Rainy Day Pennies | Debt Free Living and Personal Finance

My philosophy to finances is I am the Chief Financial Officer (CFO) of my life.  I wouldn’t want a sloppy accountant running the books to my business.  Since I am in charge of my own bank accounts, I would be the accountant in this case, so I better not be sloppy.

I have my bank accounts setup with an Account Payable and Account Receivable, which is similar to how an accountant sets up a business account, but personalized for me (since this is personal finance).

Rent, Utilities and Food

I have direct deposit setup through my employer.  A fixed portion of my check gets sent to a “Bills” checking account that I share with my boyfriend.  We pay any mutual bills with that account – rent, utilities, groceries, dining out, etc.

The rest of my check gets sent to my Checking/Debit account, then dispersed through various mechanisms.

Here is a snapshot of my ING account.

(These picture have been formatted to fit your screen and modified to protect the innocent and guilty.)

Account Receivable and Account Payable

I have a main Checking/Debit account and several sub savings accounts.  Account Receivable and Account Payable are like what you would see on a business account.  Account Receivable is the account where I link any sources of income (except my regular paycheck, which we will talk about in a minute.)  This includes payments from Amazon, Ebay, Adsense, PayPal, Lending Club, or anywhere else where I generate extra income.

My regular check is deposited into my Checking/Debit account.  The reason for this is because savings accounts at ING are treated like a money market fund with limits of 6 withdrawals a month.  My regular paycheck disperses among many accounts, so it’s best to deposit there, then send the amounts necessary to various accounts through automated withdrawals.

Accounts Payable is where I link recurring bills.  My car insurance, health insurance, or credit card payments.  The limit of 6 withdrawals a month is great checkpoint here.  If I withdraw more than that, then that’s a clue I have too many bills, and it’s time to streamline.

The snapshot here shows a sample of my bills from Account Payable.  A regular bi-weekly deposit is made.  Since the majority of my bills are regular, fixed value recurring bills, I know exactly how much I need to deposit automatically.  If I have a credit card payment due, I manually deposit the amount I need.  I keep a buffer in the account as well to allow for minor calculation errors. 

When I receive my credit card bill, I immediately go to my card’s bill payment center and schedule a withdrawal a couple of days before my due date.  This allows me a couple of days to change payment amounts if something comes up.  It also helps to ensure the credit card company doesn’t play funny games with my deposit.  I have a couple of days to catch if they didn’t withdraw/credit payment when they were supposed to.  I then also schedule a one time payment from my paycheck account to deposit money to cover the credit card bill.

Retirement Accounts

My 401K contribution is automatically withdrawn before I get my check.  My Health Savings Account (HSA) withdraws automatically from Accounts Payable.

Unfortunately, I can’t schedule an automatic withdrawal to my IRA account.  I currently have it setup with ING, and plan to move it to a Vanguard account once my balance reaches $10,000, which will be next year.

Savings Goals

The remainder of my money gets divvied  up between my various savings goals.  I am keeping most of this at SmartyPig since the interest rate is currently 3.25% and ING is at 1.50%.  (Ouch ouch ouch.)  However, these are my short term goals that must be in liquid cash.  Saving for a new car, 6 months insurance premium, vacation to the Bahamas, new computer equipment etc.

The rest of the money is put into a small “spending cash” account.  If I need to buy new clothes for work, or if I just plain want something, that money is there for me to use.

Every Penny Accounted For

I try to run my personal “books” like an accountant.  Every dollar has to be allocated and put somewhere.  Even if that somewhere is my “wallet account” from an ATM withdrawal.  It is also highly automated.  I review often to make sure everything is running smoothly.  Honestly, it was only “hard work” getting my inflow/outflow setup.  Now it’s pretty effortless, and I just review and maintain to make sure it’s running the way I expect.

Filed under:
Finances by Cathy