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in practice it means putting what seems like all your money into weird "future" accounts I'm curious, do you really mean multiple separate accounts? What's th

in practice it means putting what seems like all your money into weird "future" accounts I'm curious, do you really mean multiple separate accounts? What's the advantage to that over putting it all in one single account? After all, if one of your accounts were to run out you'd surely have to draw from the others?

tvmalsv 11y ago
I do much the same, though in my case I would change it from 'weird "future" accounts' to 'weird future "accounts"'. I use a software package called You Need A Budget [1], which is essentially a virtual version of the old envelope system of budgeting. I'll create spending categories such as "new roof" or "2016 summer vacation" and then divide the expected cost by the number of months I expect will occur before the event. Then, each month I toss that amount into that month's category. So, if I suspect I'll be replacing my roof in 3 years for about $10,000, then I will be adding $277.77 per month. Hopefully my estimation was correct and when I need to replace the roof, there's no financial stress since I'll have about $10,000 sitting in my "new roof" account. That "account" though is virtual, not a real separate account. Though I do have a separate real account I'll use to hold high-dollar/long-term future savings. But that's just a little paranoia on my side, not wanting to keep all of my eggs in one basket, so to speak. It's just in case something weird happens, like an unauthorized ACH run on my checking account or my wife splits with the debit card and drains it completely on week long bender in Las Vegas. At least the larger value "accounts" or "envelopes" would be unaffected. So, the money set aside for items like a new roof, rebuild of deck, next car, etc., is safe and sound in their own separate savings account. It works well for car repairs, which I recently confirmed. I always put $100 each month into my "car repairs" envelope. I went about 6 months with no significant repairs and then got hit by two repairs within two weeks for a total cost of about $470. I must admit I really enjoyed the lack of stress over the bill. I simply paid the man his money and drove away still having $130 in that category and it'll continue to increase by $100 per month. The YouNeedABudget.com style of budgeting has immensely improved my financial situation. It's a Mac app with a companion iOS app, but a similar method is used by the good folks at everydollar.com [2]. Their app is web-based but they also have Android-based apps. Well. This post meandered about a bit more than I had intended :) [1] https://www.youneedabudget.com/ https://www.youneedabudget.com/ [2] https://www.everydollar.com/ https://www.everydollar.com/
ChuckMcM 11y ago
I do mean multiple separate accounts, but I do not mean separate accounts in a bank. I found fairly early in life that it was better to organize expenses and income into categories and to track those categories in order to understand where I was spending money and where I was earning money. My wife and I maintain a budget with accounts for all the things we spend on. That is the accounting part, and then we have a simpler "cash management" part which is a number of financial institutions which hold money for us. When I was a kid I found it fascinating that everyone's money in the bank was in the same pile, but your account number had associated with it the amount of the pile that was "yours". It was not that the $10 bill in lawn mowing money I gave them was going to come back when I withdrew $10. Instead it just went into the big pile. By organizing expenses and income as different accounts in my budget and separating cash management from accounting, I'm able to focus on doing things which make economic sense while maintaining cash balances which are appropriate for different savings or investment goals.

tvmalsv 11y ago

I do much the same, though in my case I would change it from 'weird "future" accounts' to 'weird future "accounts"'. I use a software package called You Need A Budget [1], which is essentially a virtual version of the old envelope system of budgeting. I'll create spending categories such as "new roof" or "2016 summer vacation" and then divide the expected cost by the number of months I expect will occur before the event. Then, each month I toss that amount into that month's category. So, if I suspect I'll be replacing my roof in 3 years for about $10,000, then I will be adding $277.77 per month. Hopefully my estimation was correct and when I need to replace the roof, there's no financial stress since I'll have about $10,000 sitting in my "new roof" account. That "account" though is virtual, not a real separate account. Though I do have a separate real account I'll use to hold high-dollar/long-term future savings. But that's just a little paranoia on my side, not wanting to keep all of my eggs in one basket, so to speak. It's just in case something weird happens, like an unauthorized ACH run on my checking account or my wife splits with the debit card and drains it completely on week long bender in Las Vegas. At least the larger value "accounts" or "envelopes" would be unaffected. So, the money set aside for items like a new roof, rebuild of deck, next car, etc., is safe and sound in their own separate savings account. It works well for car repairs, which I recently confirmed. I always put $100 each month into my "car repairs" envelope. I went about 6 months with no significant repairs and then got hit by two repairs within two weeks for a total cost of about $470. I must admit I really enjoyed the lack of stress over the bill. I simply paid the man his money and drove away still having $130 in that category and it'll continue to increase by $100 per month. The YouNeedABudget.com style of budgeting has immensely improved my financial situation. It's a Mac app with a companion iOS app, but a similar method is used by the good folks at everydollar.com [2]. Their app is web-based but they also have Android-based apps. Well. This post meandered about a bit more than I had intended :) [1] https://www.youneedabudget.com/ https://www.youneedabudget.com/ [2] https://www.everydollar.com/ https://www.everydollar.com/

ChuckMcM 11y ago

I do mean multiple separate accounts, but I do not mean separate accounts in a bank. I found fairly early in life that it was better to organize expenses and income into categories and to track those categories in order to understand where I was spending money and where I was earning money. My wife and I maintain a budget with accounts for all the things we spend on. That is the accounting part, and then we have a simpler "cash management" part which is a number of financial institutions which hold money for us. When I was a kid I found it fascinating that everyone's money in the bank was in the same pile, but your account number had associated with it the amount of the pile that was "yours". It was not that the $10 bill in lawn mowing money I gave them was going to come back when I withdrew $10. Instead it just went into the big pile. By organizing expenses and income as different accounts in my budget and separating cash management from accounting, I'm able to focus on doing things which make economic sense while maintaining cash balances which are appropriate for different savings or investment goals.