My wife and I have been blessed in many ways… we have two beautiful girls, a wonderful church family, a nice house, and both of us have good careers with little perceived risk of layoff.  That being said, we also got comfortable.  Comfortable that we could spend on whatever we wanted without planning and comfortable enough that for a long while we quit paying attention to the details in our finances.

Then the market crashed, and the economy soured and we decided to take a fresh look at everything. The funny part is that I really haven’t been impacted much by the troubled economy… my paycheck hasn’t gone down, my bills haven’t gone up (in fact my HELOC rate is tied to the feds rate, so it’s been going down), and I haven’t needed a loan.  The only place I’ve really been hit hard is in my investments which is plenty bad, but which doesn’t directly impact my monthly budget.

Regardless, it was the straw that broke the camels back, and we realized that in many ways we have been living recklessly as it relates to our finances; taking too much for granted, and not being as responsible as we should be with what we have been given.  We haven’t been very good stewards.  That’s part of the reason I started this site, because we wanted to capture the journey to improve and share what we learn with others.

Last month marks the first month that we took a VERY ACTIVE role in our finances.  We have a pretty simple model, which actually makes it very easy to manage our finances . . . we just weren’t doing it and we were constantly exceeding what we thought seemed like a reasonable budget. So we created a new budget (this time we wrote it down) and we broke down our spending into a reasonable number of categories.

The way we spend money, it made sense to look at it as two pools.  I pay all of our bills (mortage, electricity, phones, etc.) out of our E*Trade checking using their online bill pay. It’s free and it saves me time and a stamp.  We also use this account for cash when it may be needed (such as lunch money for our oldest daughter or for parking downtown) and any other expenses which don’t accept a credit card (church offerings, etc.). Most of these expenses are fairly predictable.  If one of my bills varies according to the season, I ask that the company level my payment so that it remains fairly constant throughout the year. There is very little variance in what is spent out of this account from month to month.

On the other hand, all of our general spending goes on our Amex.  It’s a gold card which we pay off each month. This is where we were getting into trouble.  We use the Amex for things like food, grocery shopping, gas and entertainment.  Our spending from month to month sometimes varied by as much as 100%, so it was time that we got it under control.  We set a limit that we did not want to exceed. . . something that was both realistic but aggressive.  Then we tracked it. . . DAILY!

Each day last month, I would log in to the Amex website and review our purchases and send my wife an update.  We broke our target down into a daily spend so that we could track how much ahead or behind we were on our spending.  We also forecasted upcoming expenses so that we made sure to schedule them in a way that would not cause us to go over.  For example, we included two new tires for my car this month, but pushed out some parts that need replacing on the other car until November.

In the end, we came in under our target by 13%  and really didn’t feel that much of an impact by doing so, which tells me that all of that “other” stuff really wasn’t adding a lot of value to my life. We spent 33% less than last month on the Amex which is fantastic. I’m claiming victory a little early because my credit card cycle actually ended yesterday so anything we spend today or tomorrow goes toward next months bill.

It’s actually been extremely motivating to take such an active role in the finances. Equally important, we did it together so that both of us were very aware of how our finances stood and we could support each other in our common goal to control spending.  That sort of accountability helps to hold off the impulse buys that always seem to add up at the end of the month.

This coming month will be the first test of how this change impacts our entire budget, since it will be in November that we pay the credit card bill for October. I expect that with some cut backs on other expenses and the reduced credit card bill, we will end up in a great position going into the end of the year.