Not to hijack the thread, but, Yay, Money Maps! Never heard of it before, but I totally have to do this anytime we make a tweak to our system. We always talk about/draw it in terms of “flows”. And call our accounts “buckets” (that once they are full can flow into other buckets). Then, when all out buckets/buffers/emergency funds are full, we call it “Shields Up”, like we’re the USS Enterprise or something. No splurging til Shields Up!
We have a bunch of bank accounts, as we originally started structuring our accounts sort of following the “60% Solution” categories. We’re starting to make some updates to this (now we have a kid, we set aside money for kid expenses in a separate account too), but this has been the basic system that has worked for us for maybe 10-15 years. (It’s how we check our budget without micromanaging it anymore.) It’s definitely a “pay yourself first system”.
We have checking/savings accounts called:
ME=Monthly Expenses (budgeted, regular monthly expenses)- Gets “Zeroed Out” at the end of each month.
STS=Short Term Savings or Irregular Expenses (“Irregular” regular expenses: repairs, small gifts, doctors appointments, misc.) We keep a set buffer, maybe 3k, but depends on the size of your lifestyle. Your buffer could be x-months of living expenses/emergency fund.
LTS=Long Term Savings (for goals, and a holding place for transfers to IRA’s, etc.)
(We include “Fun” in LTS… so it’s technically LTS/Fun… but these could be separate, of course) We like to have a good size buffer in this account, so it’s also our emergency fund.
We also have:
Insurance Account= budgeted monthly amounts for premiums that come due at different timeframes, so it’s no surprises: car insurance, property insurance, life insurance, disability, health insurance. All premiums are paid from this account.
How it works:
Paychecks flow into ME (once a month, see below*) and then automated transfer distribute set amounts (based on our savings/spending plan) to Insurance Account and STS and LTS.
Then (for the brave…) we pay expenses during the month from both ME and our Credit Card (CC points!). At the “end of the month” AKA the day after the new monthly income transfer/“paycheck” comes into ME, the money that had been left in ME gets transferred to STS (to pay ME’s share of the Credit Card Bill, which gets paid out of STS). It’s a quick “budget check”, as I know what the amount should be month to month. Then I quick scan the CC Statement for anything that is not an ME or STS/Irregular expense, like a vacation expense or Fun purchase, and then transfer that amount out of LTS/Fun to pay the LTS/Fun portion of the CC. The transferred in amounts plus the previously transferred fixed monthly STS transfer SHOULD be equal to or less than the amount of the Credit Card bill (we leave a “fixed buffer” of maybe 3k in there), so it should be at or above the buffer after paying off the card. Then the month starts over again.
It’s actually simpler than it sounds, but you can see why a Map is useful when tweaking the system. Do you guys do anything similar?
*Since we’re self-employed with irregular income, we usually have a sort of “Feeder Account/Central Hub” from which we create a monthly “paycheck” for ourselves. I think this might be useful for folks who get paid biweekly or irregularly also. Also because we are self-employed we also have a "Tax Holdings" Account where we set aside % of income for Quarterly Estimated Taxes, etc.