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How do you save for long term house projects? (limited income)


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I am recently divorced and now only have a limited income. My house is also 20 years old, with minimal long term maintenance done on it. Lots of things area coming up in the next 10 years. I have a savings account with money set aside for a few things I need to fix in the next couple of years, but I also need to save money for things like a new roof. I Between the fence, water heater, roof and tree removal, that is already well over $20,000. Add flooring, paint appliances etc....we area looking at $40,000. 

How do you save for bigger projects if you don't have much extra each month? Do you save for each one, and just keep putting the money aside for one project at a time (what I am doing now), or do you just have one general savings and hope they don't all go bad at once? Do you cap it at a certain amount? Or just keep adding to it, knowing you will need it all at some point in time? I work 2 jobs so I can keep saving money...I would like a future of being able to quit my second job! BTW my credit is excellent and I have wayyyy more equity that my house is worth. If things when chaotic, I could access money via a loan. 

My way of saving in the past (when we had 2 incomes) was to have money earmarked for each expense saved ahead of time. ie I saved private school tuition money and paid cash at the beginning of each school year. I don't like to have payments. I always figure that if I don't have the money for things like private school ahead of time, then I shouldn't be sending them to private school. (I think way of thinking, was because my dad was a seasonal worker, so I grew up with variable income household that wasn't guaranteed month to month). I don't think I can set aside an entire house's worth of potential expenses. 🤣

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Can you do any of this work yourself? Or via friends using the old pizza and beer technique? (Pizza first, beer after.) Are there any programs in your area to help homeowners on a limited income, or retired homeowners, do necessary repairs? Where I live there are several that will either provide a grant or provide an interest-free, forgiveable loan.

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Not all maintenance projects are of equal importance.  We waited well over 20 years with cabinets that literally had doors that came off in my hand, before we could afford the kitchen remodel we are doing now.  But when our roof split down the middle (damage from a freak wind storm) that had to be taken care of immediately.  So we put up with a lot of old things and have done the emergent things. 

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No friends to help with the work. My friends are mostly super-busy women. (Working full time plus master's program or mom with her own business and 5 kids, etc.). I have a permanent back injury and work 2 jobs, so I can do some simple things myself but can't do heavy things.  I doubt there are any programs like that here. I live in a HCOL area, so a lot of people struggle with basic expenses. 

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Mmm. Tap, most of those programs are run at the state level. You might want to do a double check before simply assuming that either they don't exist in your area or that you aren't eligible.... especially if you're a senior citizen, or nearly.

(Caveat: Interest is bound to exceed funds. There's a reason these programs aren't well advertised. Be prepared to be waitlisted.)

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1 minute ago, Jean in Newcastle said:

Not all maintenance projects are of equal importance.  We waited well over 20 years with cabinets that literally had doors that came off in my hand, before we could afford the kitchen remodel we are doing now.  But when our roof split down the middle (damage from a freak wind storm) that had to be taken care of immediately.  So we put up with a lot of old things and have done the emergent things. 

Do you just save money into one big fund and take it out as needed? Or did you have different money saved for 'the roof' and 'the cabinets'? Does that make sense? 

I have always had a main account for my daily spending (food, gifts, clothes etc). But I saved for individual bigger projects and had a medical bill fund that I kept a set amount in each year. I really hate bills...can you tell. LOL! I even used to pay my daycare 3 months in advance, so I didn't have to pay it monthly. Over those 3 months, I would save the next three months. 

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4 minutes ago, Tap said:

Do you just save money into one big fund and take it out as needed? Or did you have different money saved for 'the roof' and 'the cabinets'? Does that make sense? 

I have always had a main account for my daily spending (food, gifts, clothes etc). But I saved for individual bigger projects and had a medical bill fund that I kept a set amount in each year. I really hate bills...can you tell. LOL! I even used to pay my daycare 3 months in advance, so I didn't have to pay it monthly. Over those 3 months, I would save the next three months. 

Well, in our case we had a kitchen fund that we kept having to use for more emergent things like the roof. So it took us much longer to get to the actual kitchen than we had hoped. 

