1. Annual Holiday Missive

    It’s that time of year again — the time where I wish my readers a great holiday season, and suggest that those who aren’t already doing it should make Christmas gift-giving a regular monthly bill. In other words, save up for it throughout the entire year.

    Now, we save up for gifts (all of them — not just Christmas) every month inside our regular Freedom Account saving. We save up for gift-giving the same way we save up for our six-month car-insurance payments. I know about how much we spend each year on gifts, so I just take that amount, divide by 12, and set aside that much each month … same as we do for every other non-monthly, recurring bill.

    For me personally, I cannot emphasize enough how much less stressful it’s made holiday budgeting and spending.



  2. Broke? Try Budgeting

    I’m not one of those guys who says that everyone needs to live on a budget. Not everyone does, because not everyone is broke.

    But if you’re broke, then yes, you need to budget your money. Heck, if you’re only semi-broke, you need to budget your money. In You’re Broke Because You Want to Be (review), Larry Winget explains it far better than I:

    You can’t survive spending more than you make. Make it fit. Keep slashing your expenses until you figure it out. Or earn more money. When you have cut the numbers until they fit within your income, live on what you earn. That is what responsible adults do. Be one.

    You’ll be fine. This budget won’t kill you. Will you die from doing this? No. Then don’t worry about it. It’s not forever. It’s what you have to do until you stop being broke.

    Why am I bringing this up? Because within the past week, I’ve had two admittedly-broke individuals tell me that (1) they hate living in the paycheck-to-paycheck club, and (2) they find budgeting to be too hard.

    So paycheck-to-paycheck is where they stay.

    In other words, while some part of them might actually prefer to not be broke, they defy all logic and refuse to actually work at not being broke.

    Sometimes, Reality Sucks

    No matter how you slice it, a successful budget is where you match your spending to your cash reality.

    This process of squeezing your outflows into your level of income will very likely show you things you don’t want to see, and really would like to flat-out ignore. But ignoring is presumably what you’ve been doing this whole time. And look how far that got you.

    I’m a guy who loves to be in control. I’m always happiest when I know where I stand with my money. Therefore, I cannot understand folks who dismiss budgeting as being “too hard” or “too much work.” Whilst my household no longer needs to follow a strict spending plan, and can get along just fine by utilizing Quicken’s cash-flow tab…

    Cash Flow - Click to Enlarge

    … the fact remains that I couldn’t have gotten to this point without having followed spending plans for years beforehand.

    By the Way: David Bach Is an Idiot

    I know David Bach says that budgeting doesn’t work. I know David Bach says that budgeting isn’t fun. I know David Bach says that just automatically slapping money into a tax-advantaged account is a path to untold riches. (I think he said something similar about house-buying, but I never bought that book.)

    I say that David Bach is an idiot. Well, maybe not an idiot, because he knows precisely how to sell financial books to a public that will pay damn near anything to be told that getting rich is easy.

    But he is wrong about budgeting. Wrong, wrong, wrong.

    Getting rich isn’t easy, and getting out of the paycheck-to-paycheck cycle is well nigh impossible if you’re not willing to work at it. And “work” means planning your spending and then tracking your spending. That much I know.

    There — I got that off my chest. I feel better now.

    Back to Civilization V for me!



  3. Quicken Users: What Do Tags Do For You?

    Reader Kelsey emailed me with a Quicken-related comment a few days ago. Buried in the middle of it was a question that intrigued me:

    Categories I get, but there’s these tag things … what would anybody even do with those?

    Personally, for my household, I haven’t really come up with a good use for tags in Quicken. To this point, categories have taken me everywhere I need to go. (I’m currently using Quicken 2010 Deluxe, and have reviewed it previously.)

    Quicken Tags: What’s the Point?

    Basically, tags give Quicken users a way to “categorize” transactions outside of, and across, categories. I guess you could call tags a “second level” of categorizing goodness.

    Suppose you wanted to sort of “sub-track” your grocery spending so that you could see how much of your grocery spending was attributable to unhealthy food. You could do something like this…

    … and then run a report as necessary to see how much you’ve been spending on foods that will kill you. But in reality, such a usage of tags wouldn’t be all that novel. After all, you could do the same thing with categories. Simply have a subcategory of “Junk Food” in your main “Grocery” category, and you’d be set.

