Tuesday, April 15, 2014

dolla dolla bills y'all

I recently took my car in for its 245,000 mile service. It was a minor service, which cost me $62 last time. But this time I had a surprise need for new brakes. The mechanic called me “You need new brakes, is that okay?” Me: Um. YES. Yes please. BRAKES. Give me the newest brakes that you have. BRAKES ARE IMPORTANT.
Anyhow, my “minor” service now consisted of new brakes and fixing a valve to the tune of just over seven hundred bucks. Which, that was fine.  I cheerfully slapped down my credit card, because BRAKES. My 1997 Honda is still chugging along (I hope I didn’t just jinx her), but this unexpected major expense got me thinking about money and how I manage it, which, incidentally, is not very well.

I tend to go in cycles. For awhile I’ll put everything on my credit card and studiously pay if off every month. And then I’ll start feeling like that is a Bad Idea because technically I’m spending imaginary FUTURE money when I use my credit card which can be dangerous and spin out of control. So then I’ll start paying cash and using my debit card, but then an unexpected expense will pop up and I’ll start getting nervous about the payments I have on auto debit so I’ll ‘borrow’ some money from my savings to pad my checking account a little bit and then I’ll start putting a few things here and there on my credit card and then I’ll go fully back to credit carding but I never feel like I’m completely settled in a successful way of budgeting.

This just won’t do. As of today I am implementing a new system.

Setting aside lofty financial goals (retirement) and other expenses (student loans), I came up with a couple lists of things I have observed about myself. My financial strengths and weaknesses, if you will.

Things I cannot do:
1.       Save money in my checking account- Can’t do it. I don’t know where it all goes but it’s like my account is a leaky bathtub. If it the money’s in my checking account it won’t be there for long.
2.       Save money in my savings account if it is easy to get to- Transfer money to checking, you say? Don’t mind if I do! And then: leaky bathtub phenomenon.
3.       Trust myself to keep an accurate calculation of all of my spending- I have my student loan payments and a couple other expenses on auto debit and I’m forever nervous that I’ll spend too much from my checking account and end up being overdrawn.
4.       Accurately calculate- Because let’s be honest.
5.       Pay for everything with cash or debit- See items 4 and 5.

And, to make myself feel a smidgen better. Here are some things I CAN do:
1.       Maintain a small ‘buffer’ of money in my checking account- I do an embarrassing amount of math every month to MAKE SURE I have more money in my checking account than I have things it is slated to cover.
2.       Save money in a savings account that is difficult to get to- I do save money. I do!  It is safer if it is difficult to access (It is safEST if I don’t even know it is there. Which explains why I've put cash in milk bottles and squirrel them away in hiding places so that I eventually forget about them (or have I?)), so now I have an account that isn’t affiliated with the bank where my main checking account is and I also don’t have a card for it or mobile access on my phone. I have weekly automatic debits set up that transfer money from my checking account to my savings. To access that money I would have to transfer it BACK to my checking account and THEN use it. For some reason that extra step helps the money actually stay in the savings account and not get bathtubbed away.
3.       Pay off my credit cards on time and in full- My mom taught me to always always ALWAYS pay off my credit card ON TIME and IN FULL. Always. Thus far there has only been one instance wherein I did not do this. It was during the time in my life when my crazy ex was being a human suckerfish and siphoning away all of my money/energy/self-esteem and I was trying to keep my whole situation from unraveling completely so I got a tad behind on some things. I couldn’t QUITE pay off my credit card bill one month and so I had to let the balance sit there and the fees start accumulating until I was moving and starting school again and trying to get things back in some semblance of order. So I womanned up and …  uh. Asked my mommy for help. She looked over my bank statement and SIGHED AND SHOOK HER HEAD (if you knew my mom you’d understand that this is actually quite terrifying and an awful punishment in and of itself). Now I always pay off my credit cards on time and in full. Always.

Okay, so I know you are waiting on bated breath to hear about my NEW SYSTEM. Taking into account what I am able to do and what history has learned me that I am definitely unable to do, here is my new system:

1.       Pay for most things with my credit cards- and obviously pay off my credit cards on time and in full
2.       Maintain only a small buffer of money in my checking account to make sure I’m never overdrawn when my auto debits and other payments go through- any extra money in checking gets transferred into savings
3.       Always have enough money in savings to cover the amount of my credit card spending at the time it is credit carded

In that way it’s like I’m using my savings account as a SUB-checking account, if you will. Pay for stuff with my credit card, pay my credit card off with my checking account, but have enough money overall so that I’m not actually going into debt when I use my credit card.
I’ll keep only enough money in my checking account so as not to ever be overdrawn because any extra money in there will just disappear. So instead of keeping it there and fighting against its natural tendency to disappear, I’ll transfer any extra dollars to the external savings account.
Technically I suppose AM spending future money that I haven’t earned yet because I pay my credit card off with the money from my checking account which I earn each payday. But I DO have the money, it’s in savings, it exists. And if I needed to I could take it out and apply it to my credit card payment, but I'd rather keep it in savings and apply my new money from payday to my credit card. If this makes any sense at all.

I was talking about this with Sunny and she told me that she has a system of three accounts: checking, savings, and spending. On payday the money goes into her checking account. Then she transfers a certain amount into her spending account to, uh, spend. And then if there is leftover money at the end of the month in her checking or spending, it goes into savings. Maybe I should have talked to her first and I wouldn't have come up with my system of buffers and credit carding, but we all deal with our leaky bathtubs in different ways. What's yours?