How We Do It: Organizing Our Finances

16 January 2018

Wow, y’all! I figured you would like this series, but I’ve been blown away by the response – I LOVED reading your thoughts on last week’s post on time, so thank you SO much for sharing! Truly.

To catch up any new gals: Nancy Ray and I are writing an eight-part series every Tuesday in January and February covering “how we do it” in eight different areas: the rhythms, habits, and routines that help us get things done and make the space and time for what matters most. You can read more of the backstory here.

Today’s topic is finances! I’m particularly excited about this post for many reasons (obviously), but one is that it really drives home what I love about this series: that you’re hearing from two people with similar hearts but different ways of living them out, showing that there’s no one right way to do things. Anyone who knows Nancy or I knows that we are both extremely passionate about financial literacy and freedom, but the fascinating thing is that “how we do our finances” is in some cases very different.

How We Do It: Finances

Let’s dig in! I wanted to begin with a few of the principles that guide John’s and my thinking on money, because all the tools in the world won’t be much help if your thought patterns are constantly conspiring against you. Here they are:

1. Whenever possible, we take advantage of the power of compounding and the time value of money. We want to make our money work for us as hard and as often as possible, which means starting NOW, even if that means starting small. Time is so powerful, and it’s the only part of the wealth equation you can’t make up. More about this here.
2. We remember we can’t judge anyone else’s financial situation from the outside. We might see a coworker going on a European vacation and be tempted to think we should be able to do that, but not realize they carry credit card debt or rent a super-small apartment or never eat out or don’t save for retirement. We try not to make decisions based on comparisons, especially since they’re always incomplete.
3. We believe our money has been entrusted to us. By God, to be clear :) And because we believe that, we feel an extra measure of responsibility to spend, save, and shepherd that money wisely and for the greatest good.
4. We believe money is a tool. It’s not inherently good or evil. I’d liken it to a chainsaw. It is very powerful, and very effective at what it does, but it can’t hammer a nail. You can’t expect money to do things it was never meant to do, like make you happy.

So how do these principles play out on a daily, weekly, monthly, and yearly basis? For us, it all comes back to the budget. We live and die by our budget, because without it, I’m sure we would be in very sorry financial shape. We make an annual budget and track it in a Google Doc. (Note: our doc and how we use it have changed a bit since I wrote that post five years ago, but it’s still a good overview!) It’s a system that requires some upkeep, but we’ve found a few things that make it easier: we commit to updating it twice a month (generally on the 1st and 15th, the same day we pay our credit card bills), and we almost exclusively use cards, so transactions are easy to reference and record.

That’s right, we use credit cards! I wouldn’t recommend them for everyone, but we pay ours off in full twice a month and have never carried a balance. The rewards (2% cash back for us) and the ease of tracking our spending make them the right fit for us. We have three: one predominantly used by John for his expense categories, one predominantly used by me for my expense categories, and one used by both of us for joint expenses (which include most things, including gas, groceries, gifts, dining out, June expenses, vacations, etc.).

We also each have a checking account and savings account (which we both have access to, but our paychecks get deposited into our respective accounts). I pay most of the bills out of mine, so to keep things simple, John simply “levels our accounts” on the 1st and 15th by transferring the difference from his checking to mine, so that we each have the same amount.

Our savings and checking accounts are at Capital One 360. I LOVE CAPITAL ONE 360! I’ve considered writing a Marvelous Money post just about this bank because I love it so much :) Why? The interface is great, there are no fees, and most importantly, they let you open as many savings accounts as you want!! Over the years, we have opened accounts to save for vacations, for our backyard renovation, for a new car, for our wedding, and many other things. You can give each account a unique name and set up automatic transfers each month, making setting aside a pool of money and building it over time fun and mostly painless! Highly, highly recommended. (NOTE that that is a referral link – I get $20 if you sign up, but I would NOT share something we didn’t adore! We’ve been customers since 2006 :))

Another thing that has simplified our finances: our charitable giving account. If you give away money regularly, whether to your church or other organizations, I would highly recommend one. I went into much more detail here, but the reason it helps simplify things is that at tax time, you only have to look one place to itemize your deductions.

I’m not going to chat too much about debt in this post because aside from our mortgage it’s not a huge focus for us right now, but if it is for you, I’d recommend checking out this post which talks about how we paid off my student loans!

Retirement savings are a priority for us, and we both have 401ks we contribute to through work as well as IRAs. Most importantly, we always make sure to contribute at least enough to get the full match our companies offer. Here is my beginner’s guide to 401ks and beginner’s guide to IRAs, if you’re new to this arena! We also use an HSA (Health Savings Account) as an important part of our retirement savings plan, as they are highly tax-advantaged. Might be something to consider if you have a high-deductible health plan!

