Changing Things Up A Bit
After much internal debate, debate with my wife, and playing around with different scenarios in Microsoft Money, we’ve decided to change around some of our cash flow. Currently we’re putting about $700/month into our Irregular Expenses account and budgeting to spend $500 or less on Irregular Expense categories each month. We’re usually around $300 - $500 with spending on Irregular Expense categories. Most of this spending actually goes on our rewards credit card which then gets paid off out of our checking account each month. The $700 we put into Irregular Expenses each month is a transfer from the checking account, where all of our income goes in to. We transfer enough money from the Irregular Expenses account each month to cover what we’ve spend on the rewards card. This means about 2 1/2 weeks after we move money into Irregular Expenses, we’re moving a large chunk of it back out.
I’ve never been comfortable with this money movement. It always seemed like we could do something more efficient, something…simpler. Now that we’ve opened our Wells Fargo PMA account and we’re actually earning interest on money in checking, we’re eliminating the Irregular Expenses account. Since checking doesn’t earn as much interest as Irregular Expenses we’re giving up on some interest income each month. However, we’re greatly simplifying things. We no longer have two bank transfers each month. We no longer have to figure out how much of the irregular expense categories were spend on the rewards card for one of those transfers. We no longer have another account to reconcile each month.
Our plan going forward is to put $700 each payday to the Savings & Debt account, preparing us to pay off the 0% credit card by next January and pay for the wedding travel this summer. We’ll let anything extra build in checking and turn the cushion in checking into our emergency fund. The money we currently have in Irregular Expenses will get moved to checking. Anything we were paying from the Irregular Expenses account will now get paid from checking. With the elimination of the car and student loan payments, and our inherent discipline, this situation will work out much better for us. Starting in January we’ll be able to put some money toward savings for stuff (vacations, home improvements, etc), put some money in the brokerage account for investment, and start paying down the HELOC. It’s amazing how eliminating debt payments opens up whole new possibilities.