By Melissa Tosetti
Brad and Courtney recently moved back to the States after several years of living in England. While overseas, they lived on two very modest incomes. They reached out to us to create a Spending Plan once they were both working full time again. With the kids getting older, they try to balance enjoying life now while paying for braces, bills and saving for retirement.
Their situation is unique in that they were meticulous trackers of their spending. But, having lived on modest incomes for so long after moving, they did end up accruing some debt that they wanted to get paid off – but, they wanted to do it while finding a balance of still being able to enjoy life. They felt like they lived on nothing for so long that balance was critical to the sustainability of their Spending Plan.
Like so many, one of their biggest struggles was getting caught by Intermittent Expenses. It seemed like every month something out of the ordinary would come up.
One other thing I’d like to note regarding Brad and Courtney’s situation – in addition to tracking their spending, they also did meal planning. Basically, they had been doing everything they could do to make their go as far as possible, which is commendable!
The Spending Plan process was made much easier by more money that was now coming in. As part of the process we did create a plan for their Intermittent Expenses, but based on the timing of when we started working together, many of those Intermittent Expenses were going to hit in the first five months of putting their plan into play, so we created a triage plan for them.
For each of those Intermittent Expenses we figured out what was going to hit when and how much they needed for each. They set up savings accounts for some of the big ones and began to feed them monthly. But because some of those savings accounts hadn’t fully funded prior to the need for that savings, it created the need for their triage plan.
They opened their savings accounts with Capital One 360 and they also opened a second checking account linked to those Savings Accounts. They began using that second checking account for those Intermittent Expenses with a twofold strategy:
1. If they know in advance an Intermittent Expense is going to hit, they transfer the money to the second checking account and use the debit card – keeping their Intermittent Expenses separate from their Monthly expenses.
2. If they get surprised by an expense, then they use their regular debit card, but when they get home, they transfer the money and immediately pay back their account for the Intermittent Expenses. This ensures they don’t fall back on credit cards and stay focused on paying down their debt.
Yes, it takes a few extra steps, but they’re able to keep their spending under control.
A month after putting their Spending Plan into play, Courtney talked about how having the debit card for their Intermittent Expenses has worked really well for them. They don’t feel bad about something like getting a haircut because the money is there.
She also appreciates how the money has a chance to build in those savings accounts. For example, they didn’t spend on clothes this month so that money will build for when the weather changes and they need new clothes. Also, “it feels good that we’re already setting money aside for Christmas.”
Courtney and Brad came to us with excellent money habits in place. We were able to just help them strategize ways to more easily manage their cash flow so they no longer get thrown off by those Intermittent Expenses.