A number of readers have asked me about 529s and college savings for kiddos recently, so I will likely write a separate Marvelous Money post on that topic in the future. We do have an account for June that we have contributed to, but I wanted to mention here that it is not a priority for us right now, given that we are going so aggressively after our mortgage goal. We feel confident with the overall plan we have, and know that we can make more progress without dividing our focus unnecessarily! Just like when you’re tackling debt, I think it is often most effective to pick one area of focus and go hard after that one instead of trying to implement five different things at once.

Finally, I wanted to briefly share how we divide up the financial responsibilities in our family. I think it’s equally important for each partner to have a role, AND for those roles to be clear and defined. These are ours:

Emily: Bill payment and account maintenance (activating cards, calling customer service, etc.)
John: Taxes, investment strategy, and “R&D,” or bringing new ideas to the table (like our tweaked mortgage plan)
Together: Set yearly budget, record transactions in the budget, and participate in our every-other-month “net worth” meetings

We call them that not because our net worth is so high (ha), but because they are when we look at a global picture of our finances and our budget. We look at what’s in each account, talk about changes to our budget or financial situation, progress we’ve made toward our goals, and more. To be clear, we talk about our finances on a more regular basis than every other month, but this is dedicated time we’ve set apart to cover more in-depth topics.

Friends, I hope this post was helpful for you!! Don’t forget to read Nancy’s post here. I’d love to hear what tool or practice has been most helpful for you in organizing your personal finances! Or, if this post brings up a question for a future Marvelous Money topic, I’d love to hear that, too! :)

Where we’ve been and what’s coming up:
Time: Em’s post and Nancy’s post
January 23: Home
January 30: Personal Life
February 6: Work
February 13: Relationships
February 20: Spiritual Life
February 27: Kids

27 Responses to “How We Do It: Organizing Our Finances”

  1. Dave

    Naturally, I very much enjoyed this post! I’m super curious about your use of separate checking and savings accounts. Clearly you jointly manage your finances, so I’m wondering how you utilize the separate accounts? Please elaborate :)

    Em

    Hi friend! :) Great question, and one I thought I might get! Honestly, the answer is simple if not somewhat unsatisfying, ha! We both opened Capital One 360 accounts (then ING Direct) before we were married, so obviously we did them separately. We also both have worked for the same companies and established direct deposits into our checking accounts before we were married. Since we could link the accounts and overcome any “joint finance” issues pretty easily, it just was never a priority to open a new joint account, so… we didn’t? Haha! Enough other things to worry about, I guess :)

  2. Kelly

    This is great! I’d love to hear about your recommendations on credit cards as I’m still learning about all the ones offered.

    Em

    Hi Kelly! I know people have lots of different theories on credit cards, but for us, we just keep it simple and opt for one that has no annual fee, 2% back on ALL purchases, and cash back rewards. I know some people swear by travel rewards, but cash back keeps things simple for us!

  3. I have heard great things about the 360 accounts because of the multiple savings accounts aspects! My husband tracks our sinking funds (along with all the other budget categories) on spreadsheets, but spreadsheets just don’t excite me! 😂 and I have truly grown to love our budget meetings—wouldn’t have said that before 6 months ago. :) I love the idea of setting up a separate charitable giving account too! And yes, also elaborate your separate accounts!

    Em

    I’m so glad to hear that, Mary!! It makes me so happy! :) I feel the same way about our net worth meetings – they truly fire me up because we are working together towards something that matters to us! I answered Dave above about the joint accounts :)

  4. Gillian

    I am intrigued by your 360 bank. I’ll have to look into that as well as an official charitable giving account. Great post!

  5. I too very much enjoyed this post, especially the financial principles that guide your approach! Imagine me nodding my head off in agreement as I read those 4 principles! :) I had the same question as Dave though – would love to hear more about why y’all utilize separate accounts!

    Em

    Honestly, the answer is simple if not somewhat unsatisfying, ha! We both opened Capital One 360 accounts (then ING Direct) before we were married, so obviously we did them separately. We also both have worked for the same companies and established direct deposits into our checking accounts before we were married. Since we could link the accounts and overcome any “joint finance” issues pretty easily, it just was never a priority to open a new joint account, so… we didn’t? Haha! Enough other things to worry about, I guess :)

  6. Audrey

    Hey Emily! Thanks for the great series! I have seen on here before that you guys pay off your credit cards twice a month, and I was wondering if you could do a credit card post. I would be interested in hearing about paying off twice a month- and which cards you use. Thanks for your help!

    Em

    Hi Audrey! So glad you are enjoying the series!! Paying off our credit card balances twice a month is a practice we started when we first opened credit cards, in college, when we had much lower credit limits. As I understand it, an important component of your credit score is not carrying more than half of your limit at any one time (and by carrying I don’t mean overdue, just at any point!). So, when our limits were much lower, we started that practice to make sure we were doing that, and just never stopped! :)

    Audrey

    That makes sense. Thanks, Emily!

  7. You have such a finance mind – I love that you include ways for others to have the same mindset! I hate thinking about money sometimes, but it seems like thinking about it is the way to not have to worry about it, If that makes sense!

    Em

    YES!!! I completely agree!