    However, say you wanted to track all your “Nonessential” spending. That’s a “tag” that could span across categories because, after all, “nonessential” could apply to Groceries, Entertainment, House Repair & Remodel, and just about any other category you could think of.

    So keeping an eye on “Nonessential” spending, via a tag named “Nonessential” or something similar, is more along the lines of what Quicken intended tags to accomplish.

    Possible Use of Tags: Tracking Your BMF

    One “big picture” idea for tag-use that comes to mind — but which I’d be way too lazy to implement — would apply to anyone who wanted to follow Elizabeth Warren’s Balanced Money Formula, as described in her book All Your Worth (review).

    Warren advocates that folks classify their outflows as one of three types: “Must-Haves,” “Savings,” and “Wants.” Then track where your money’s going, and aim for the following percentages:

    BMF Targets: 50% Must-Haves, 20% Savings, 30% Wants

    I’m good with using those three “types” to track spending and saving, and to create a plan for such, but I’m a Certified Data Dork, too. I would also want to know what I was spending on, say, groceries, household consummables, mortgage debt, and so on.

    So, in Quicken, I’d categorize my spending normally as regards the groceries, dining, and so on. But then I’d also give my spending “tags” of Must-Haves, Savings, and Wants as applicable. That way, I could quickly generate a Quicken report (utilizing those tags) to show me how my BMF-style money plan was working out.

    Possible Use of Tags: Monitoring Use-Tax Expense

    For a while, I really thought I could make great use of Quicken’s tagging feature by assigning specific tags to my use-taxable online purchases throughout the year. By assigning a tag of something like “Use Tax” to all my online purchases on which I hadn’t paid sales tax at the time of purchase, I could, at tax time, fire up a simple report and see how much I needed to remit in use taxes to my state’s taxing authority.

    In the end, though, I decided to treat my use-tax liability as what it really is — an ongoing “debt” that I owe to the state, and which I pay off in April of each year. So I accrue for it in its own Quicken liability account, as detailed in my Quicken: Handling Use Tax tutorial.

    What Have You Made Tags Do?

    I’m sure lots of people have put Quicken tags to work for them — I’m just not one of those folks. To date, I’ve been able to make categories do ALL my heavy lifting.

    So what about you? Have you come up with a great use for Quicken tags that I’ve overlooked?



  4. School Supplies, 2010 Edition

    It’s been a while since I discussed the economics of school supplies. In fact, the last time I covered the subject was in 2006. In “Back to School Adventures,” I mentioned that a whole lot about the school-supply-buying process seemed to have changed since my wife and I were kids.

    Now that we have a daughter in elementary school, my perspective has shifted a bit. And this piece from the New York Times sort of touches on what many folks are seeing:

    NYT: Budgets Tight, School Supply Lists Grow…

    From the article:

    Pre-kindergartners in the Joshua school district in Texas have to track down Dixie cups and paper plates, while students at New Central Elementary in Havana, Ill., and Mesa Middle School in Castle Rock, Colo., must come to class with a pack of printer paper. Wet Swiffer refills and plastic cutlery are among the requests from St. Joseph School in Seattle. And at Pauoa Elementary School in Honolulu, every student must show up with a four-pack of toilet paper.

    For the retailers, back-to-school season is second only to the holidays, and parents’ longer school-supply lists are a bonus — especially at a time when shoppers are reluctant to spend. While the impact is not enormous, retailers are looking for anything to lift sales.

    Yeah. That’s one way to temporarily goose the economy, I suppose.

    Our List This Year

    The Times article notes that many back-to-school lists this year include items like cleaning supplies and packages of typing paper. Due to budget constraints, schools are now passing such expenses on to parents directly.