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We really need to address this as well.  Dh has always had a job with plenty of overtime available so if something urgent came up he could work extra but now it’s a more fixed income.  I’m thinking having a general emergency/house repairs fund for urgent stuff and then saving for each less urgent project one at a time in order of priority.  It’s amazing how much you can survive with being non functional.  And some things can be purchased secondhand etc while other things cost what they cost.

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Dh and I are like you.

The big difference is he is paid every two weeks, so we budget months for 4 weeks' worth of income.  That leaves a few extra paychecks each year to go our fund.

We ranked our projects from most needed to least.  Some could have bandaids: our roof issues were modified by increasing the ridge vent ($600).  Our water heater was able to limp along for another 3 years thanks to a fabulous plumber/electrician ($250).  We removed some of the minor tree issues while searching for someone to take care of our giant one.

We also got a credit card with a high limit.  When we replaced our water heater finally, our state offered a rebate and we were able to do it with cash/wait for the rebate.  But if it had happened before we were ready, we needed a way to cover the cost.  The credit card was there just in case.

The fence is still a pipe dream, unfortunately.  But our neighbor gave us the idea of creating a visual boundary with scrub pines, so that's what we'll do for now.

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We just have one big savings fund that the money for each project goes into. But we also learn to do a lot ourselves, YouTube can teach you so much.  or hire people in the specific trade we need but who do things on the side for extra cash. So, for example the HVAC guy who works for a large established HVAC company who did our ac replacement on his weekend off and charged a fraction of the amount it would have cost had we hired the company he works for. 

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I have a sub account at the credit union for house repairs.  I just out some money in it each paycheck.  Then it is there when I need it.    I am putting off things like paint and carpet as things like furnace and deck repair were/are more important.

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I have a general savings account for funds like this. I like spreadsheets - hey, I'm an accountant! I use a sheet in my general budget spreadsheet; the total rolls up into a master sheet for the bank account so it says: House Repair $1000, Car Repair $2000, etc. I have a general "House Repair" fund that gets fed with (sadly, not nearly enough) money. I then have at the bottom of the spreadsheet where I track the fund a list of things that I need/want and an estimate of costs if done different ways and notes of programs I've found to help pay for it. It looks like this:

HOUSE REPAIR

Date Deposit/Withdrawal  Total

6/18/21  $55                       $1286

6/19/21  ($286)                     $1000  Furnace Repair

 

 

Washing Machine - $225 used/$750 new - $50 rebate for new from Electric Utility (new purchase only)

Flooring Repair - $175 DH/$550ish from company X

Paint Laundry Room - $75, but have to repair door first

 

Then, as things NEED done, they get pushed to the top of the list, and my wants go to the bottom. 

Edited by historically accurate
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I’m still trying to hammer out my long term plan there. In the meantime, I’m loving my bank account (Ally, but I’m sure others do it) with “buckets”, where I can set goals and allocate funds. That’s what I’m doing for all of the things we’re planning for the new house, and I intend to do it for future needs.

Exactly how to get the money in there...   lots of math manipulation, lol. But definitely prioritizing things I can’t get away without over the things I can do with out!

Learning the non-heavy stuff is good.  Dh got frustrated making the first of our many new window screens but, once he got the hang of it, it was TOTALLY worth the savings!  I hate deck staining, but I don’t think I’ll ever pay someone else to do it because it’s not that complicated.  And I’ll gladly paint anything I can reach. Some plumbing issues are super simple with YouTube, but I don’t envision myself carrying a replacement toilet.

 

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@Carrie12345 Installing a new toilet is actually not that difficult!  

I like one big fund for all house stuff, and a list of estimated costs for the repairs- listed in order of need.  You can add a target date if that help, too!  

If you are doing home repairs, there are Restores that have lots of new and used building materials - think bathroom vanities,  faucets,  tile, doors and knobs- not lumber or drywall.  You can sometimes find really great bargains there!  Businesses donate overstock,  floor models, returns- and often they are in great shape.  Just a thought for saving $$.  

Anything you can do by yourself or with a friend or grown kid will save you money.  

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1 hour ago, Carrie12345 said:

I’m still trying to hammer out my long term plan there. In the meantime, I’m loving my bank account (Ally, but I’m sure others do it) with “buckets”, where I can set goals and allocate funds. That’s what I’m doing for all of the things we’re planning for the new house, and I intend to do it for future needs.

