Managing what’s left

Automatic transfers can put many financial tasks on autopilot, reducing the effort needed to achieve goals. If you don’t automate anything else, automate your retirement savings to ensure you’re saving consistently.

Also consider saving money in separate accounts — often called “savings buckets” — to cover big, non-monthly expenses such as insurance premiums, vacations and car repairs. Online banks typically allow you to set up multiple savings accounts without requiring minimum balances or charging fees. You can name these accounts for different goals, and automate transfers into those accounts so the money is ready when you need it.

My family typically has eight to 12 of these savings accounts at our online bank. I figure out how much I want to have saved by a certain date, divide by the number of months until that date and send the resulting amount, via automated monthly transfers, from our checking account.

Return to your aftertax monthly income figure. Subtract your musthave expenses, your contributions to retirement and savings accounts, and any extra debt payments you plan to make consistently. What’s left is your spending money for the month. (Nothing left? Try winnowing some of those must-haves or set less ambitious savings or debt pay-down goals.)

In the olden days, you might have put cash in an envelope and used it for your spending money. Once the envelope was empty, you were supposed to stop spending. Some people still do that, but in today’s digital, contactless world, you might prefer other approaches.

The easiest would be to put all your spending on a single credit card that’s dedicated to this purpose and paid in full every month. (And since you’re paying in full, consider using a cash back or other rewards card to get some extra benefit from your spending.) Check your balance every few days or set up alerts to let you know when you’re approaching your spending limit for the month. To protect your credit score, you can make payments periodically throughout the month so your balance stays low compared to your credit limit.

Alternatively, you could use more than one card, a debit card or a spending app that’s tied to your checking account, such as Venmo, PayPal or Zelle. A budget app or spreadsheet can help keep you on track. You also could consider setting up a separate checking account just for this spending. Again, many online banks offer checking accounts without minimum balance requirements or monthly fees.

Your budget won’t be perfect and you’ll have to make adjustments as you go. But at least you, and your money, will be headed in the right direction.