So limit your subaccounts to the essentials. Getting your Freedom Account started can be tough early on, as you're probably not used to setting aside money like this on a monthly basis. Try starting out with a minimum number of subaccounts. Spend it for the purposes - even minor ones - that you intended. When those big expenses pop up, allow your planning and saving to do what it was meant to do. Don't let yourself feel guilty about using funds from your Freedom Account. (Once my Christmas subaccount hits $500, for instance, I don't make any further deposits until some of that money gets used.)ĭon't hesitate to use your account. When that balance is reached, don't deposit any further money into that subaccount until you've made a withdrawal. Determine your ceilings (maximum necessary balances) for each particular subaccount and respect them.
Don't let the balances build up ad infinitum. The money in it is targeted for specific future expenses. This is a spending account, not a savings account. This is what you've been saving that money for! Makes sense, doesn't it? A Few More Freedom Account Guidelines When your Freedom Account expenses happen, pay them! If you spent $780 on automotive repairs, maintenance, and tags last year, you'll want to put aside at least $65 per month to cover them this year (you hope!).Ħ. For example, your usual $500 Christmas gift-giving spree would be fully funded ahead of time by setting aside about $42 per month ($500 / 12 months = $42). Now determine what dollar amounts you could set aside monthly to take care of each of these wallet-busting bills. What were the bills that caught you by surprise? What bills didn't surprise you, but still found you unprepared? Auto repairs? Property taxes? Insurance deductibles? Medical bills? Holiday and birthday gifts? Here's a list of some ideas: Auto repairs Some of these will come to mind immediately others will probably require that you search back through a few checkbook registers, or scroll backward through your computer financial program, if you use one. Find and list your irregular, big-ticket expenses. Take a moment or two to read it sometime. And that means those oh-so-vital credit cards might never have to come out of your wallet or purse.Īs as example of just when and how a Freedom Account might be useful in real life, my article "When Murphy Comes Calling" describes just that. At the very least, such an account would help to alleviate the immediate financial strain imposed by irregular expenses such as those above. In a perfect world, your Freedom Account provides for these bills entirely. You deposit small sums into it each month because you are thinking ahead: You're anticipating bigger, specific expenses down the road. Think of the Freedom Account as a sort of holding bin. Freedom Account: Your Financial Holding Bin Thus, December rolls around, and out come the handy credit cards. (And it probably gets more expensive every year, too.) Yet people simply do not take the time to build up the necessary funds beforehand. But just because an expense isn't in front of you right now doesn't mean it's optional.Īnd what about expenses like Christmas? That one hits at the same time each year.
You know all these expenses are going to show up sooner or later with many of them, you just don't know when. Included in this category might be items such as car repairs (usually expensive almost always unexpected), vacations (very expensive, but also very plannable), medical bills (always expensive almost always unexpected), six- or twelve-month insurance premiums, insurance deductibles, work clothes, Christmas gifts, and other items like these. Debt-Proof Living (formerly The Cheapskate Monthly), urges that each household create and manage what she refers to as a "Freedom Account." Many people, she writes, get themselves into credit trouble not by splurging on spur-of-the-moment fun purchases, but by finding themselves unable to pay for those big-ticket, necessary expenditures which Life drops on them from time to time.
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