- I hate the idea of budgeting, but I found a way called “bucketing” which works much better for me.
- Basically, my husband and I have many accounts for different purposes that we allocate money across.
- This helps us save 30% of our income every month, and fully fund all of our retirement accounts.
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I do not like the word “budget.” It sounds restrictive, and makes me think of saving receipts and using spreadsheets — neither of which appeal to me. I do like the idea of organizing my finances and knowing where my money is going so I can reach my financial goals, however.
So, my husband and I came up with a system that I like to call “bucketing” rather than “budgeting.”
This means that we allocate our money across multiple bank accounts every payday, with each account having a designated purpose. This works for us because it gets the job done without requiring us to keep track of every dollar — an idea I loathe and I know I would not maintain.
Some financial goals my husband and I have already achieved with this method include paying off our mortgage early and saving at least 30% of our total income every year for early retirement.
Through our savings, we’re able to fully fund my husband’s Thrift Savings Plan (TSP) and both of our Roth IRAs annually. We also make monthly contributions to our daughters’ 529 college savings plans and can pay cash for major household purchases. For example, we just paid cash to have a new garage built this year, and bought a gently used car outright.
How we landed on this approach
Our approach goes back more than a decade, to when we first bought our house and realized that we had a cash flow problem. Whenever we paid all our bills at once, we would run low on grocery or gas money until the next payday rolled around. Our mortgage was by far our biggest bill, and it seemed like we were draining our account every time it was due in the middle of the month.
Before long, my husband got an idea after looking at our mortgage statement. Like most lenders, our bank created an escrow account for us to cover our homeowner’s insurance and property tax bills. Every month we would fund our escrow account for our total home payment, and then the bank would pay our insurance and tax bills from it for us when they were due.
We decided to create our own escrow checking account to improve our cash flow problem. We estimated all our regular, yearly home expenses and then divided it by 12, knowing we’d need to put that much money into our escrow account each …….
