The One-Month-Ahead System

It took me several years, but I finally figured out how to manage my families finances so we never worry about the bills.

First, I used a windfall (could be a tax refund, holiday gift, inheritance, bonus, etc.) to get a month ahead of my bills. This means any money received in January is for February living expenses. Don't use direct deposit unless it goes directly to a savings account. You are likely to use it before you mean to if you put it in your checking account. Otherwise just hang onto those checks until about 4 days before the first of the month. Then deposit the checks or transfer from savings into your checking.

When you make your deposit, get cash back for regular items such as gasoline, allowance for kids or the working person, groceries, and money for things like a night out, movie rental, haircut, etc. We call those incidental expenses. Put the cash into a coupon holder - one slot for groceries for the month, incidentals, gasoline, etc. That's all you should spend for the month on those items.

Write any checks for bills due the first of the month. Then whenever a bill comes in, pay it right away. Part of my going through the mail is writing checks for bills received and getting them ready to go out in the next day's mail.

When you are at the bank (I only go once a month to do all this), transfer into another checking account money used for bills that aren't monthly, like car insurance that you only pay twice a year, or property tax, home insurance and auto registration paid only once a year. Each month you put only a month's portion of the total bill for each item into that second checking.

This way everything that's left STAYS in savings. The bills are always paid right away and there's money earmarked for the big non-monthly bills and other living expenses. You can make it a habit to never go into your savings account to pay bills by using this system.

The next windfall you get after starting this should go directly into savings. You'll soon find you have a good back-up in case of job loss or emergency expense.

Padma in Pima