Friday, July 31, 2009

Budget genius

As a self-employed person who gets occasional lump sums of money, rather than a monthly or weekly paycheck, planning for solvency year-round can be a bit of a trick. Somehow I have managed this task for years, but had yet to work out a system that really put me at ease. You know I love systems. AND NOW I MAY HAVE DEVELOPED THE BEST ONE YET! Bear with me as I attempt to explain. (This is basically a large-scale "envelopes" scheme).
  1. Open an account with ING Direct, an awesome online bank that used to offer awesome interest rates, until our economy tanked.....sigh.
  2. Open 6 accounts and name them as follows: January/February, March/April, May/June, etc. You could open 12 accounts if you prefer, but this feels obnoxious to me.
  3. Determine your budget needs per month. There are a million online tools to help you do this if you don't know how to. So, let's pretend I figure out I need $1000 a month to survive (this is just for funsies, folks).
  4. Beginning with the Jan/Feb account, deposit $2000 ($1000 a month for 2 months, see?). Do this in every account until you run out of money from your savings.
  5. Step back and take stock: Maybe you have enough money to fill your goal of $2000 in all six accounts. YAY! Stop working for a year. JUST KIDDING. REALLY, KIDDING.
  6. Whenever you get a paycheck, deposit it into the next account until there is $2000 in each account.   **note:  If this is a job that is not taxed in advance, I tax myself...put 25% of this check into a special "tax fund," so it is there in April when I need it.  
  7. At the beginning of each month, transfer $1000 from the appropriate account into your checking. Pay bills, etc.
  8. At the end of each month, if there is money any left over, transfer ahead to another lean month OR put in a special savings.... I have a "couch fund," a "computer fund," and a "christmas fund."
And that is that! Now, anytime I start freaking out about the future, I just check my accounts and see that I am actually covered through ___________. So even if my freelancing is slow in a particular month, I will not starve. Also, I am not tempted to spend inappropriately when I get one of those "large" lump sum checks... because I know that my little accounts are waiting.

Pure genius, no?

1 comment:

  1. The New Oregonian9:22 AM

    This is BRILLIANT!!!