Category Archive: Emergency Fund

What To Do With A Tax Refund

My wife and I filed our taxes this evening.  The process was pretty straightforward and only took a few hours.  We have a small refund heading our way – we plan to use it to help rebuild our long-term cash savings.

Over the years, we have used our tax refunds for:- funding our emergency fund, purchasing furniture for our new home, paying off credit card debt, and going on vacation.

In a perfect world, we would have our withholding dialed in, and our refund would be very, very small.  As many have stated before, there’s no reason to give the government a “tax free loan”.  The reality is, our income fluctuates each year, and we would rather play it safe and over-withhold, rather than get stuck with a tax payment at filing time.  Also, I had some business-related expenses that reduced my taxable income more than I had anticipated.

Over the past year, we have begun the process of rebuilding our cash reserves.  I had to deal with a series of medical expenses in 2016 -which cut into our savings.  The tax refund will go towards our six-months-of-expenses savings.

What do you plan to do with your refund?

Leave a comment below or connect with me via Twitter @NCN – and have a blessed day!

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Get Out Of Debt – A Better Budget

I recently wrote about our debt reduction process – a simple one-page guide to getting out of debt.

Step 2 of our process was:

We created (and followed) a zero-based budget. We “spent” our paychecks, on paper, at the beginning of each month, so that we would know where our money was going to go.

I thought I would elaborate a bit on our budgeting process – and some tips that work for us.

We break our budget into three major categories: spending, saving and giving.

Within those categories, we try our best to estimate upcoming monthly expenses.  We save for annual expenses (such as insurance premiums) and quarterly expenses (such as our car insurance premiums).

The easiest way to save for a non-monthly bill?  Divide the amount due by the number of months until the due date – and that’s the amount to put into savings, each month.  When the bill comes due, you’ll have enough in savings to pay it, and you can avoid the “shock” of that non-monthly expense.

I am the math-nerd in our family, so I do most of the budget creation – buy my wife also plays a very important role.  She’s very practical – and often understands more about the day-to-day needs of our family.   So, after I create our first-draft, she looks it over, suggests changes, and then we finalize our budget.

After all of these years, we still use the good old envelope system to manage our cash.  It works for us for day-to-day transactions – but we also use our debit cards.

I have tried (and liked) various budgeting software programs, but the real truth is, our finances are so simple at this point, our budget is just a simple spreadsheet.

My wife and I both receive monthly paychecks – and I make some irregular income, throughout the month.  All irregular income is placed into our savings account so that it is available for unplanned-for expenses (or cool stuff that we just want to buy).

We make contributions pre-tax to our retirement plans, so we don’t technically “budget” for those funds.

I do my level best to pay all of my bills on the first day of the month.  We use online banking through our local bank to pay most of our bills.  I think we write 2 checks per month, for local services.

We try to stay on top of things – and to remember irregular expenses and possible category changes.  Recently, our oldest started driving (yikes!) and we had to change our allocations for gasoline, insurance, car repairs, car replacement, etc.

Our kids have their own money – from gifts and working around the house – and we have taught them to use this same system.  Our older two are brought in as we discuss the budget, and they often have great ideas for saving money and allocating our funds.

We include debt reduction (paying off our mortgage) under the spending category.  If we had many debts, we might create a fourth major category – debt reduction.

Creating a zero-based budget – and “spending” every dollar before the month begins – really helps us stay on track.  Please subscribe to No Credit Needed via daily email or rss – and follow me via Twitter and Facebook – for more content.  Blessings.


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Get Out Of Debt – The Emergency Fund

I recently wrote about our debt reduction process – a simple one-page guide to getting out of debt.

Over the next few days, I plan to elaborate on each of the steps mentioned in the article, starting today with a few notes about step 1 – and the emergency fund.

My wife and I have our primary checking account with our local bank.  This allows us to deposit our paychecks locally – and is a great place for my son to find coins for his collection.  The account is interest bearing and is free.

Our saving account is online – and that’s where we keep our emergency fund.  Withdrawals from our checking account and deposits into our savings account take place each week, easily initiated from our online bank account.  We can easily track our account balances via our online bank’s phone app.

emergency fundWhen getting out of debt – before we started aggressively paying off our debt – we worked hard to fund our beginner’s emergency fund.  Our goal was to keep a minimum of $1000 in the account, at all times.  We managed to keep between $800 and $2000 throughout our process.

The emergency fund helped us cover unplanned-for expenses – and helped us avoid adding to our credit card balances.  We dipped into the emergency fund, if memory serves, twice during our debt reduction process.

Both times, we paused our debt reduction (while still making minimum payments, obviously) and rebuilt our emergency fund.  Cash reserves were (and are) that important to us!

After getting out of debt – and prior to the purchase of our first home – we worked to save six-month’s worth of salary in our emergency fund.  We used the same “method” for savings as we did for debt reduction – but this time – the “extra payments” were going into our savings account.

When we purchased our home, we used a small portion of our emergency fund to help with our down payment.  We did this to avoid PMI.  After purchasing our home, we rebuilt our emergency fund.

Over time, as we have gotten better at living on a budget and understanding our month-to-month financial needs, we have moved away from a strict “emergency fund” – and more towards categorized “cash reserves”.  In other words, our cash is allocated, on paper, for future purchases and long-term goals, plus emergencies.

Our emergency fund provided a lot of comfort during our debt reduction process – and continues to help us as we work towards total financial independence.  Thanks for reading – and have a blessed day!

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