Stackbacks System

This year has been one of many financial goals. The ultimate goal is to get everything to the point where I don’t have to think about where the money is going, or whether we’ll have enough at the end of the month. We’ve made a lot of progress toward that goal throughout the year: refinancing our mortgage, tracking finances with Yodlee, and automating and maximizing our savings.
Recently, we took our organization a step further, and implemented a sort of Stackbacks budget system. As the creator says “This budget system is based on a simple idea… You shouldn’t have to think about your budget. Figure your budget out once, not constantly. I want to pay my bills on time, reach my financial goals, and have money I can spend without worrying about it.” Ding! Sounds good to me, how do I do it?
For us, it took a while, but we are doing it and liking it.
Back in March, we opened a high-yield savings account with HSBC Direct. We started feeding an emergency fund with a bit of each paycheck, having it direct deposited, so we never saw it even pass through our main checking account, and thus were not tempted to spend it, or use it to cover an overdraft. Then, in June, HSBC introduced their online payment account. It was easily linked to the savings account, and didn’t cost anything, and pays 2.5% interest, so I went ahead and opened it, while somewhere in the back of my mind, I thought it would come in handy sometime in the future. My wife was still wary though, since the account didn’t come with paper checks, and had no branch access to speak of. So I didn’t really do anything with the account for a while.
Then I discovered Stackbacks and the 4 week challenge to mastering your budget. I was intrigued and read the steps:
Step 1: Open a new checking account. Did that with the HSBC payment account.
Step 2: Identify your planned expenses. I put together a spreadsheet that listed out all of our big expenses and their due dates. Yodlee helped greatly here, as did signing up for our utilities’ budget payment plans.
Step 3: Control your cash flow. As the creator of the system mentions, this is the most crucial part, and the hardest for us to get through. What I did was to set up my direct deposit to have enough money deposited into the HSBC payment account to cover all of the expenses I listed in step 2. Then I set up online bill paying from that account, and scheduled the transactions to get entered into Quicken, and automated their payment. I moved the emergency fund to Presidential Bank’s savings, so that we wouldn’t be tempted to dip into it. And the rest of the money would go to our regular checking account, which would be used for things like gas, groceries, etc.
Step 4: Manage your budget. It would be easy to think that your job is done, but this is the part we are working on now. The easy part is paying and reconciling bills. That is mostly automated now. But we do still need to check up on ourselves and make sure we are not blowing a lot of money on things we don’t need. If we start doing things well, we should find ourselves with some extra money at the end of each month that we can start using for things like vacation funds, and college savings. The key thing we have left to do is to give ourselves an “allowance,” rather than just dumping everything that is not a bill or emergency fund into this account. Doing that will just perpetuate the cycle of living paycheck to paycheck, you’ll just be better organized when doing it. So we’ll keep an eye on how much we’re spending on living expenses, with the goal of increasing the amount we’re saving each month. So far, we’re not doing great on this front, because I stupidly forgot that my curling membership was coming due (almost $500 unplanned expense there), and we had a couple of other unplanned things pop up. But we’re working on it, and hope to get things smoothed out in time for the big expenses of the holiday season.
It took some effort, but we are pretty happy with the way things have turned out. We’re no longer spending money on stamps, or forgetting to put bills in the mail. We still have our local credit union account, so we can still write paper checks if needed, and get free ATM withdrawals for spending money. Best of all, we don’t have to spend nearly as much time fussing over the budget.