Today’s post is very special because my amazing husband is writing for me! He’s writing about his financial management system.
Hi! I’m Coleman, Michelle’s husband and she asked me to write a post about my financial management system. I typically save a lot of money, not through a hard numbers system, but more a set of guidelines.
First off, I’m 25 and have been working since age 13. I have a degree in geology and I’m currently working towards my Master’s in Engineering. The only debt I am associated with is our mortgage. I paid off my student loans within a year of graduating while working on an oil rig.
I have a tendency to work at jobs where I don’t have to spend any money. For example, during college I worked as a raft guide and was able to live on-site for free (though I did live in a tent all summer). I was able to eat one meal a day for free and did not have to pay lodging.
When I worked on the rig, I lived on the rig for months at a time. I did not have to pay for meals or lodging. This allowed me to focus almost my entire paycheck to paying off my loans. I started with plans of working on the rig for five years, then after the first month it was two years, another after another month it was one year, and finally I decided I’d quit after I was out of debt. Thankfully, I was able to get out of debt within a year and I was able to come home (because it that year I worked nearly 5,000 hours!).
My Financial Management System
I use two accounts: my checking account and my overflow savings account. All of my purchases go through my savings account. If my checking account exceeds $3,000 (I call this my “ceiling”), I deposit the difference into my Capital One overflow savings account.
If I get cash from working a side hustle, I place that money in a safe and at the end of the year it’s deposited into my savings account.
If I can’t pay for something without a loan, then I clearly don’t need it. The only exception I would consider is for a major purchases, such as a house or returning to school. I might consider doing this for a newer car, but that is a strong maybe.
If I need to make a large purchase then I loan myself the money.
- Let’s say I needed to buy a car. I found one that was $7,000. I would take $2000 from my checking account, leaving just enough to cover my base expenses, and then take the remainder from savings.
- My new ceiling for my checking account is now $1,200 ($200 over my base expenses of $1,000).
- I will continue to use this new ceiling until I pay 120% of the ‘loaned’ money back into the savings account. After I’m done repaying myself, I go back to my original ceiling ($3,000).
- Now let’s say I sold my old car for $1,500. I classify that money as savings, so I still owe $8,400 (instead of subtracting that $1,500 from the cost of the car).
I use this method because it forces me to cut my spending back to the bare essentials until I have recovered.
I also use monetary penalization to help me to change my behaviors. All of that money goes to savings. For example, if I didn’t go to the gym for a week this month then I would have to make an additional $50 payment to savings.
How I Spend Money
I purchase my needs as they arise, unless it is a large purchase. If it is a large purchase, I will look to find the best possible way to save money on this purchase (look for sales, coupons, price-match, etc.).
When I purchase wants, I will spend months researching every detail and specification about the item. I will look at all current models, read hundreds of reviews and scour the internet for prices, variation, and any other possible information on the item. I will then wait, sometimes for years, for what I want at a great price. When I find it, I jump on it. To an outsider, this may seem like an impulse buy. But I have been waiting for a long time to buy this item and it satisfies me the same way as if it were an impulse buy.
Where I Make Mistakes
It turns out not having debt is not always a great thing. I paid off all of my student loans shortly after graduating and I had been debt-free for 4 years when we applied for a mortgage. It turns that all the credibility I felt I should have had disappeared because I hadn’t taken out any sort of loan since paying off my student loans. Because my credit had been inactive, I did not qualify for our mortgage. My wife did, however, because she still had student loans and continued to make payments.
Honestly, it doesn’t make any sense to me that paying off all your debt should penalize you. It also doesn’t seems right that your good credit disappears 3 months after the last cent is paid. I’m still working on recovering my credit because of this misstep.
I’m also bad about investing. I don’t have the time or desire to add more stress to my life with managing a stock portfolio at this point. And I struggle with the idea of other people taking care of my money, so I do not want someone else to manage an investment portfolio for me. So basically, I’m stuck with lower interest rates in my savings accounts for now.
- I would suggest doing the credit card thing: have one credit card, make a small-ish purchase every month, and pay the entire balance off every month. Never carry a balance if you can help it.
- If possible, try to find a job where the job pays for at least one of your regular expenses: transportation, meals, lodging, etc.
- Look at college one of two ways: It’s a business decision or it’s your last big vacation. What I mean by that is college is where you select if you want to pursue your passion or have a financially successful future (in rare cases these overlap but not that frequently).
- If you want to utilize college from a business perspective, get a degree in something that will make you money and do good. Some examples of these degrees are engineering, accounting, becoming a nurse or physician, or get some sort of business degree.
- If you opt for the vacation option, party it up and make it count because you will be paying for it for the next thirty years.
- Don’t discount trade schools. Trade schools specialize in hands-on skills, such as plumbing, masonry, wiring, mechanics, and driving
You can get your Commercial Driver’s License for $3,000, buy a truck for $60,000, and start making $50,000/year just 6 months after graduating high school (and trucks have a pretty decent resell value if you decide you don’t like it). You don’t like being a truck driver? Sell your truck and get your money back. Try selling a $60,000 degree that doesn’t get you a good paying job.
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I hope you enjoyed this post from my wonderful husband!