    Not that I’d care all that much, but there weren’t any such items on our daughter’s list:

    • Qty 1: 5-subject notebook
    • Qty 1: Wide-ruled notebook paper
    • Qty 2: School glue 4oz
    • Qty 3: Kleenex
    • Qty 2: Crayola Crayons (24ct)
    • Qty 2: Crayola Markers (10ct)
    • Qty 1: School box (small plastic)
    • Qty 1: Box gallon zip lock bags
    • Qty 1: Box bandaids

    And, because we must make every effort to ensure that “all are equal,” there’s this admonition at the bottom:


    You’ll note that the list doesn’t contain pencils or scissors. I’m not sure why scissors aren’t on there, but for my daughter’s grade level, pencils are supplied by teachers. (They’re some funky mechanical variety, or something.)

    And yes, the “No names on supplies” message bugs me. A lot. If I’m willing to send my kid to school with a nicer-than-average notebook, or at least one that’s better than what I’m willing to donate to the Community Stash, then all such a message is going to do is make me resent the “We’re all equal” implications it carries.

    Yes, I understand why the note is there. However, life isn’t about everyone being equal. And it never will be, no matter what agenda our public schools and federal authorities promote.

    I’ll leave my comments at that. (While I’ve considered starting a political-rant blog, this one ain’t it.)

    Supply-List Differences

    In my 2006 blog post linked above, several commenters mentioned that the supply lists you get straight from teachers can differ greatly from those provided by retailers.

    As for our experience (well, my wife’s experience, as she does the supply shopping), last year’s teacher-provided list differed from the retailer-provided list by only one item. And the difference was negligible. The teacher’s list asked for “washable markers,” while the retailer’s list specified only “markers.”

    This year, my wife tells me, there were no differences between the two lists. (Well, at least not from the list provided by Target. We didn’t check any other retailers’ lists.)

    Teachers Forking Over

    Another bit from the NYT article that I’d like to comment on:

    Ms. Cooper, the Alabama mother, spent her summer making the most of the school-supply stores’ new interest in classroom supplies. “Each week I go to the stores’ Web sites — Staples, OfficeMax, Office Depot,” she said, and posts the deals on a blog for fellow bargain hunters. “All three of these major stores are offering jaw-dropping deals every week,” she said.

    And as overwhelming as it might seem to some parents, she would rather buy the goods than expect Emily’s teacher to do so, she said.

    “We don’t expect Wal-Mart cashiers to buy the plastic bags for our groceries, or the mailman to pay for the gas to deliver our mail,” Ms. Cooper said.

    As a guy with two teachers in my immediate family, I’m sympathetic to this. I don’t want my child’s teacher paying for my child’s supplies, certainly, because that’s my responsibility as a parent.

    I also don’t want my child’s teacher forking over her own cash for other kid’s supplies, if I can help it, though I know this is going to occur. The standing order with whomever teaches my child’s class in any given year is to let me or my wife know what’s needed, if supplies run low. We’ll do our best to get it handled. (Hey — I have a Sam’s Club membership. I can get stuff. And as long as I’m just supplying for a single class, my monthly budget can handle it.)

    Anyone else have thoughts they’d like to share? I’m interested to hear others’ opinions!



  5. Why I Promote ‘Baby Steps’

    When you have a website about personal finance that’s been up and running for years, you’re going to get plenty “Where do I start?” emails from readers.

    It’s pretty much inevitable.

    Same goes for your day-to-day life. As a financial blogger, if you develop any sort of “rep” at all, you’ll get similar questions from people you meet first-hand. The ones you don’t scare away, at least. You’re an Excel-wielding freak, after all.

    Over the years, in these situations, I’ve become quite comfortable in my promotion of Dave Ramsey’s Baby Steps plan. The reason it became my first choice?

    Simplicity, with a capital S.

    Well, actually, that’s just the main reason I point folks toward the Baby Steps. The plan can, with minimal description necessary, fit on one page. Everyone grasps it, and grasps it quickly. In a world where smart personal finance is frequently nuked by eye-glazing jargon, fine print, and fast-talking brokers of every sort, “simple” is a big plus.

    However, in my opinion, Ramsey’s Baby Steps plan is also the best-packaged (yes, this matters) and most accessible money plan out there.

    Dave Ramsey himself often says (correctly) that there’s nothing new in what he preaches. Instead, he just “packages” it better than everyone else.

    (He also has a mighty powerful, semi-captive “in” with the church-going crowd. But that’s a tangled post for another time.)

    Don’t You Care About the Math?

