The End of Family Budgeting
This blog post has been almost a year in the making. In January of this year I switched over my banking to a new bank called "Simple." I can now honestly say I spend more time brushing my teeth than I spend on personal finances and family budgeting and my family is actually staying right on budget. I used to pay all my bills and make all my purchases using credit cards and payoff the balance every month to take advantage of the cash back rewards, but the control Simple has given me over my finances has allowed me to save multiple times more money than I would have received as cash back from credit card rewards.
What is Simple?
Simple is new kind of bank that started off by 1st designing the customer service side of the bank and then they went after finding a federally insured banking institution to go along with those services. Most other banks out there are the other way around, they are no more than a thin customer service shell wrapped around a traditional banking institution. Simple is a web-based personal bank account that is linked to a VISA debit card and works via the web and a smart phone application. You pay for things just like you normally would with your VISA card, which can be used as either a credit card or a debit card. If you choose to use it as a debit card you must enter a PIN number and if you use it as credit you must sign for the purchase just like you do with a normal credit card. The difference comes in what happens next. Instead of having to wait anywhere from hours to days after your transaction to be posted to your account it IMMEDIATELY shows up on your Simple account and your are notified of the transaction on your smart phone via the Simple App. Ok, so maybe Simple is a little bit faster in recording the transaction on your account. Why is that such a big deal? In my case, I used to use two different credit cards to make all of my purchases including as many of my utilities as I could pay with credit. Every month I would run over my budget because during the last several days of the month my last 2 or 3 days of transactions had still not posted to the account so I didn't know exactly how much of my monthly budget I had left to spend. You can spend a lot of money in just a few days, so it is really important when budgeting that know exactly how much you have spent.
So I mentioned earlier that I am now spending more time brushing my teeth than I spend on personal finances and family budgeting. How do I pull that off? Simple (pretty clever, I know). Simple keeps track of everything for me now instead of me having to manually categorize my expenditures and then figure out where those items fit into my monthly budget. My online Simple account keeps a running tally of my "safe to spend" amount in my account and it's this "safe to spend" number that tells me how much money I have left to spend until my next paycheck arrives. Below is a promotional image from the Simple website that shows what the "safe to spend" reporting looks like within the Simple iPhone application.
You can see at the very top of the iPhone screen there is a "safe to spend number", which is exactly what you need to know before deciding whether to make a purchase or hold off until your next paycheck. Below that is more information about your account:
- Available Balance: This is the current amount of funds sitting in your account. This includes funds that have already been saved towards a goal (more on goals later) or funds that have already been paid out or scheduled to be paid out to someone but have not yet left your account.
- Scheduled: These are checks that you have already scheduled to be sent (mailed out by Simple) but the checks have not yet been debited from your account and sent out. For example, you got the water bill in the mail today and it is due at the end of the month. So you schedule a check to be sent from Simple in the next couple of weeks to the water company. The check hasn't been mailed yet so you still have the money in your account but you have essentially spent it already so it is taken out of your "safe to spend" number.
- Goals: Goals are simply things that you are saving up for. It can be something as small as taking the kids out for ice cream this weekend or something large like a new water heater for the house. Goals are money that has been set aside for something so it is money that is no longer "safe to spend."
So your "safe to spend" number is just:
Safe to Spend = Your Available Balance - Scheduled - Goals
Online or Electronic Payments
Quite a few monthly services we all pay for now days allow us to either pay by credit card or they will pull funds directly from your bank account. This works with Simple just fine. In fact, for all of my monthly services that vary from month to month I pay this way (like my electric bill and my water bill). Your Simple checking account has a routing number and account number just like a normal bank account does, so it is really easy to configure these services to automatically pull funds from your account. When you have services like this pulled from your Simple account they just show up as a regular transaction, they are not scheduled. So the money is not taken out of your "safe to spend" amount until the day it is actually pulled from your account. If you want transactions like these accounted for earlier I suggest you create a goal for them and fund the goal from a paycheck and then spend from that goal when the money is later pulled from your account.
Since Simple is not a physical bank you can just walk into, how do you write and deposit checks? First off, you can't write physical paper checks yourself, they won't work with a Simple account. If you want to mail a physical paper check to someone with funds from your Simple account you can do that either through the a web browser or the smart phone application. You enter in the name, mailing address, any account number or invoice information you want referenced on the check and the amount and Simple mails out a very professional looking paper check. Simple even shows you on a calendar a range of days for the expected delivery date so you can decide how soon you need that check to be mailed in order to ensure it arrives in plenty of time. But what about those times when you need to write a check for something immediately? I have a few of those cases myself, like drop-in day care at my kids' school. They don't accept cash and you must pay by check on the day you use the service. So I still have a traditional bank account with a checkbook and use that checkbook just for those couple of things that require an immediate check to be written.
