Friday, March 09, 2007

Cashflow Commentary

It's been a pretty quiet week for me, financially speaking (other than the raise, but that doesn't kick in until my next paycheck). Most of my time has been spent doing things that don't cost money (both of my volunteer projects began in full force this week, which partially explains the slow posting schedule). Tomorrow, however, is going to be one of those dammit-I-spent-$50 kinds of days: I have a brunch date and will be joining a friend at a bar to celebrate his birthday. At least dinner parties are free (when you're not the one throwing them and already have a bottle of wine you can bring). I'm just hoping that I can talk myself into the laborious Village-to-East Harlem subway journey late at night after a few drinks and save (well, forego spending) $20 that way.

Anyway, I really liked this post that NCN did about the details of his money management over the course of a month, and I thought I'd share my own strategy.

I budget on a biweekly basis, so, the night before my paycheck direct deposits in my checking account, I enter a pay in Budget, which distributes the alloted amounts amongst the "envelopes" that represent my various budget items. That's how I keep track of how much money I have available in various categories. I have my automated transfers to ING accounts set a couple of days early, so the debits usually hit the day my paycheck is deposited: $20 goes to my gift fund (which I just tapped for the first time this year to buy K's sister's wedding present), and $25 goes to my mini-E fund. The only monthly bill I pay (other than rent) is the one for our Netflix account; it debits my checking account monthly, and when it does, I deduct that $26 from the corresponding envelope in Budget.

I enter my expenses into Budget on a daily basis. I usually round up to the nearest dollar, for simplicity's sake.

About halfway through the two-week pay period, I check in with how I'm doing. If it looks like I'm coming in safely under budget, I'll generally try to find an extra $25 or $50 to push over to my mini-E fund. I'll skim this amount out of various envelopes in small increments, and make the transfer. Other than this skimming, I let money accumulate in the envelopes I don't spend from on a weekly basis, like my clothing and haircut envelopes. I don't earn interest on this money (about $400 right now), but it does serve as a big cushion in my checking account, and it saves me the hassle of transfering things in and out constantly. Because of this cushion, I guess you could say that I don't "live paycheck to paycheck," even though it feels like I do when I'm trying to stretch my budgeted amounts in particular categories until the end of the pay period.

If, at the end of the pay period, I have extra money lying around (or I feel like skimming more out of the less-active envelopes), I send it to my mini-E fund. (Soon I'll begin splitting my transfers between the mini-E and my travel fund.)

Lather, rinse, repeat.

How do you manage your cashflow?

1 comment:

finance girl said...

Dang girl, you got it down. Very smart system you have. We pretty much do the same in theory, although the difference for us is when I use the CC I actually write it out of the checking account. I use a CC that pays a 2% cash dividend (it's a Citibank card) otherwise I wouldn't bother. It's very smart what you are doing, because you are assigning every $20 and not just letting it sit undefined in your checking account getting flabby.