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What We Do With Extra Money….

April 20, 2011

The last post (monthly budgeting while getting paid every two weeks) explained, in part, how to throw two paychecks into your savings account every year, painlessly. There are really multiple ways that we save money:

  1. We take a certain amount out of our paycheck every month that goes into our retirement account. It is an employer-matched 401k. We are currently saving 11% of our income per paycheck (which is matched up to 4% by my employer). Employer-matched 401k programs are free money.
  2. We have a certain dollar amount taken out of my paycheck every two weeks that is direct-deposited into a savings account in a bank that isn’t our checking account bank. I want that money hard to get to.
  3. Twice a year, we can put a paycheck straight into the savings account. Living on 24 paychecks but receiving 26 paychecks. No brainer.
  4. Once a year, no matter how we’ve tried not to, we get a tax refund. Not complaining.
  5. We try to spend less than we budget every month. Though that is rarely thousands of dollars, it has been hundreds of dollars on occasion. At the end of each month, I go over our categories and see where we’ve spent less than we’ve budgeted. All of that money is electronically moved into our short-term savings account. Every month!
  6. I make a little extra money as a portrait photographer and as an announcer for sporting events at the local high school. Neither activity brings in a lot of money, but we save it anyway. This usually goes into its own account so that I can pay sales tax on the photography money, tithing on both, etc.
  7. Sometimes I find money on the side of the road. Actually, the last time that happened was when I was in 6th grade.

Now, here’s what we do with much of the money we save:

  1. Most goes into savings. We have a 401k, a long-term account, and a short-term account. The long-term account is for emergencies, and large future expenses. The short-term account is for larger expenses during the current year (summer trips, vacations, insurance, etc.).
  2. This last year we took some of the money I made as a photographer and paid all of my daughter’s pre-school tuition up front. I hate monthly bills. So even though it didn’t save us any money, it saved us having to budget that monthly amount. Some places will give you a discount if you pay up front. Our insurance is that way, so we pay it all every six months.
  3. Speaking of that, we save all of our insurance money for the year, all of Christmas, and all of our summer vacation and leave it in our short-term account.
  4. When I make a little extra money through sports announcing, that money may go to something fun. That isn’t always the case, and I always check with J to make sure there isn’t  an area where we need the money. I used a little of that kind of money to pay a bill to get our van fixed, and a little to buy a gardening book (which I LOVE!!!), and the rest went to short-term savings.
  5. We’re planning to get most of our yard in this summer, and much of the money we save each month after all expenses are paid goes for that short-term project.
  6. For years (every year until this year) we took at least half of our tax return and put it in a low-interest CD at our local credit union. I realize that we could be making more interest elsewhere, but we just wanted the money to be hard to get to. We’ll use that money to help with college, missions, and marriages.
There are probably other ways we save money, and other places we put it. The point is, we don’t just let it sit there, doing nothing. We have a plan for all of the money we save, and that adds to the motivation to “be good” each month….
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