked about those of us that have a difficult time with budgets and being consistent about tracking our cash. Once you figure out your variable expenses (anything NOT fixed like food, going out, clothes, etc.) you can either take that money out in cash OR just open a second checking account!

When you open a new account, number one, you won't have to worry about losing your cash and two, you can see your spending patterns without having to collect receipts.  With both of these methods, you will know when your spending has to stop (when the money is gone) and you won't have to worry about dipping into money that is intended for a fixed expense, like say your electricity.. or worse, your mortgage.

So figure out how much variable cash you have after your bills are paid, work it out so that money goes directly to your new checking account* (set up direct-deposit in equal amounts from each paycheck). Everything else goes into your primary account and will cover your fixed bills.

Make sure that the fixed bills are being paid when there is cash in that account however, so call any lenders, retailers, or organizations that you are paying and change dates as necessary.

*Make sure you know the details of the checking account you are opening. An increasing banks and even some credit unions are instituting fees to maintain a checking account; some will waive the fees if you have a certain amount being directly deposited- so read the fine print!

Who sticks to their Budget?

What do you do if you just can't stick to your budget?


Budgets are easy right? You just grab a notebook or download a free budget form online and voila- you're set! You insert your income and expenses and just make sure that you are not spending more money than you make and "the end".

I don't know how many articles and books I have read that break down the basics of budgeting with simple language like that above. It IS simple... in theory. However, budgeting is one of the hardest things we will ever do financially. First, we have to do it every day; second, it has to be altered... and frequently because things never stay the same. And finally, we are expected to stick to it.

Here's the problem. We can make our budgets, and then we have to track our spending. Are you going to collect a receipt every time you purchase something and then discipline yourself to sit down once a week to track everything in a spreadsheet? Most of us? Probably not.

Then, what if you decide to track it using your online bank account? You use your check card for all your purchases and then download the information to see what your are spending (no receipts needed). Maybe, but how do you know once you are reaching a certain category's threshold? For example, you budgeted $100 a month for entertainment and you are getting towards your limit, but you're not exactly sure because you haven't been online in a few days, so you just decide to spend the money and you'll pay yourself back next month? That's where the problems begin.

If formal budgeting and tracking systems are not working for you- ditch them! It's a waste of time if its chronically failing.

The fixed expenses in our budget are the easy ones; we generally know what they will be month to month. It's the variable expenses that mess with us. So, grab a budget form and plop in your income, subtract all your fixed expenses (including saving)- whatever is left is what you have for the variables (food, entertainment, home supplies etc.). If you are not going to officially track your spending daily or weekly, then take that cash out of your account and move to the "envelope" method. The money that is in your checking account is only for bills, the cash you take out is for the rest.

If you use this method, just make sure that you're taking the cash out weekly so that you don't use it all at once. And keep a buffer of $100-$200 in the account to cover for expenses that maybe unexpectedly higher than you planned.