This past month has been awful for us financially and the rest of the year doesn't look that good because of it (will be playing catch up). Anyway, we had started auto deposits to our new Freedom Account on 9/15 and I can already tell that I'm going to LOVE it! I am initiating my first transfer from it back to my checking to cover a hospital bill, oil change, two small gifts and two shirts I bought (on clearance, of course). I can just tell that this really will bring peace of mind in at least some aspects of our financial life.
I did decide to use an ING savings account for our Freedom Account. I didn't want to see the balance information every time I checked our checking account. This was definitely the best decision for us. I think out of sight, out of mind is the best thing right now.
Anyway, we earned 7 cents in interest in September and that will be added to the $20 Challenge since we'll be adding all found money to that.
Freedom Account is Working
October 18th, 2008 at 11:16 pm
October 19th, 2008 at 11:06 pm 1224457577
October 21st, 2008 at 12:07 am 1224547659
I don't know what a freedom account is, but I have some goals set and am direct depositing money each month too.
I am up to $8. in interest so far. Outta sight, Outta mind.
Way to go!
October 21st, 2008 at 04:59 pm 1224608345
October 23rd, 2008 at 02:35 pm 1224772521
October 24th, 2008 at 09:58 pm 1224885520
Basically, you have a set amount automatically transferred from your checking account each month to a savings account (or whatever type of account your prefer) to cover all of the unexpected, irregular payments that come up throughout the year. My subcategories currently include:
Auto Maintenance & Repair - $1,000/year
Date Night/Family Activities - $360/year
Gift - $360/year
Clothing - $360/year
Vacation (airline tickets home) - $900/year
Emergency Fund - $528/year
To cover the numbers above I have $153 taken from each paycheck (two times a month). I then keep track of how much money is in each subcategory using a simple Excel spreadsheet. When you need money for something you transfer the money back into your checking. This would be especially helpful if you have property taxes on your home, etc.
I know that there are others here who use this method since this is how I first learned about it and Mary Hunt who wrote about it in her book (see my first blog entry). I knew about this concept before reading it in her book, but she had already thought it all out and tells you how to set it up very simply. That's what I needed; why reinvent the wheel.
October 26th, 2008 at 02:22 pm 1225030921