    Of course I care about the math. When I was working through my own “debt snowball,” I rerouted as many debt dollars into low-interest promo offers as I could, and then threw all extra cash at the highest-rate debts first. It worked great for us … but it also lengthened the time between instances where we could “cross debts off the list.”

    In lieu of that, I had to find other ways to keep myself motivated and on track. Most of these had to do with creating It’s Your Money and Money Musings and writing as much as I could. And oh yeah — I read every financial book I could get my hands on.

    Look: Paying debts off by smallest- to largest-balance, rather than by largest- to smallest-interest-rate, is practically guaranteed to cost more in interest. (Though how much more it’ll cost is very much a factor of how skyscraper-ish the rates are that you’re paying.)

    What it does give you, though, is something that 98 percent of debtors I’ve encountered desperately need. And that something is near-term, rapid bursts of motivation. A sense of immediate progress. A way to look down and see that they are, in fact, moving forward. They’re marking creditors off the list.

    It’s all about “quick wins,” as Ramsey phrases it.

    I’ve given the pay-by-balance versus pay-by-rate battle a lot of thought. Once I account for human nature, I have to come down on the side of pay-by-balance. So on this facet, Dave and I agree … but lots of other money bloggers disagree.

    Getting to Debt Freedom:
    How Much Does The “How” Matter?

    While it makes for interesting reader comments on higher-traffic blogs than this one, the “pay-by-balance” versus “pay-by-rate” debate seems, to me, to mostly miss the target:

    If the plan you follow works — if it gets you out of debt, decreases your stress, and improves your life — then it was the right plan.

    One More Reason I Recommend Dave…

    It’s because he’s everywhere.

    It comes down to that motivation thing again. If you’re feeling like you’re losing your grip on your finances, like your emergency fund saving and your debt paydown plans aren’t going anywhere, like your Baby Steps have become Baby Stumbles, then a few “visits with Dave” via his ubiquitous radio show and/or his nightly Fox Business call-in show can get your head straight in a hurry. And if you’re a Sunday-go-to-meetin’ soul, odds are pretty darn high that you’ll have a Financial Peace University setup going on there which you can easily access.

    No other money guru is as accessible, as available in as many channels, as Dave Ramsey is right now. AM radio … TV … live events … books and DVDs … you name it. He’s there, and ready to smack you upside the head should the need arise. (Which it will.)

    So there you go: In my mind, it’s the simplicity and accessibility of Dave Ramsey that puts him at the high-water mark of today’s financial personas.

    Is he a salesman at heart? Absolutely he is.

    Does he need to move DR-branded product? You bet he does.

    But until someone else’s name starts popping up in the “My husband and I finally have our finances under control, and it’s all thanks to Dave Ramsey” statements I hear so often, his Baby Steps plan will be the one I suggest.



  6. How We Manage Our Money

    It’s been a while since I discussed how my household manages its money; the last time was in October of 2006. Some things have changed since then, and since readers continue to ask my opinion on ways to keep funds running smoothly at the ol’ homestead, I’d like to cover the topic again.

    Receipts, Receipts, Everywhere

    This, inevitably, is Issue Numero Uno for many readers: How can I keep track of my spending as well as my spouse’s? It’s impossible to know where the money’s going!

    Actually, it isn’t. Or, perhaps more correctly, it hasn’t been for us. Oh sure — it was a challenge for a while. Back when we were paying bills from our checking accounts (more on that later), we ran into a few obstacles. But once we became debt-free and were able pay our card balances in full each month, things got easier.

    Cash Flow in a Box

    So how to handle all those receipts? Well, we do it with a box.

    This invention, I call our Cash Flow Box. Whenever either of us spends money, we tuck the receipts into our wallets RIGHT THEN. Later, once we get home, we toss the receipts in our Cash Flow box. Mail and bills go here, too.

    Since I’m the guy who handles bill-paying and money-tracking for our household (gee, can’t imagine why), I sit down every couple of days and enter the receipts into Quicken. (You can tell I’m a sicko, because I actually enjoy this part. Then again, I’ve found that being in control of your money tends to have just this sort of odd, Twilight Zone effect on people.)