  8. Jewel

    Like you, I’m on board with responsibly using credit cards. I like getting things for free or free-ish. I realized that I could use a credit card to pay for stuff and then earn points to get free airfare or something else. Traveling is really important to us. We do it a lot. So it kind of felt wrong to not be making credit cards work for us and just always going the straight-cash route (save up forever/pay full price). If you ever write a post on how to go places for free/free-ish/heavily discounted, I’d read it :)

    Em

    Ha! I also of course enjoy getting free things :) We only use cash back cards right now because they’re just simpler and we know we’ll always use the rewards, but I know some people love and are very savvy about using travel rewards!

  9. This is so much good encouragement, Em! I’m so glad to read your post on this, and Nancy’s. Money is something I have NEVER been good at, but it’s my first Power Sheets goal this year, and I am confident that I will become a good steward of my money, with God’s help. :)

    Em

    You absolutely can be! It is within all of our power without a doubt, and it has such far-reaching consequences. Cheering you on!!

  10. Sarah

    Hi Em!
    I am loving this series so far. In the “Time” blog you wrote, the part that stayed with me the most was your list of things you don’t spend time on. I would love to read your list of what y’all dont spend money on!!!

    Em

    Hi Sarah! I’m so glad! And that would definitely be interesting! I have written a previous Marvelous Money post that gets close to it: http://www.emformarvelous.com/marvelous-money-making-trade-offs/

  11. Katie

    Hi! As a big fan of your Marvelous Money series (and other personal finance series, such as Refinery29’s Money Diaries, that give a glimpse into how others “do” their finances), this post feels long-awaited and much appreciated!
    Regarding joint vs. personal spending: how do you and John handle ‘personal’ spending money in your joint budget, and how do you decide what’s a ‘personal’ expense vs. a joint budget expense? My husband and I each have individual “spending” accounts, with monthly transfers for “fun money”/personal spending money , separate from our joint checking/savings. However, we’ve struggled about how much personal spending money is enough for us to feel like we can spend some guilt-free without feeling like we’re taking away from our joint priorities – savings goals and paying extra on student loans. Along the same lines, I’ve struggled with what should be “personal” spending vs. part of our joint overall budget. For example, aside from some basic skincare necessities, I feel guilty buying makeup with our joint “personal care” budget even though it’s something I use almost daily. Same thing with clothes/shoes shopping unless something is an absolute necessity. These aren’t things my husband needs (at least not as often or at the same cost), so I feel guilty taking from our joint budget. Curious how you and John have handled these topics? Thanks!

    Em

    Hi Katie! That’s a great question! In fact, I think it might be a good topic for a future post, but I’ll go ahead and give a few thoughts now :) These are the categories in our budget that we track separately for each of us and have separate amounts allocated for: Miscellaneous, Personal Care, Dining Out (separate from a joint Dining Out category), Clothing, Gifts (we also have a joint category), and Hobbies/Leisure (we also have a joint Entertainment category).

    We budgeted more for John in Dining Out than for me, but in every other category I have more money budgeted (sometimes significantly more, like in Personal Care). The simple fact is that even though I would consider myself a spectacularly frugal consumer of beauty and self care things, my hair cuts are five times as expensive as John’s – and repeat for every other aspect! Since we set the overall budget together first accounting for our most important goals, I don’t feel guilty spending my budget, because I know everything else has been taken care of. I hope that helps!

  12. emma

    Please do write about Capital One! But even if you don’t, I appreciate the link in this post! We spend and track money similarly to you and John, so it would be nice to have 2% back!
    My only issue regarding money right now is this: my income is not a lot, and it is maddening to me that I cannot contribute more to my 401k/mortgage payment/savings/my child’s savings. I would LOVE to have all these things sorted out and just throw money at them, but I do not have the funds to do so. The most obvious answer is to make more money, but that proves to be difficult in every aspect (current employer unwilling to pay me more and no other good job prospects currently). While I know you can’t fix that issue, I am wondering if you can provide some feedback about this frustrating situation. Were you (or maybe are you) in a position in which you cannot save as much as you would like? What can I do so I don’t always feel like I am failing in this area?

    Em

    Haha! I wish I could fix that issue for you! :) I don’t know if I’ll ever get to the point where I didn’t wish we could save more, but I would say I’m generally satisfied with what we can do at the moment. Probably my best tip for you would be to choose 1-2 priorities and focus only on those, which will hopefully help you feel like you’re making more progress. As an example, like I mentioned briefly in this post, we are saving VERY little for college at this point – but feel confident that if we pay off our mortgage on schedule and then switch that amount to accumulating college savings, we will be ready in time.

    My other suggestion would be if you feel like you’ve exhausted every reasonable option and are desperate to make progress, sometimes you have to get radical – like trading in a car, cutting out vacations, switching childcare, etc. I am a big proponent of moderation in general, but sometimes if you’ve tried everything else, it takes a big leap to get things moving.

    Cheering you on!!