Exactly how to get the money in there...   lots of math manipulation, lol. But definitely prioritizing things I can’t get away without over the things I can do with out!

Learning the non-heavy stuff is good.  Dh got frustrated making the first of our many new window screens but, once he got the hang of it, it was TOTALLY worth the savings!  I hate deck staining, but I don’t think I’ll ever pay someone else to do it because it’s not that complicated.  And I’ll gladly paint anything I can reach. Some plumbing issues are super simple with YouTube, but I don’t envision myself carrying a replacement toilet.

 

It's not the replacement toilet that is the problem.  It is carrying out the old used one 🙂

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I go with keeping a certain amount reserved for unexpected emergencies and feeding the fund as best I can. Then, keeping a prioritized list of projects and working through them as the money comes available. Expect the list to shift over time. Working through projects as I can, staying on top of maintenance, and keeping funds earmarked for the unexpected is really the best I can do. It also helps to know the difference between cosmetic upgrades and good repair. Upgrades are at the bottom of the list. 

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I keep a list of things that need done and we do what we can as the money comes available. There is very little to budget from paychecks. But anytime other money comes along (stimulus checks, tax refund, side income) then we use that for either house or travel needs. 50/50 that it gets eaten by some sudden emergent expense though like car trouble or medical bill. It’s frustrating and hard.  So my only real suggestion is to take heart that you aren’t alone. 

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One rule of thumb is to plan to set aside 1% of your home's value annually for what you might want to think about as a reserve/replacement fund.

I'm a CPA by trade so my answer reflects this. Now, if you want to get really into the analysis, you can copy how homeowner associations work a budget for their reserve fund. Basically, you have a spreadsheet where you list all the possible items that you have to plan for. Fencing, Roofing, Gutters, Asphalt, Bathrooms, Refrigerator, etc. You can get as detailed as you want. Nowadays, it is very easy to find this information online. Research the useful life of each. For example, a wood fence generally has a useful life of 15 years. On your spreadsheet, you would have this:

Fencing     Useful Life    Original Date   Remaining Life      Replacement Cost    Reserve Needed

Remaining Life is a formula that subtracts the number of years between your current date and original date (this should be a cell that as today's date) from the useful life. 

Reserve needed would a a calculation that is the replacement cost divided by useful life multipled by the difference between useful life and remaining life. 

Say a fence is 10 years old and has 5 years left. It costs $4,000 to replace. It means that as of today you need to have $2667 saved. 

When you do this for everything and have the amounts you need for everything added up as a total that tells you how much you are underfunded if you are. Doing it in a spreadsheet that autocalcuates for you based on the current date (there's a formula in spreadsheet that pulls the current date), then it automatically updates all the calculations for you. If you find out the cost changes for something that you need to replace, then you just update that number.
 

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1 hour ago, BusyMom5 said:

@Carrie12345 Installing a new toilet is actually not that difficult!  

 

37 minutes ago, hjffkj said:

It's not the replacement toilet that is the problem.  It is carrying out the old used one 🙂

Yeah, I’m not afraid of the skill.  It’s the oddly shaped weight I want no part of!

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We have a general house repair category, bigger upcoming projects are saved for specifically. 

We take care of things as we can and do most things ourselves. There are always more projects to do than time and money so we definitely prioritize.

I've read multiple suggestions that home maintenance funds should be around 1-3% of the home's value for year, that is my general  fund amount(replaced as used) along with any known upcoming expenses.

Last year we painted the exterior of the house (did it ourselves) it took forever but costs about half the cost. We got very "lucky" and ended up with hail damage and got a new roof minus our deductible so that got marked off my list (so keep an eye out if you get hail or wind damage- we didn't think ours was that bad but ended up getting an insurance pay out). This year is the year for appliances- we've replaced the water heater and washer and I have a fund for the dishwasher now. 

Edited by Soror
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We have multiple funds, but not so much for multiple projects as it is to keep me from having to look super closely at every budget item. We tried to budget on paper and be picky, but other than envelopes for food, gas, entertainment, we saved MORE when we didn't get fiddly with too many categories. Our day to day spending gets deposited into our (Oops, got interrupted) checking and debit card accounts with direct deposit (or something close to it).