    If any receipts need to be kept for tax purposes (or some other reason), I have a set of manilla folders right next to the box for just this purpose. Think flexible-spending account receipts, small-business expenses, and large-item purchases (where warranty might be an issue) here.

    The rest of the receipts get File Thirteen’d as soon as I enter them in Quicken.

    Easy peasy.

    Joint Checking … Times Four

    For starters, our household has multiple joint checking accounts — four of them, in fact. And a host of savings accounts (online variety, mostly) on top of that.

    Click here to start saving with ING DIRECT!

    I primarily use our ING Direct Electric Orange checking, while Lisa uses a local credit-union checking account. Due to its extreme ease of use, ING Direct also holds most of our savings at present.

    Since ING Direct isn’t exactly a “local” banking entity for us — if you need to see someone face-to-face, whatcha gonna do? — we also have two joint, no-fee checking and savings combos at local institutions. We generally keep only a few hundred dollars in these “just in case” accounts.

    Pay It All By Plastic

    Here’s the caveat to all these checking accounts: We rarely pay for anything by check. Every expense than can go on plastic OR can be paid electronically will be handled that way. We use two cash-back, no-fee cards for this. We pay these cards in full every month.

    Because of this, we typically write no more than one or two paper checks per month.

    Spending and Account Balances

    I am a Quicken devotee. It is my Ultimate Money Security Blanket, and I’m not ashamed to admit that. I depend on Quicken like snow depends on cold.

    Right now, my laptop runs Quicken 2010 Deluxe (review), which I believe is one of the best Quicken versions yet.

    Quicken tracks our spending, our account balances, our net worth, our bills and recurring payments, and about a thousand other things that are only important once or twice per year. (Use taxes would be one!)

    And oh yeah — I now use Quicken for our…


    Honestly, we don’t need much of a budget these days. With no debt (other than our mortgage) and a definite aversion to long-term financial commitments, we just don’t have that many bills coming through the door. Savings-building is our goal now, and I can accomplish it just fine, thank you, with Quicken’s recently-added Cash Flow Tab.

    Cash Flow - Click to Enlarge

    What’s coming in? What’s going out? The Cash Flow Tab tells me what I need to know. Once I got our recurring bills and deposits set up, and designated the correct “spending” accounts for Quicken to monitor, I no longer had any need for my Spending Plan spreadsheet at all.

    I love my Spending Plan spreadsheet. But having my budgeting tool contained within Quicken makes things oh so simple.

    And simple is good.

    Download Transactions? Nope!

    I have never once used Quicken’s ability to download transactions from banks and other financial institutions. As noted elsewhere, I enter all Quicken transactions by hand.

    Keeps me “closer” to our spending, ya know? (Plus I’ve heard too many horror stories about transaction downloads going horribly wrong!)

    The All-Important Freedom Account

    I believe that the discipline to save up for future expenses — rather than relying on the kind-heartedness of Visa and Mastercard — is a hallmark of successful personal finance. Heck, it may be THE hallmark.

    In any event, we do such saving in our Freedom Account, which resides with the rest of our savings at ING Direct. Why?

    Because it’s darn easy (and immediate) to transfer funds to our Electric Orange checking, where the vast majority of our transactions land at some point. (We pay our credit cards electronically via Electric Orange.)

    This is one area where Quicken falls short. Since it doesn’t allow for subaccounts, I track our FA subaccount balances with ExcelGeek’s Freedom Account spreadsheet.

    Emergency Fund

    I don’t have a specific spreadsheet that I use to track my Emergency Fund. We’re currently keeping most of our E-fund (say, 90% of it) at ING Direct. Any transactions which affect our Emergency Fund get logged/tracked in Quicken, as noted above, and I can always see our E-fund’s balance right there in my Quicken toolbar.

    Small-Business Stuff

    Lisa and I both have our own small-business ventures. I utilize QuickBooks 2009 Pro to manage these tasks.

    Credit Monitoring & ID Safety

    I monitor our credit reports and scores monthly. I do this with TrueCredit 3-Bureau Credit Monitoring . (Here’s my TrueCredit review, if you’re interested.)

    Whew … that should pretty much cover it!



