Learning to manage your money effectively can be tough.
If you grew up in a household like mine, money was not a topic to be discussed with children. That was “grown folks’ business.”
No one teaches you, and then, you become an adult, and you’re expected to just magically know what you’re doing.
Thankfully, I learned to manage my money because a friend who was good with money showed me how he did it.
I want to be that friend to you. Hopefully sharing information about our finances will help you to manage your own.
Our budget
I broke down in this post how we handle our monthly budget.
After reading Budgets Are For Rookies on The Physician Philosopher, I realized that calling what we do a budget is technically inaccurate.
Related: Budgeting Tips for Beginners: A How-To Guide
A budget gives you defined, rigid limits. We use flexible categories.
We don’t say, “We spent $98 in this category already, and we only budgeted $100, so we can’t buy this $5 item.” If we want the $5 item, we buy the $5 item. As long as the total spent is about what we planned, we’re cool.
At the end of the month, we look back at what we spent in each category versus what we had planned to spend and balance the budget to determine how much extra we can put on our debt.
Living below our means allows us to handle our money this way.
Our accounts
We have a joint checking account, joint savings account, joint brokerage account, joint credit card, two individual checking accounts, and two individual credit cards.
Joint checking
When we got engaged, we moved all but a small amount I no longer remember from our individual checking accounts into a joint checking account.
Our paychecks get deposited here, and this is where we pay all of our bills from.
We use an online account that pays us interest. Plus, we can withdraw money from any ATM and receive a reimbursement for any ATM fees.
Joint savings
We have about a month’s worth of expenses in this account.
We’re focusing our efforts on paying off our debt, and we’re comfortable having so little because (1) our jobs are stable and (2) we live below our means, so if an unexpected expense comes up, we can cashflow it. We’d end up making a lower extra payment on our debt that month.
Our savings account is another online account. We like them because they tend to pay higher interest since the banks don’t have as large an overhead cost as banks that operate brick-and-mortar branches.
We aren’t currently contributing to this account, but once we finish paying off our debt, we plan to raise it to the recommended 3 to 6 months of expenses.
Related: Everything You Need to Know About Emergency Funds
Joint brokerage
This account is with Charles Schwab, which offers low-cost index funds. Similar companies include Vanguard and Fidelity.
We own shares of Schwab’s S&P 500 fund and a little bit in a conservative mutual fund.
The conservative mutual fund is like a step up from our savings account. It’s mostly invested in bonds, but includes at least 30% stocks, so it gives us slightly higher returns than our savings account does (about 6% vs. about 2% in our savings account as of May 2019).
I’ve mentioned before that your savings is not meant to be an investment, so I wouldn’t recommend this strategy as a replacement for your emergency fund. We like having a little bit of money above our emergency fund that has the potential for greater returns but is still less volatile than the stock market.
Note that this investment can still lose money, whereas the money in our savings account won’t.
Once our debt is paid off, we plan to invest more in this account.
I’d like to either invest more in the S&P 500 fund or start investing in Schwab’s total stock market fund (the equivalent of Vanguard’s VTSAX, which many of my favorite FIRE bloggers invest in). I plan to research the best approach for us down the line.
Joint credit card
We have a rewards card that offers 2 points for every $1 spent. We can redeem the points we earn for gift cards or statement credits on travel expenses. Plus, the points never expire.
We put all of our joint expenses on our joint credit card throughout the month and pay it off in full every month.
Related: Your Credit Card Is Not An Emergency Fund
Before we got married, both of us had been putting all of our expenses on our credit cards and paying them off at the end of the month, so we just continued that practice once we combined our finances.
Doing this maximizes the number of points we earn each month, but ensures that we don’t pay more than necessary because we don’t incur interest.
Individual checking accounts and credit cards
These are the accounts and credit cards we had before we got married, but now we use them for our personal spending money, which I mentioned in our monthly budget.
Our spending money is automatically transferred into these accounts each month.
I still use my individual credit card for all personal spending and then pay the card off at the end of the month because that’s what I’m used to.
I don’t spend all of the money each month, and anything I don’t spend just stays in my checking account. The same goes for Mr. TMG.
Our debt repayment and net worth trackers
The final pieces in our money management system are the Excel spreadsheets we use to track our progress on decreasing our debt and increasing our net worth.
As I mentioned, at the end of each month, we reconcile our budget and determine how big our extra debt payment will be. Once we make the payment, we update our debt repayment spreadsheet, which shows how much we have paid on each loan, how much we have left, and the total debt paid so far.
It’s been huge in keeping us motivated.
Related: Our Debt Payoff Plan: Paying Off Over $670,000 of Debt
In the middle of each month, we also calculate and update our net worth. (We used to do it at the end of the month, but one month we forgot until the 15th, so we started tracking in the middle of the month from that point on.)
Related: How to Calculate Your Net Worth
We have a few different sheets (tabs) here: the very first net worth calculation we did in December 2016 and the net worth updates from December 2017, December 2018, the previous month, and the current month.
Doing it this way allows us to see our progress over time. Seeing our net worth continue to increase (not including any increased value of our house) shows us that we’re doing something right.
Conclusion
That’s a brief look at how we manage our money. I hope you find it helpful. Feel free to hit me up if you have any questions.
How do you manage your money? Is there anything we’re doing that you might try?
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Hi, I’m Rho! I’m a wife, mom, and Biglaw associate who believes that true wealth is having control of your time. I help busy lawyers like you take back control of your time by teaching you how to achieve lifestyle freedom through mindset shifts and financial independence. Read a little more about me here.
