Sunday, May 29, 2011

How Can You Afford All Those Kids? part 2--spending and saving

We used to spend our money as we received it and lived paycheck to paycheck.  But then things would come up and we hadn't saved for them.  We'd have to scramble to come up with the money and pinch hard somewhere to make it work.

But you learn as you grow older.  I now have a system set up where we set money aside each month for things that we know we'll need/want money for in the future. (And I think it's really important to pay attention to what is a need and what is a want.)  We have our regular amount we know we'll need for food, bills, gas, etc.  And then we divide up what we can into separate categories, deciding together how much to allot to each category.

Each family would want to choose their own categories, but here's our list in case you are curious:
taxes, clothing, computers, furniture, vehicles, education, vacations, gifts, medical/dental, date night, kids college, house/farm capital, allowances--for Roger and myself.  We haven't really felt convinced the kids should get an allowance so they don't.  But they do occasionally do extra jobs that earn them money.  I think that's our whole list, but I may have missed something.

Each payday when I pay bills, I take the allotted amount and transfer it to savings.  Then I move it from what I call Emergency Savings to all the separate little accounts on Quicken.  As far as my bank knows, it's all just one savings account.  When we have an expense that fits one of these categories I can reimburse our checking account from that specific savings account.  It's so nice when the seasons change and we need new clothing to know that our clothing savings has built up over the last few months when we didn't need to be buying clothes.  Or when we hit birthday season (6 of the kids' birthdays are in the first 3 months of the year) and we can afford gifts.

None of this would be possible if we just bought whatever we want whenever we want it.  We have a credit card, but we don't buy things we can't afford.  We use our credit card because I really like those reward points, but we pay it in full every month.  It would cost too much to pay the interest.  But that's another post for another day.

This video clip really sums it all up.

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