  7. 12 Things Said By People Who Suck With Money

    Pardon me, folks, whilst I take a moment for myself. I’m going to vent right now, mostly because it feels like a great time to Go Soapbox on the world.

    I don’t know exactly what set me off this evening (it’s late Sunday as I write this). But I’m pretty sure that the NY Times article “Couple Learn the High Price of Easy Credit” didn’t help. Thanks to Tricia at Blogging Away Debt for linking it. But after reading it, I don’t feel at all that this couple has what it takes to climb out of their hole. From the article:

    … and $13,680 on a CashBuilder Elite Visa, including a monthly finance charge of $200.

    A “CashBuilder Elite” Visa? Finance charges of $200? That’s the great thing about credit cards and the credit-card industry: Sometimes the irony is Just. So. Thick.

    Anyhow, let’s get to the show. Let me find my trusty ol’ cynical soapbox…

    12 Things You Hear From People
    Who (Probably) Suck With Money

    1. “Don’t look at me. It’s my [wife/husband] who spends it all.”

      Of course. And if you blame them long enough, it’ll all work itself out in the end, right? Or at least the judge will make it so it does. (“Work itself out,” and “end,” I mean.)

    2. “Who has time to budget? Not me.”

      This one’s pretty universal. The convenient thing is that they’ll have plenty of time to budget when they hit retirement and stop workin—

      Oh, wait. Never mind.

    3. “We refinanced last week and paid off our credit cards.”

      No, you didn’t “pay off” your debt, Maureen. You just moved it. And you’ll be moving again when the bank forecloses on your house. But first things first: You need to get those cards maxed-out again.

      Then . . . just give it time.

    4. “I wanted to pay off the cards, but my husband says his investments are doing better than the interest.”

      If your cards are charging you today’s standard rates — say, 14 to 18 percent interest — then I have news for you:

      Your husband is either lying, or he can’t do math.

      Just sayin’.

      (Note: Pfbloggers and FatWalleters are exempt from this one.)

    5. “Yeah, it was a lot of money. But you only live once, right?”

      I’m not sure. But as long you’re alive, you might as well be making payments.

    6. “Of course I need the new Dodge Behemoth SUV. It’s safer for our child, and my show poodles need more space.”

      Which is precisely why I can only dream of watching folks like this filling up in a world of four-bucks-a-gallon gas—

      Oh, wait. Never mind.

    7. “I couldn’t save money even if I wanted to.”

      No, what you probably mean is that you couldn’t sacrifice even if you wanted to. Which you don’t.

      But that’s okay. The folks at Crate ‘n’ Barrel love you.

    8. “I could pay all my bills off if they’d just give me that [raise/promotion/bonus] at work.”

      Yeah, you and everyone else. Except that when more money comes in, it just means that more money goes out, and you’re right back at #7 (above) again. That’s why they call it the Rat Race.

    9. “Man, if I won the lottery, all my money problems would be history.”

      No, what you mean is that all your money problems would be historic. As in of epic proportions. Because if you can’t manage thirty grand a year, you can’t manage three hundred grand, either. Mark it down.

      The line of lottery winners who’ve gone broke starts right over there. And it stretches all the way back to . . . oh, I don’t know. Maybe Miami.

    10. “I put it on my Worst Buy card, so I have six months to pay it off before there’s any interest. We’ll have it paid off by then.”

      Sure you will. You, again, and everybody else. You could’ve paid for it with cash if you’d wanted to, right?

      (Another instance where most money-bloggers and FatWalleters are probably exempt.)

    11. “But it’s my wedding! I dreamed about it forever, I want to remember it forever, and I want for that day to be fabulous!”
      Okay. So I heard this from someone doing an interview on TV. It might’ve been a put-on for all I know. But there are ladies out there who feel this way, right? I just got exceedingly lucky and met one who didn’t, right?

      Worth noting: It’s easy to remember your “fabulous wedding” forever when forever is how long you (and/or your parents) will be paying for it.

    12. “Hello there. I’m Joe Smith. I’m a U.S. Congressman. How are you today?”

      Fine, thanks. So . . . you, uh . . . you deficit much, Mr. Smith? How’s that darn federal-budget-thing working out for you? Tell me: Do you guys ever actually use those calculators we taxpayers paid twelve grand for?

