Can someone explain Freedom Funds?

iVillage Member
Registered: 04-26-2003
Can someone explain Freedom Funds?
4
Thu, 06-05-2003 - 12:38pm
I have been reading your posts and would like to know what Freedom Funds are? Ok, I know I am a little dense! Also, I sort of get the Snowflaking, but could someone refresh me on this too? Sorry to be so dumb, I just need all the help I can get.

Thanks for your replies on my other question about minumum payments! We are all in this together!

Lucy
iVillage Member
Registered: 03-27-2003
Thu, 06-05-2003 - 1:11pm
Freedom Funds:

You're not dumb! This is a term coined by Mary Hunt, and it's not obvious what they're about unless you've read her book, "Debt Proof Living," or had them explained to you.

In short, freedom accounts are set up to make sure you have money to cover all those little "unexpected" expenses that shouldn't be "unexpected"--car repairs, tax bills, dental bills, medical bills, Christmas, birthdays, clothing, etc.

For each category that you identify, you go through one or two year's worth of records and add up your total yearly cost in that category. Then you divide that number by 12, to get your monthly amount. Every month, you set that amount aside in a separate checking account (called your freedom account or freedom fund). When expenses arise, you already have the money available and easily accessible. Hunt recommends putting all the money in one account, but then keeping separate records so you know how much is available for each category (cars, taxes, medical, etc). She gives good details for setting this up in her book.

I think everyone has a different variation on this, but here's what I do:

I opened an ING Direct account (you get a $25 bonus for opening one if you use a referral--there are plenty of people on this board and on the ING Referrals board who will be happy to give you one, as we get $10 every time someone opens an account on our referral) for each category. ING is great, because it offers a high rate of return (2.1% right now) and you can have as many accounts as you want and put a "nickname" on each one. So I have "Xmas FA" "Power FA" "Auto FA" etc. However, you can only withdraw from each account 4 times per month, and you have to wait 5 business days after deposits in order t owithdraw. But it works for me.

Well, my toddler is sitting on my desk in front of th emonitor to get my attention, so I can't see what I'm typing, so I'd better go. Hope that's helpful.

Heather

iVillage Member
Registered: 05-08-2003
Thu, 06-05-2003 - 3:06pm
My freedom fund goes into a savings account that I don't have access to with my bank card. It just has online banking and I need a days notice to transfer the cash out to chequing.

I have items in it such as:

Bill: Annual:



Appliances $0

Clothing Kids $0

Clothing $0

Clothing $0

Contingency Fund $500.00

Dental/Prescriptions $200.00

Domain: 03/04/04 $14.32

Domain: 02/27/04 $22.99

Donations $50.00

Drivers License - 2005 $60 $12.00

Drivers License - 2007 $60 $12.00

Gifts Fund $650.00

House Insurance Deductible Fund $1000/5 years $200.00

House maintenance $1,000.00

Irving - Furnace Oil 1200 $1,200.00

Phone Cards $40.00

Property Taxes May to Sept 30 $761.32

Property Taxes 2004($1,443.05 starts Oct) $0

School Supplies $40.00

Vacation/Family $500.00

Water Commission $360.00

I can't copy the spreadsheet because it won't format properly, but those are the annual costs, and I have another column that gives me the annual total divided by 26 to get a biweekly amount that I have to deposit into savings. Right now we're putting $236 into savings biweekly for this stuff. The $0 columns are funds I need to start but don't have the available budget for right now. (Kids are alright though cuz I buy their stuff with my ebay sales profits). I track the individual funds with savings goals in quicken, but a ledger book or note book does the job just as well.

Those drivers licence funds are actually $60 for five years, so it's $12/year for an expense. Doesn't seem like a big deal, but when I had to come up with $50 last spring I was sure wishing I had a freedom fund in place! Next time I will be all set and it won't faze me a bit.

Last year, (my first year), was a little rough in setting the funds up because I only had 8 months or whatever until some bills came due and I had to prorate them by 1/8th to build up the fund, and I had to use credit for some bills still when I wasn't fully freedom funded in that area, but now a year has gone around and they're all in place at 1/26th savings per paycheque it's great! I love freedom funds!

iVillage Member
Registered: 04-26-2003
Thu, 06-05-2003 - 10:30pm
Thanks for the info. I understand now! Sounds like a great concept!

Lucy
iVillage Member
Registered: 03-31-2003
Fri, 06-06-2003 - 10:29am
I also use an ING account that I set up late last year from a referral from ivillage. I've got it split into Furniture, Celebrations (weddings & christmas), auto, pets, vacation, car insurance. The money comes out of my checking account, and I split it between the ING accounts. I dipped into it last month to cover some compulsive spending bills, but I'm back on track now (I didn't touch 'Celebrations', because hopefully we'll get to the J.P. this month.)

Lee Ann

www.werenotafraid.com