Emergency savings--about 3 months expenses in a separate money market type account, not in our regular bank

Mortgage fund--mortgage payment debits every month from here. We have money direct deposited to this account that exceeds our mortgage by just a little bit. This money is for small repairs like plumbing, electric, etc. or small projects we can DIY that are not expensive. Nothing big unless we happen to go a really long time without needing things fixed.

Yearly expense account--this is for things that are due once per year such as life and disability insurance, car insurance, half a cow from the butcher, vacation, Christmas, etc. Most of this falls in a very short span of time for us, so it's essential that we stay on top of this fund. We pay all of our insurances annually because we get a discount. If we had an emergency, we could switch to quarterly or month to month for most.

Long-term savings--this is to avoid using the emergency savings if at all possible, and once we get past a certain threshold, we take money off the top for big projects, new cars, etc. It's all in one pot because priorities can change, but once we start talking about spending it, I have it mentally divided up.

HSA--one has long-term money in it for COBRA if DH were unemployed. It's partly invested in the options offered. The other is a fund we use to reimburse ourselves for expenses. If it gets low, we stop reimbursing ourselves for a while just in case we have major back-to-back medical bills after a deductible year turn-over.

It helps if you can pre-fund some of these funds just a little bit (tax returns, etc.). It's impossible for us to fund the bolded fund during the months we are spending it if we haven't already saved quite a bit ahead. The rest grow incrementally. We set all of this up when things were going quite well with us financially. Before that, we didn't have quite as many funds, but we also didn't have so many things that were due in just part of the year. 

Edited by kbutton
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Two checking accounts and one savings account and a HELOC is how we do it.

HELOC is for emergency stuff that is urgent.

I added up all of our recurring non monthly expenses and divided by 12.  I included an allotment for car repairs as we have very old cars.  Naturally it’s only an estimate.  But the other things were more predictable, like property taxes or annual or semi-annual insurance bills.  Then we used to divert that amount into the overflow checking monthly, and pay our regular monthly bills out of the ‘balance’ checking account.  This meant that whenever a big, nonmonthly bill came in I would look in the ‘balance’ checking account and pay as much as possible from there, and use the overflow account for the rest.  Over time the overflow account would build up to where we could do home work from it.

However, then DH had a period of unemployment, and my pay is variable, so we switched.  Now he is working and his pay goes into the monthly expense category. We have a balance in our HELOC, and my pay goes into the overflow account.  I look at that monthly to pay nonmonthly bills and to pay down the HELOC as aggressively as possible.  This means that sometimes I have to borrow some back on the HELOC to pay a big nonmonthly bill, but overall our trajectory is to less debt over time.  Once the HELOC is paid off we will return to the former method, and resume working on our house again.  We are keeping our fingers crossed that we can avoid unexpected big expenditures until then.

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We’re supposed to save for those? 🤷🏼‍♀️ 

Honestly this house takes almost all our discretionary income. It’s 25ish years old... code for, “bought just in time to replace everything.” And I mean EVERY thing - every appliance, the well pump, pressure tank, water heater, AC, furnace...

I can’t even fathom what it would be like to not have house repairs or medical bills. We’ve cash flowed most of it (except the recent major stuff - wheelchair van and bathroom remodel) so I am no help there. 
 

i think ideally put as much as you reasonably can in a generic house fund to use as needed. 

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We pay for 90% of household remodel and repairs using Amex points cashed in for Home Depot ecards. A coworker turned me on to doing this when I was 28. He did this with the cash-back from his Discover card. I started this in 2002 when I was single and owned my first home. Almost 20 years later, we still do this even though the house and yard have grown quite a bit from that first house. We use Amex for everything, and I mean everything, that we possibly can that we would normally pay for with "cash" to rack up those points. We do not carry a Amex balance. It's free money in the end. My mom bought a bunch of Pottery Barn furniture that way after cashing in Amex points for PB cards over a length of time.

Also, whenever we are asked what we want for Xmas, birthday, etc (although we try hard to discourage buying us anything, we have relatives that insist on a gift), we ask for Home Depot cards. They are my favorite gift to receive.