As for depositing checks, it's very easy. The iPhone application is used to take a photo of the check you want to cash and deposit into your account and your check is cashed and deposited.
Cash and ATMs
I don't like to carry around a lot of cash, so its important for me to able to get cash quickly and easily when I need it. Simple lets you do just that. Simple works with a network of over 55,000 ATMs nationwide here in the U.S. and both the Android and iOS apps have an ATM finder built into the app so you can quickly find the closest ATM to you at any given time. As long as you use one of the 55,000 ATMs (they partner with the Allpoint ATM network) there are no fees for getting cash from an ATM. I travel quite a bit and so far I've never gone anywhere where I am more than a mile or two from an in-network ATM.
Going from Complex to Simple Budgeting
I've used several different budgeting programs over the years to help keep track of my household budget and all of them required a certain amount of time to manual "tweak" and move data around in order to work. Most recently I have used both iBank and Moneywell on the Mac. And while both of these pieces of software did a really good job of documenting what I spent in the past, neither of them did a very good job of telling me where I am within my budget right this second. That is now possible with Simple, but just as the name implies you must simplify your budgeting and financing in order for it to work really well. The simplification that is needed isn't in how you categorize your purchases, but in how you budget for them. I'll use myself as an example. For my monthly budget I have a spreadsheet that list all of my monthly bills (mortgage, insurance, utilities) as well as recurring expenses (groceries, gas, eating out, going to the movies). I used to track and budget against all of these categories but it took so much effort to keep track of it all. When I switched over to Simple for my banking I looked at that long list of items and broke it down into just two categories:
- Monthly Expenses
Monthly expenses are things that I can't really choose NOT to pay for or purchase, things like my mortgage and insurance. I added all of those items up (which was about 2/3 of the items and about half my monthly budget) and calculated how much I needed from each paycheck to cover these things. Now, when my paycheck hits every 2 weeks I just pull that amount out of my "safe to spend" and put it into a Goal I call "Monthly". When I have to pay for one of the items that is covered by "Monthly" I just spend from that Goal within my Simple account (each transaction within Simple you are allowed to categorize, tag and you also have the option to spend from one of your saved "Goals" instead of having the purchase come out of your safe to spend number). Below is another snapshot from the Simple website that shows what the Goals page looks like. For the example I just explained I would only have 1 goal called "Monthly" and when a new purchase or charge showed up in my account my safe to spend number would temporarily decrease by that amount until I opened up the iPhone app or visited my account online and chose to spend from my "Monthly" goal for that item.
All of the "other" items in my budget are for things that are expected expenses but either I have some amount of choice about when or how much I need of these items or the items needed over a given period significantly vary from month to month. It is all of these "other" items that are budgeted for and spent from within my "safe to spend" number. These are things like groceries, gas, eating out, going to the movies. The biggest chunk of my "other" list is something called Miscellaneous and this covers all sorts of things like the name implies (books, an iPhone app, renting a movie, buying a replacement light switch for the house, etc...).
The other piece of how I budget is by creating other goals for bigger items or things that I know I really want to do and might normally be part of my "other" chunk of my budget but I really want to save something back to make sure I can do that thing in the future.
An example of this would be the external hard drives I needed to use for my home video archiving project. I knew I would need these hard drives over Christmas break because that is when I will be off work and have time to complete my project, so I started a goal several months ago to start saving back a little bit at a time. Simple gives you an option when you create a goal to either save the money all right now (the money immediately comes out of your safe to spend and is put into this new goal) or to save money slowly over time with an end date. In the case of choosing the end date option, Simple calculates how much is needed to be saved each day in order to meet that goal and each day Simple automatically moves that amount out of your "safe to spend" and into your goal.
A different type of a goal example would be saving money back to take my family out to the movies once a month. Normally I would just use money (if it was left to spend at the time) from the "other" portion of my budget, but I really wanted to make taking the family out together once a month a priority. So in order to make sure this always fits within our budget I created a separate goal called "Movies" and I take a small amount out of each paycheck and use that goal to fund our monthly family trip to the movie theater. The great thing about budgeting this way is that it is so flexible. Say there aren't any good movies out we all want to see this month or we are really busy for several weekends in a row. Maybe we all go out for pizza and bowling now instead of seeing a movie. I just make those purchases come out of my "Movies" budget (or "spend from goal") and I've kept that family activity separate from the rest of the budget end ensured I always have funds available for us to go out.
