Maybe it’s because I’m a money nerd, but I enjoy reading about other people’s financial life. I love to see how other people manage, save, invest and earn their money, especially those who have successfully reached their financial goals. I’ve gleaned some great strategies and tips just from reading about how others operate their finances.
Though I don’t share our exact numbers (maybe someday!), in the spirit of sharing, here is how we manage money at the Centsibly Rich household.
An inside look at how we manage money
How we earn it
We’ve been a single income family for almost 17 years now, so we rely on Alan’s income. (Though I’ve had my fair share of side hustles over the years and worked part-time now and then, it’s never been enough to pay all the bills.)
All extra income is variable and inconsistent. The advantage to living on one income for so long is this extra income is “bonus” money that we save, as much as possible.
Blog. I make a small amount through the blog. At this point, it’s not much and barely pays the expenses, so we don’t use it, just save it for future blog expenses.
Craigslist and ebay sales. There is rarely a month that goes by when we don’t have something for sale online. We sell things we no longer need/use and also flip items picked up for free or cheap. (Yesterday we sold a headboard we made ourselves!)
Market returns. I’m not sure if this fits here or not, but the money we have invested often earns returns (it could also lose money too!). We invest through our tax advantaged accounts (401k, IRAs, HSA) and rarely pull money out (though we will be using some HSA money this year due to high medical expenses).
Future plans for income
Real estate. We have purchased our first investment property (though we haven’t taken possession) and plan to purchase a few more. Any cash flow from the property will be saved for future investments at this point in the game.
Where we keep it
As I wrote this, I realize we have several accounts and may need to simplify at some point, but here is what we currently have:
We have two personal checking accounts and two business accounts.
One personal account is for paying bills, the other is a sinking fund of sorts and earns .49% interest.
One business account is for the blog and the other is for rental properties.
We have two savings accounts. One is for vacation (Capital One 360). The other is a general emergency fund (with Ally Bank). We also pay our annual propane and insurance out of this account.
Each month, automatic transfers are set up to pull money from the personal checking account and deposit it in the savings accounts.
I still have my Digit account (even though they started charging for the service). Digit uses algorithms to take small amounts out of the personal checking and deposits it into a savings account. I like it because it saves money that would probably otherwise be spent. I actually thought about closing this account when they started charging, but decided it was worth it (to me). I’ve saved over $3000 in the last year with Digit.
If you’re interested in learning more about how Digit works, check out my review.
We have a small taxable account with the robo advisor, Wisebanyan.
Alan started contributing to his 401k in our mid 20s, when he got a permanent, salaried position. For many, many years, he contributed the minimum to get the company match (FREE money!). In our mid 30s, we started raising our contribution when he got raises each year and now we max the 401k contributions each year ($18,000).
Each of us have both Roth and Traditional IRAs with Vanguard. We started these back in 2010 and, though we haven’t maxed them each and every year, most years we do. (If you’re curious, we like index funds – specifically, VTSAX).
My parents purchased a life insurance policy for me when I was a teenager. That company went public when I was in my 20s and I received 108 shares at that time. Soon after, I cancelled the policy (in favor of term life insurance), but retained the shares. I will probably sell this year.
529 College Savings Plan
The kids each have their own 529 accounts, started when they were babies. There isn’t enough to cover 4 years at a university, but it’s enough to help them out. We plan to help them as much as we can outside of the 529, financially and otherwise. Jake is planning to go into the Air Force, so his college expenses will, eventually, be covered.
How we manage it
Automation, automation, automation!!! This is the key to consistently saving. The 401k, 529, HSA and savings accounts are automated each pay period. We use our tax return and savings throughout the year to front load our IRAs.
Our investments consist of index funds (low fees, good historical performance, plus we’re in it for the long haul), balanced out with some bond funds. Soon we will add real estate to the mix.
Our only debt is our mortgage, though we will have another small mortgage very soon (rental property). At this point, we are not trying to aggressively pay down this debt (at 3.25%), but are using any extra money to continue investing in real estate. At some point, we will start accelerating repayment on the mortgage on our primary residence.
Credit cards. We use credit cards for most day to day purchases, such as groceries, household needs, etc., as well as some bills (such as our cell phone). I keep a running total of each credit card (now Tiller does this for me!) and we pay it off each month without fail, earning rewards along the way. (We’ve paid for vacations in the past with these rewards – but right now, we’re just using cash back cards).
Automatic bill pay. Most of our utilities and other monthly expenses are automatically withdrawn from the personal checking account. We always have an extra cushion in the account and track bills each week to eliminate any risk of insufficient funds. (We never pay those pesky bank fees.)
Online bill payment. I like to thoroughly check my credit card statements each month. I don’t have them automated for this reason, but I do pay them online (saves a check and a stamp!).
Checks. I still write two checks each month!? We can’t pay online or automate our trash and water bills. 🙁
We track…everything! And I mean, everything. For several years, I relied on my personal spreadsheet for this. Recently, I started using Tiller, which automatically pulls all transactions from my accounts and puts them into a spreadsheet for me to categorize.*
I check in at least once a week, so we can adjust spending as needed for the rest of the month. I have no set budget, but we adjust as necessary to stay within a certain spending range each month. There are months we go over (vacation), but we have savings specifically for those months.
So there it is, friends! After writing this and reading through it, I realize our system could come across as complex, but it’s actually quite simple and doesn’t take much time after it’s set up. We take a set it and forget it approach to saving and investing, and simply take a look at spending each week and adjust as needed.
Do you enjoy reading about other people’s finances as much as I do? How do you manage your money? Do you automate? Are you as attached to spreadsheets as I am?
*I will write more about Tiller soon, but so far I LOVE it. It’s saving me a ton of time, catching transactions I had previously missed, plus I still get to use a spreadsheet!
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