Bill and Budget Organization

Mint.com is a good, free tool to use. You set up your monthly budget and track every dollar you spend. It will give you bill reminders for upcoming bills as well. I'm sure there are many other good options but mint works for me.

Two years ago I built a budget spreadsheet within Excel and I have since maintained yearly copies of it for budget tracking. Each year I create a template based on the previous year's spreadsheet and I will calculate expected salary, expenses, taxes, and so on... to assist me with determining how much money I will have available for saving, investing, and spending.

Regarding my bills, I receive emails whenever a statement is posted and that is my reminder. I have my email set up on my phone and I am constantly monitoring it. Several companies will allow you to set up recurring payments so that the bill payment is on cruise control. I have never had a late payment since college, and in college I would pay late due to the lack of funds at the time.

I have so far always based my percentages of what I save off of my gross income. I am still single and I am in my third year of work. So far on a yearly basis I have saved or invested upwards near 45% of my paycheck and this year I am targeting 35-40%.

My financial situation is fairly simple (i.e, not married and no kids).

[A] Set up autopilot LINK

I used to set reminders, but that still caused too much stress because of the demand of my profession and certain aspects of my lifestyle… meaning I didn’t want to have to worry about tracking down bills whether by physical mail or email and worry about due dates if working a few late nights or traveling. I made the decision to put as much on autopilot as possible – which is surprisingly a lot.

For autopilot, there are four options:

(1) set up auto draft through the payee (based on the amount billed),

(2) set up automatic payments charged to your credit card through the payee (based on the amount billed),

(3) set up recurring payments through your bank’s online bill pay (if the amount due each payment will not change),

or (4) set up automatic payments through your bank’s online bill pay (based on the amount billed).

Optimally, all payments would come from one account and use the same method to make things neat, but real world application doesn’t allow for it. The method of payment should depend on the capabilities of the payee and should also depend on the quality, security, and trustworthiness of the payee. For instance, rent vs. mortgage. Rent would be set up on recurring payment through bill pay so the person or company would receive a check in the same amount on the same day every month whereas a mortgage would best be set up on auto draft. Watch the first few payments carefully to make sure it gets paid without a hitch.

I have all of my payments set up using one of the methods above with the exception of credit card payments which I pay manually through bill pay to force myself to review those transactions.

[B] Bucket or compartmentalize LINK

“Savings” are automatically taken out each check and distributed to the accounts that I want. A 401(k) contribution is an obvious. Beyond that, I keep 3x monthly expenses in my "operating account". This is the account I use to pay all bills and expenses. Any excess periodically gets swept into my “savings account”. I keep 6x monthly expenses in my "savings account". I use this as an emergency fund and to fund my Roth IRA and my HSA as early in the contribution year as possible. Any excess gets periodically swept into my self-directed taxable brokerage account.

[C] Have a destination for every dollar LINK

Every recurring expense has been budgeted for. I have two income steams budgeted -- paychecks and reimbursements. I have sixteen expense categories budgeted.

Of my gross, 40.75% goes directly into my operating account for living expenses, 37.25% goes directly to my 401(k) and savings account as mentioned above, and 22.00% is taken out above the line for taxes, insurances, and charitable donations. Bonuses are just that and are not budgeted for. Outside sources of income are just that and are not budgeted for.

Realistically, my living expenses at 40.75% should be the maximum that I should spend in any one month. My budget for electricity is based on the highest bill that I should expect to see. My budget for gasoline is based on the most that I’ve spent on gasoline in a one month period. It’s very easy for me to come in below budget by about $500 or more during certain months of the year and becomes a game to come under budget during other months. It’s very satisfying to look on Mint and see that I’ve come in under budget.

[D] Be goal oriented and gamify LINK

In addition to using Mint, which is great and takes less than a minute to check daily, I have a very elaborate spreadsheet that gets updated quarterly that projects out my income, expenses, and personal financial statement for two years. It’s my personal goal to grow my net worth by a certain percentage each quarter. All of my efforts are towards that end. At the end of each quarter, I know what it should be and it’s disappointing not to achieve it.

[E] Control access points

I use my Amex for everything. It’s my main access point for paying for things that aren’t set up on autopilot. It has to be paid every month and has excellent fraud, security, and notification systems in place. I also know from my budgeting process that total transactions are limited to $1,000 per month for me to be on budget. Roughly, anything over and I'm over budget. Anything less and I've saved for that month.

For security and simplification reasons, I don’t use debit cards or other credit cards unless absolutely necessary. If I do use another credit card, I immediately make a mobile payment so I don’t forget to pay it.

[F] Follow security best practices

It’s important to follow best practices for security -- password strength and architecture, dual authentication, limiting access, firewall, anti-malware, virus protection, updates, downloading apps from trusted developers, etc. -- if you’re going to leverage technology. Use one official personal email address just for official business so junk doesn't interlope with important items in your inbox.