In this episode, we answer a couple of listener questions on how we setup and use our budget.
Our first listener email comes from Virginia. She asks,
One question I have is how many bank accounts (checking or savings) do you need to have?
You need to have a savings account and a checking account. The checking account is where your income goes and where you pay bills from and your savings account is for your emergency fund and any money that you plan on holding on to.
There are a lot of categories (personal fund, house expenses, gas, variables, loans, groceries, entertainment, etc.) Do you separate all of this money into different accounts or do you just throw it all in one and then make payments?
All of our bills and purchases minus mortgage, utilities, and car are paid on our credit card. At the end of the month, we pay off our credit card bill from our checking account from the income we have made over the course of that month. So we only use one account for all of our expenses and payments.
Money that you’re setting aside for things that only get paid once every couple of months or maybe even once a year, (car insurance. amazon prime, etc.) are you putting a monthly amount towards that into a checking account and then it just sits there until your payment is due? or is that going into a savings?
We don’t do this, but it is a good idea. We have enough extra left over each month that we can pay these items on the spot. Our problem is that our budget says that we can put an extra ~$2,000 on the house, but in reality, it is less because of these longer-term expenses. If you don’t have a monthly cushion there are other options and that leads us to a similar question from listener Samantha.
Listener Samantha had this to say,
am a new listener and hear you talk about putting money aside into your saving for various items. Do you keep track of how much is in your savings for each item or not? Example: $500 for travel, $200 for car expenses, $300 for gifts, etc.
We are playing with the idea of adding up these types of expenses and putting money into our savings account monthly to better manage them and meet our monthly goals better and more consistently. We would estimate our yearly costs for car insurance/maintenance, home maintenance, birthday’s, Christmas, etc and divide by 12. Whatever that amount is, we would put that amount into savings each month and pull from savings when those expenses come. It will take time for money to build up and you may have to adjust at the beginning to better fit your current expenses.
As always, if you have any questions, comments, or suggestions for us please feel free to contact us or leave a comment down below.