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Our “Funds” Budget System Explained

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Our funds budget system is what keeps us from going over budget and helps us manage all those "unexpected" expenses.

If you’ve been reading my blog for any length of time, you’ve heard me mention before about our “funds system”. Basically, we have funds budget system where we have certain automatic withdraws happen every month or week that get applied to certain “funds”. 

What is a “fund”?

A “fund” is a separate checking or savings account that we have set up either at our regular bank or at our online bank that we use. Some of our funds are:

Other funds that we may end up setting up:

  • Home Maintenance 
  • Clothing

How we came up with this system

Every month, we have the usual bills: rent/mortgage, utilities, and so-on, but there are many annual expenses that can come up expectantly. For example, regular car maintenance such as oil changes or tires. And after several failed budgeting attempts, we decided that we needed to do something different.

After all, our budget was no longer working every time a car needed an oil change or random part fixed.

And since we don’t have any credit cards, we knew that making these items that were bound to come up through the year at random times, a priority we’d no longer keep messing up our budget.

And so this system was born.

How do you set-up this system?

Look over your budget and evaluate your lifestyle. What are some expenses that you know are going to come up (car/home maintenance, medical, etc.) and what are some expenses that you want to come up (vacations, special outings, etc.). Once you have these written down, look over your budget and determine how much money you can set aside every week or every month to a separate account designated for these items. I highly recommend that if you haven’t read my 50/20/30 budget post yet, that you check it out here. It explains a lot more about budgeting around your lifestyle. Then come back to this post to figure out the funds you should set up. 

Let me caution you here.

It’s going to take a while to build up these accounts and you may not be able to start all of these accounts at once. We started this process with just an auto fund and moved on from there. In fact, there are a few other funds we still need to create. So, don’t stress if you can’t possibly start all of these accounts right now. Pick the most pressing ones to start with (like an auto or medical fund) and then move on from there.

Where should I set it up?

We have some of our funds set up at our regular bank (Wells Fargo) and some at Capital One 360. Our emergency fund (which is obviously for just emergencies) is set up at Capital One 360 since it’s more out-of-sight, out-of-mind, but our auto fund is set up at our regular bank. 

My husband and I both drive paid-off older vehicles which means that we will have pay for regular vehicle maintenance more than someone who has a newer car. So we keep that account at Wells Fargo where it is easy to access the money right away if a car breaks down. 

We have my husband’s project fund set up at Capital One 360 as a checking account because Capital One 360 doesn’t charge a fee nor have a minimum balance requirement. 🙂 

Do you use a funds system or something similar? We’d love to hear about it!

 

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