    Okay. That’s about all I can come up with right now. What sorts of things have you heard uttered from the mouths of financial slackers? What little snippets tip you off that someone’s stuck on the First Rule of Holes, figuratively speaking?



  8. Suze Orman: How to Split the Bills

    “How should we split the bills?”

    Suze says (on the Suze Orman Show which aired 2007/01/13) this is the most common question she gets from couples. (I’d have thought she’d hear “Should we have separate accounts, or joint?” more, but what do I know.)

    For most folks, the default answer to the bill-splitting quandary is 50/50. But Suze suggests that it’s almost never this easy (no kidding!). And that for couples where the two spouses earn significantly different amounts (which would be most couples, probably), splitting the bills 50/50 will almost always lead to resentment and frustration.

    Here’s the fictional household setup that Suze presented as an example:

    Partner #1 makes $7k/month.
    Partner #2 makes $3k/month.
    Household expenses total $3k/month.

    In the case above, Suze would suggest that the bills be split 70/30, rather than 50/50. This way, each partner/spouse is responsible for an equal percentage of the bills rather than an equal dollar amount. They don’t earn equal dollar amounts, so they shouldn’t pay equal dollar amounts.

    After all, paying $1,500 worth of bills (a 50/50 split) drains the $3k earner a lot more, percentage-wise, than it does the $7k earner.

    My first thought, of course, is that there are roughly four couples out there making $10k per month and spending only $3k/month, so the example is kind of flimsy in that regard. Numbers like that just ain’t happening for Joe and Jane Sixpack. Still, I recognize that it’s the math that matters.

    I’m all for fairness in relationships and finances, and Suze’s idea makes sense to me: Pay the bills in the same percentage that the household income is split. Still, I can already hear the uproar from the “But we’re married, and we’re ONE now!” crowd. “What’s hers is mine, and what’s mine is hers! The only percentage that matters is the one we’re paying on our Discover card!”

    And they have a valid case. Really, I think Suze’s point was meant more for non-married couples, but she wasn’t really clear on this. My advice, in any case, would be this:

    Just do what works.

    And if what you’re doing isn’t working, change it.



  9. How I Manage My Money

    Note: There’s a newer version of this post here.

    Getting (and keeping) a grip on your finances isn’t an easy task. Every so often (like yesterday) a frazzled reader will ask, “How do you do it?”

    Well, I’ll tell you. My system works like this:

    The Grand Overview

    I track all accounts, balances, and financial transactions in Quicken 2006 Premier Home & Small Business. This is also where I categorize my past and current spending, as well as monitor my net worth, assets and liabilities, and investments. I also use it to track all my small-business (namingly, this website and my wife’s jewelry/craft business) inflows, outflows, and accounts. Quicken is also a tremendous tool for handling all tax-related items and accounts. I use the heck out of it for this. Is Quicken pricey? Yes, the fancier versions can be. Does it require a fair bit of learning time? Yes, though this also depends on what version you get and what you want to use it for. Would I give it up? No way. Not a chance.

    Monthly Spending Plan / Budget

    For all that I love about Quicken, I absolutely despise its budgeting setup. It’s cluttered, nonsensical, and useless to me. So, to budget (as well as monitor in real time) my spending for each month, I use a slightly-modified version of my Excel Spending Plan (v2.0). You can download it from the near-bottom of my Excel financial spreadsheets page. And more details can be found at my Spending Plan page.

    Emergency Fund

    I don’t have a specific spreadsheet that I use to track my Emergency Fund. However, I do keep most of my E-fund (say, 90% of it) in its own account at Emigrant Direct (review). Any transactions that affect my Emergency Fund get logged/tracked in Quicken, as noted above, and I can always see its balance right there in my Quicken toolbar.

    Freedom Account

    I use ExcelGeek’s Freedom Account spreadsheet to track my Freedom Account and all its subaccounts and balances. I keep my Freedom Account funds at ING DIRECT (review), in an account that’s separate from everything else. If you’ve never heard of Freedom Accounts before, or if you’re just not sure what exactly they can do for you, head over and check out my Freedom Account page.

    What combination of software (and/or notebook paper!) do you use?