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Debbie Sharp Loeb, teacher by training but full-time mom to a disabled son, craftsperson, bead artist, great cook, creative homemaker & terrific spotter of cool new products for everything under the sun, presents Hodgepodge: recipes, household hints, stories about children, friends & relatives, cool stuff, music, & much more.

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Monday, January 07, 2008

Budgeting, Money Management, & Getting the Most Out of Credit Cards

I’m going to “piggyback” a bit on Carol’s posting for today on W.O.W. and talk about budgeting and other things.
Actually I’d been meaning to write about this for a long time and thought this was as good as anytime to do it. Now this isn’t something that everyone will want or need to do, but it might be helpful to some that are either starting out, or having trouble managing their money.
We’ve been doing this since we were first married. It works for us and others we’ve told it to, like it as well, and use it. It’s a very “concrete” way to manage money. We've done it so long we never changed.
First of all we don’t deposit a whole pay check into our checking account. The mortgage – which is the biggest amount, will get deposited when the check is cashed as it is paid at the first of the month.
* The checking account is used only to pay bills. What do I mean by that? Well, that checkbook never leaves the house. I don’t take it anywhere to pay for anything.
* We use one of those small check size files with many compartments to manage money.
The compartments are labeled with such as the following:
Miscellaneous - Garbage, Sewer/Water, Home Owner’s Insurance, Loan, Time Share, Etc.
Car Insurance
Car Repair (Money put aside for any future repairs)
Credit Cards
You can also have Phone, TV, and whatever else is a regular bill for you.
The compartment in the front of the file is left empty.*
We only use credit cards that give us something back.
American Express – Hilton Honors – Free stays at the many places they own.
Discover Card – Cash Back Bonus, etc.
You get the idea.
Now Paul budgets so much money for each compartment in the file. When there is extra money they can be “padded” with a little more.
So say I go grocery shopping and I spend $50 (putting it on a credit card). When I come home I take a $50 bill from the food compartment and clip it to the receipt and put it into the *front empty compartment. This way I know just how much is there to budget for food and can plan accordingly. When the credit card or other bills come in, the money is there to be deposited into the checking account to pay the bills.

So -
budgeting is done
bills get paid in full
money is put aside for future bills and savings
and we’ve gotten bonus extras in the form the credit cards give us!
We never pay any credit card interest. We’re the ones the credit card companies don’t like because they don’t make money off us!

You might even want to get your teenager to start this when they start working. They can put money aside for car insurance, gas & repairs, clothes, savings, recreational spending, prom, trips, and whatever else you feel they need to budget for.
Brian started with a Discover Card in his name, under our account to use at college. They said even with it being under our account it will help him to build up a good credit rating for when he goes off on his own.


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