The MAD BUDGETEER has done made budgeting and bill paying one whole lot easier. The bookkeeping simplification I first proposed in a scheme to synch credit-card charge cycles with real-world monthly income cycles worked — I’ve now learned that it’s possible and not at all difficult to use my beloved American Express charge card, with its generous kickbacks and its near universal acceptance, between the first of the month (when my actual budget cycle begins) and the 20th (when American Express’s billing cycle ends and a new cycle begins), and then cover the remaining ten or eleven days with cash dollars.
We have established, in response to commenters’ queries, that for reasons that make no sense to real-world humans, American Express will not change its billing cycle on my credit card to match my personal income-dictated budgeting cycle, which runs from the first to the thirty-first. AMEX’s billing cycle runs from the twenty-first to the twentieth. This means that charges made between about the twentieth of a given month and the first of the following month actually amount to loans against the presumed income of the following month.
And between you and me, with the Congress we have in office just now, I presume nothing, certainly not where Social Security and investment drawdowns are concerned. I do not want to borrow against next month’s income to pay this month’s costs. Ergo: the strategy of using cash during the ten-day period when AMEX suggests that I take on exactly that kind of loan.
To my mild surprise, it worked. Last month, instead of an $1100 AMEX bill (the amount budgeted for discretionary spending), I ended up with a $950 bill, having paid the difference with pieces of paper dyed green and marked in various symbolic denominations. Paying with a finite amount of cash, surprisingly (considering my profligate habits), worked to limit the amount of spending that happened during that last ten days of the month.
Very nice.
Somewhere in the sporadic discussion of the proposed simplification of my exotic bookkeeping and budgeting habits, Frugal Scholar wondered why I don’t lump all the little “cookie-jar” bank accounts — the one holding money to pay property taxes, car insurance, homeowner’s insurance, Medicare D insurance, and Medigap insurance; the one holding emergency & diddle-it-away savings; the one to pay month-to-month nondiscretionary and routine discretionary costs — into one single no-nonsense account and just stop worrying about whether there was enough, at any given time, to pay the bills. After all, if one ran into the red, one could always pull some more leaves off the money tree over at Fidelity.
Well, thought I: Well, but…but…but?
But why not?
The cookie-jar approach worked well when I had a job and a healthy income was flowing in. Given that healthy income, I inclined to spend pretty much at will. If I really wanted something, what the hell? I’d just buy it! But to be sure enough money was stashed to cover taxes and other crucial bills, I set up an account at the credit union to hold monthly set-asides that would accumulate, over 12 months, enough to pay the property tax, the car tax, the homeowner’s insurance, and the car insurance, all pretty hefty bills. Each month $445 went into that account. To cover surprise bills and whims I couldn’t live without, I opened a second savings account, which collected $200 a month.
Because I didn’t overspend often, at any given time the diddle-it-away short-term emergency account held $1500 to $2500.
Knowing nothing better at the time I was laid off my job, my solution to the need to cover all the regular bills plus Medigap plus Medicare Part D and to disburse income from coming from not one, not two, not three, but four sources was to open yet another account. Of course! A “pool” account to hold all incoming and from which to disburse monthly allowances for living and annual, semiannual, or quarterly bill-paying.
Now we had…what? checking (1), “pool” (2), tax & insurance (3), emergency savings (4)…yes! FOUR FREAKING BANK ACCOUNTS TO KEEP TRACK OF AND RECONCILE! Plus the monthly American Express bill and the monthly Mastercard bill. And of course the accounts for the S-corp. And the Fidelity statements for the regular IRA and the Roth IRA and the brokerage account and the Vanguard funds. And the statements from Northwestern Mutual for….
To coin a phrase: argh.
The credit-card cycle now adjusted to fit my whim, I finally had time to consider this other craziness. It struck me that, where the credit union is concerned, all that’s really needed is a checking account to hold all incoming cash, from which to disgorge money to pay routine bills, and a savings account to hold funds for small emergencies and indulgences.
So. Today the deed was done.
Because I couldn’t figure out how to actually close close an account at the credit union online, and because one of the four freaking bank accounts was a money market account (effort to maximize “dividends”) — which would incur penalties if its balance dropped below a certain threshold — I took the time to drive to the CU and get an employee to help consolidate accounts and close The Deceased.
Good thing, too: A savings account I thought was the main, root account for the credit union membership was really something else, and the savings account I wanted to close was the actual, real root account. Had I tried to do this on my own, I would’ve made another fine mess of things! Even with the CU’s rep riding herd, moving non-emergency funds into a single account while keeping the emergency finds intact turned into a production.
Naturally.
🙄
Lest you think I’m unique in my craziness, the credit union’s teller remarked that a lot of people set up cookie-jar accounts with names like “tax savings” and “emergency savings” and “new car savings” and “pay off loan.” She said some people have a half-dozen such pokes. Here I thought I’d come up with something original…. 🙂
At any rate, the originality or whatever it was is now gone, and as of today I’ve got two, count-’em, (2) accounts: one to hold all incoming funds and disburse money to pay bills, and one to accrue funds to cover unexpected and short-term emergency expenses. The bottom line in the first account becomes irrelevant, at least until it approaches zero: month-to-month budgets will be tracked exclusively in Excel, with little concern to what’s in the bank.
That’s because what will go into the bank on January 1 will be drawdowns from Fidelity and the S-corp sufficient to cover, when supplemented by Social Security, all routine bills for 2014. Teaching income will also go into that account. In lieu of the $200-a-month stash for extraordinary expenses, that $2400 per annum will stay at Fidelity, and the teaching income — which averages out to $320/month when prorated over a full year — will substitute. This actually gives me about $120 a month more in extra spending money than I have now, while reducing drawdowns from retirement savings.
So. Life is simpler. And life is better. Money-wise, that is.
