If you’ve been reading my blog for any length of time, you’ve heard me mention before about our “funds system”. Basically, we have funds budget system where we have certain automatic withdraws happen every month or week that get applied to certain “funds”.
What is a “fund”?
A “fund” is a separate checking or savings account that we have set up either at our regular bank or at our online bank that we use. Some of our funds are:
- Vacation
- Auto
- My husband’s “Project Fund”
- Christmas
- Slush Fund
- Medical Fund
Other funds that we may end up setting up:
- Home Maintenance
- Clothing
How we came up with this system
Every month, we have the usual bills: rent/mortgage, utilities, and so-on, but there are many annual expenses that can come up expectantly. For example, regular car maintenance such as oil changes or tires. And after several failed budgeting attempts, we decided that we needed to do something different.
After all, our budget was no longer working every time a car needed an oil change or random part fixed.
And since we don’t have any credit cards, we knew that making these items that were bound to come up through the year at random times, a priority we’d no longer keep messing up our budget.
And so this system was born.
How do you set-up this system?
Look over your budget and evaluate your lifestyle. What are some expenses that you know are going to come up (car/home maintenance, medical, etc.) and what are some expenses that you want to come up (vacations, special outings, etc.). Once you have these written down, look over your budget and determine how much money you can set aside every week or every month to a separate account designated for these items. I highly recommend that if you haven’t read my 50/20/30 budget post yet, that you check it out here. It explains a lot more about budgeting around your lifestyle. Then come back to this post to figure out the funds you should set up.
Let me caution you here.
It’s going to take a while to build up these accounts and you may not be able to start all of these accounts at once. We started this process with just an auto fund and moved on from there. In fact, there are a few other funds we still need to create. So, don’t stress if you can’t possibly start all of these accounts right now. Pick the most pressing ones to start with (like an auto or medical fund) and then move on from there.
Where should I set it up?
We have some of our funds set up at our regular bank (Wells Fargo) and some at Capital One 360. Our emergency fund (which is obviously for just emergencies) is set up at Capital One 360 since it’s more out-of-sight, out-of-mind, but our auto fund is set up at our regular bank.
My husband and I both drive paid-off older vehicles which means that we will have pay for regular vehicle maintenance more than someone who has a newer car. So we keep that account at Wells Fargo where it is easy to access the money right away if a car breaks down.
We have my husband’s project fund set up at Capital One 360 as a checking account because Capital One 360 doesn’t charge a fee nor have a minimum balance requirement. 🙂
Do you use a funds system or something similar? We’d love to hear about it!
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I have funds for absolutely everything. There’s something about already having money specifically set aside for that purpose that makes bad situations (home and auto repairs, medical bills, etc) just seem not so bad. I set my funds up in YNAB, otherwise I would probably use an account like you have at Capital One to be able to create sub-accounts.
My most unique fund is
I have funds for everything: daily, monthly and yearlong. I keep a notebook that each payday I update with the total deposited and if any spent. Some funds get $3 a paycheck and others get a lot more. I have categories in a notebook but all the money is one savings account. I transfer the money to checking when the payments need to be made.
My “daily” money is kept in envelopes that are filled on payday. These are groceries/household items, eating out, clothing/shoes, boys for sports etc, my fun money, my husbands fun money, entertainment with friends, gift giving, and a small amount for a safe at home for un-expected things.
My “year long” categories are: oil changes, car maintenance, household repairs, graduation party, drivers education, vacation/camping, vehicle registration, camper storage, life insurance, orphanage support, winter and summer taxes, and tracfone.
My “monthly” amounts are also in the savings but are based on the monthly cost times 12 divided by 26 for the amount that is deposited each payday. These include: electricity, school loan, gas, vehicle gas, water, insurances (house, life, vehicle), mortgage, home equity, church donation, tv/phone/internet and union dues for both of us.
After reading your post and the 2 previous comments above mine I am a little worried. We have no funds…maybe this is setting us up for failure.
Don’t worry Jennifer! Setting up funds is easy – decide which fund you’d like to start with first (I suggest an emergency fund if you don’t already have one in place and if you do already have one in place, then maybe start with an auto fund), decide the starting amount you’d like to have in that fund – $100, $500, $1,000, etc. once you’ve done that, set up the fund and start contributing to it regularly from your household budget. 🙂
We have funds setup for various things. I track it all through an Excel spreadsheet.
I love funds! We used to have a few funds – auto and gifts/Christmas mainly – but once we got serious about paying off debt we decided to forgo those for awhile. We are just extra careful about keeping our older vehicles up to date and budgeting in when they need oil changes and such. Once we pay off all our debt, we will definitely go back to funds. The only ones we have left besides our small emergency fund is our two “fun accounts” where we each get $50 a month to spend on what we want.
Our budget system is the “half-a**” budget system. Basically we pull out everything but our bills and expenses such as gas and food. This helps keep us on budget and make sure that we don’t overspend.