How We Manage Our Finances

This post is going to go into more detail about how we manage our finances. A few months ago I posted about frugality where I discussed in broad terms how Tyler and I aim to pay down debt and save money; you can check that out here. In this post I am going to break it down more specifically and explain how I manage our google docs spreadsheet.

Assess Your Debt

The first thing that I did was assess all of my debt. Even if that is all you do, this is a key step. Sit down and just do it. I analyzed all of my accounts (credit cards, lines of credits, loans) and put down what I owe overall, the due date, the interest rate, and the monthly due date. This allowed me to really get my head around whether these accounts were the best available to me and if I had some options. What I mean by that is, what are my interest rates and what are my total amounts owed and what strategy do I need to figure out to get a handle on it all. 

How to Pay Off Debt

There are two predominant lines of thinking when paying off debt. One is the Suze Orman way, which includes paying off the debt that has the highest interest rate first. I have tried this method and of course, it does work. My preferred way though is the Dave Ramsey way. This method has you start paying on the debt you owe the least amount to and then snowball on to your next debt. So for example, say you owe $500 on a credit card with an interest rate of 10 % and then $2,000 on your motorcycle with an interest rate of 15%. Dave Ramsey suggests you pay as much as possible on the debt that is lowest (at least the minimum and any extra you can) and then once that is paid off, you take what you were paying on the credit card and add it to your minimum payment for your motorcycle (the snowball effect) and you will get the motorcycle paid off quicker. This is what I have used over the last year and it has worked really well for me. 

How I Organize It All

Here is an example of how I use Google Sheets (it is like excel) to keep track of our finances. FYI this is a mock up, not our actual finances. I am not saying this is the "be all end all" but for me it works well. There are apps and online tracking programs that are free that you are welcome to use which do the tracking for you once you upload all of your financial information. I choose to sit down at least weekly and track it myself. I actually have the app for my bank and the Google Sheets app on my phone so I frequently track as I go and do a more extensive analysis when I sit down each week. I find it to be really helpful because I can analyze where I can slim some of the outgoing money and channel it to reducing debt. Our overall goal is for Tyler and I to be out of debt in the next 5 years, including out mortgage. I think this will allow us so much financial freedom so if I wanted to work part time when we have a baby or we wanted to travel or to focus all our money on our dream home, we have those options. More to come on the dream home in another post. 

 Here I list our income and then our debt. Like I said before, I identify the type of debt, the monthly payment, I also have a column for when I pay the actual bill (handy to make sure I got it paid on time. I also have a lot of automatic payments to help lower my bill and I keep track of that too so there are no surprises), the interest rate (more on this later), the due date, the date I paid it (helpful when a company claims you did not pay your bill... I will not name names...) and then the total amount due. I love watching that number go down!

A closer look at those different columns. 

Another rule I try to keep to is the 50/20/30 rule (Hence my color coding). This is a rule that states 50% of your income should be for fixed expenses (like your mortgage, cars, utilities), 20% of your income should go to savings (like retirement and savings accounts), and then 30% is your lifestyle choices (like eating out and gym memberships). With the Dave Ramsey method, you would put less aside in savings while you are still paying down debt so that is what I have illustrated above. My biggest advice is to sit down with your significant other (or with yourself) and decide what is absolutely necessary and what can you live without. Tyler and I do not have a large entertainment budget because we frequently stay home. For others that may be different. 

This is how I keep tabs on my utility bills. I also keep track of doctor visits and car maintenance. 

I keep a pretty detailed account of our grocery shopping. Since Tyler and I have quite the animal kingdom and we do a lot of cooking at home and gardening, this is a fairly large chunk of our budget. It is much bigger than our entertainment budget. We also shop at a variety of places depending on what we need. This helped us identify that we were making frequent stops at Albertson's because it is near our home when we needed something quickly. It was nearly a quarter of our grocery budget. Now we have a better grocery list and we meal plan so we are not just buying things on a whim.

Then we keep track of refueling our vehicles. It helped us identify that it matters a great deal if I drive the vehicle that does not get as good of gas mileage to work when I work further away. That may seem obvious but we just didn't realize how significance of a different it made. We have essentially switched cars because it makes such a difference. It was hard at first because we both got attached to "our" cars but honestly, they are just cars that get you from point A to B. It means we keep both cars pretty free of stuff (which I love) and we keep two sets of keys available to us at all times. It actually works pretty well. 

 And then we keep track of all of our entertainment purchases. Tyler and I give ourselves "allowances" that we have our own individual checking and savings accounts for. It is nice because then he and I can use that money to spend of ourselves or on others but it doesn't have to be ran through the joint account. This keeps things a lot simpler. Plus I keep tabs on our savings and retirement accounts. I love watching these balances grow! 

Interest Rates

Most people at some point or another have debt, and therefore need to worry about interest rates. The rate makes a big difference in how much more money you will end up paying to buy said item. For example, most credit cards, especially credit cards related to stores, have incredibly high interest rates. I am talking greater than 20%. These are not cards you want balances on. Generally your first credit card may have a higher interest rate, but as you pay your bill on time, and ideally a bit over the minimum, you will be eligible for lower interest rates. You do have to start somewhere though and that can be tough. Ideally never charge more that what you can immediately pay off. This is where you can build your credit but not put yourself into debt. Eventually you can get a credit card that gives you money back and these are the ones to aspire to. Again, paying off as soon as possible. I do not suggest closing your credit cards that you do not use because that negatively effects your credit too. Keeping those open increases your overall good standing. Pay attention though because some credit cards will charge you if you do not use them and others may close after a certain period of time of not being used. 

Often times after you have been paying on a debt for a period of time, you can call and see if you are eligible for a lower interest rate. It does effect your overall credit score for them to run your credit and give you a new interest rate so you do not want to do this often, but it is worth it in the long run. I recently was able to half my interest rate on a car loan so that was pretty huge! 

I would say an overall goal would be to not go into debt if you can avoid it. Buy used cars, buy items you can afford, and seek out grants and scholarships for school. If you need to borrow then manage it well. I have had all of the different lines of debt but I am in good standing on all of them so my credit score is excellent. It has been stressful having so much debt but I have learned a lot and know how to prevent myself from getting back to where I was.

I hope this was helpful for you. If you have more specific questions please let me know! 


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