The big difference between how I "tweak" and "fiddle" with my budget now as opposed to how I used to do it is that now I can very quickly just open up the app on my phone and in a tap or two I've adjusted all of the day's purchases so that they are spent out of the correct goal and made sure they are all categorized correctly. I used to spend an our or two every weekend doing this in front of the computer, but now I can do it when I have a few minutes standing in line at the grocery store.
I saved the most important part for last...saving money! I mentioned earlier how I had this long list of items in my monthly budget and after you add all of those items up and subtract them from my paychecks for the month there is some money left (by design). That left over money is for savings. I create a goal in Simple called "Extra" and each paycheck I pull out that pre-calculated amount that I should be able to put towards saving into my "Extra" goal. I also use the "Extra" goal to pull money out of "safe to spend" if I have had to make a purchase for something and pay for it via another method than my Simple VISA card (like a credit card or a personal check from my normal bank account). This way my "safe to spend" stays accurate and still reflects how much I can safely spend for the month. If something comes up that I haven't budgeted for I will "spend" from my "Extra" goal, because that is what savings is for...unexpected things that come up.
Husband and Wife & 2 Separate Simple Accounts
Simple doesn't allow you to have more than one cardholder per account, so my wife and I have separate Simple account with separate Simple VISA cards. So how do we both spend from and track against the same budget? Simple is actually working on being able to link two or more account to the same spending goals and safe to spend numbers, but for now you can't do this. So the way I have set this is up is the following...
- My account is used to pay for all the "Monthly" expenses
- My wife then only has to pay for and track all of the "other" expenses for the month
- I take that "other" monthly category and give her about half of that part of the budget from that paycheck
- Every 2 weeks she is mailed a physical check and the full amount of that check is her "safe to spend" amount for the next 2 weeks
- She then cashes that check and deposits it into her Simple account and she has funds for the next 2 weeks
We each buy varying portions of this part of our budget every month so splitting that part of our monthly "safe to spend" evenly between us is never quite right. So in order to correct it as needed sometime she needs more money one month and I need more money the next. If she needs more money I move that amount out of my "safe to spend" and into my "Extra" and she moves the same amount of money out of her "Extra" goal (which is essentially her saving account within Simple) into her "safe to spend". This keeps both of our "safe to spend" amounts accurate and ensures we both know where we are within our budget at all times. Granted this requires me to actually communicate with my wife about our budget on a regular basis, but I see this as a feature. In order for a budget to work you need to talk about it. Some people might look at what I'm doing by sending my wife a physical check every month and say I am giving her an allowance. That would be true if I just sent her that check and we never talked about it and never adjusted our "safe to spend" numbers as needed. So no, I don't have my wife on an allowance (at least no more so than I have myself on an allowance).
How does customer service work with a bank you can't physically walk into? It works incredibly well. I can either pick up the phone and call someone at Simple or even better I can send Simple an instant message from within the app on my smart phone. The budgeting scheme I described above I didn't completely invent myself out of thin air. At first I was pretty confused about how Simple worked so I asked Simple support some questions via the app and I got some incredibly helpful and detailed answers back that allowed me to come up with the scheme I described above. I've also had to ask support about some charges and holds on my account and every time I received a response very quickly and my questions was fully answered (and in most cases they even threw in extra information I didn't ask for but that information helped me make even better use of the service).
Simple is a very different way to bank, but in my opinion a much better and more powerful way to bank. I know I only skimmed the surface of what Simple can do for you, so rather than try and cover everything I will just refer you to Simple's FAQ page and let them answer questions I didn't answer as part of my post. As always, feel free to post a comment below if you have a question for me.
In summary, moving my banking over to Simple has been one of the best financial decisions I have made. It has given me complete control over my finances and budgeting in a way that I have never had before. Even more importantly it has freed up a large chunk of my time that I used to spend dealing with all this stuff and now I can spend it doing other things. I can't recommend Simple enough...
How to sign up
Simple is still only accepting new customers by invitation only. If you are interested in trying it out I have plenty of invite codes I can give out. Just get a hold of me either via the comments field below this post or via my Contact Page and I will be glad to get you an invite to this amazing service/bank. Just to clarify, I don't get any kind of kickback for bringing people into this service and Simple does not sponsor my blog in any way (in fact nobody sponsors my blog...do you see any ads anywhere?). I am writing about this great service because I hope it can help others as much as it has helped me. It has set me free from the chore of family budgeting!