 

Just an alternative suggestion to setting aside cash or savings. 

Edited by aggie96
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This may apply to you in a few years. Our disabled dd has received SSI since she turned 18, and a condition of getting that money is that she must pay rent. The rent she pays us is our home repair/improvement fund.

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48 minutes ago, Soror said:

We have a general house repair category, bigger upcoming projects are saved for specifically. 

We take care of things as we can and do most things ourselves. There are always more projects to do than time and money so we definitely prioritize.

I've read multiple suggestions that home maintenance funds should be around 1-3% of the home's value for year, that is my general  fund amount(replaced as used) along with any known upcoming expenses.

Last year we painted the exterior of the house (did it ourselves) it took forever but costs about half the cost. We got very "lucky" and ended up with hail damage and got a new roof minus our deductible so that got marked off my list (so keep an eye out if you get hail or wind damage- we didn't think ours was that bad but ended up getting an insurance pay out). This year is the year for appliances- we've replaced the water heater and washer and I have a fund for the dishwasher now. 

I am on a money board that the suggestion is putting 1-3% value in a fund per year.  More towards the 2-3%  Then you divide that out and put the set amount away monthly in a sinking fund.

We don't do sinking funds.  Just pay for things as we need to as we have money left over every month after bills, spending, and savings.

Do you get a tax refund? 

Did you get stimulus?  Or the CTC?

Are you planning on staying in the home long term?  Or do you think you will move?   Would taking a Home equity loan be something that you could afford to pay back?  Do you still have a mortgage? Could you refi and cash out some equity?

For the things you listed I probably wouldn't save for each specific one.  I would save in general and then do what is most needed first.  Our water heater went out last summer.  We tried Youtube to fix it.  Looked into replacing an expensive piece but in the end it wasn't worth it to do that vs buying a new one based on age.  We could have saved half the amount of money having dh do it, but he wasn't comfy messing around with a gas line.   But we didn't have hot water for a week, because of when they could come do an replacement for it.   But dh does a lot of things around the house just by using Youtube that has saved us so much.  He and the kids just replaced a toilet last weekend.  The next ones will be even easier now that they know how. 

Do you have a handyman in the area who is a jack of all trades and could do some of the work for a lower price? 

I do agree to pay attention and maybe have your roof inspected by insurance for wind or hail damage that they might cover.  I have heard a few people do that. 

I have also heard of people opening credit cards for the bonus and using that $ (or giftcards) to use on their homes or spending. 

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I would like to add—

Even though we are not spending on the house at present, I still do keep that list going.  It’s extremely useful when bargains or free stuff appear online locally, because I know exactly what to jump on.

For instance, our trusty old washing machine has been glitching lately, very occasionally not spinning enough, but 3 years ago when everyone was ‘upgrading’ to newer machines with modern features, an old but working one very similar to ours was listed for $50 on the local elist, and I got DH to go over and buy it.  It’s stashed in the garage, ready to swap in if ours fails completely.  That’s one less thing to save for.

Planning for cheap redundancy is a huge money saver in the long run.  We drive very old cars, but as part of that strategy we always have one more than the number of regular drivers in the household.  That way we can swap that extra in if one fails badly so that we have to buy another or leave it in the shop for weeks.  The carrying cost for that third car is about $600 for insurance and less than $100 for registration, which is a lot less than renting a car or being forced to buy something we don’t want for an exorbitant price ‘in the moment’ because we are rushed.  (BTW, our cars are a 95 Nissan light truck, a 98 Camry, and a 2001 Mercedes Coup, all bought used.). 

Cheap redundancy works especially well when older appliances are easier to repair or more reliable than new ones, like dishwashers or stoves with mechanical controls rather than electronic ones.  

The Buy Nothing facebook page for our neighborhood often has garden supplies or home improvement project leftovers available for free, as well as furniture and children’s items.  This is a very big money saver for home projects.

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8 hours ago, Tap said:

Do you just save money into one big fund and take it out as needed? Or did you have different money saved for 'the roof' and 'the cabinets'? Does that make sense? 

I have always had a main account for my daily spending (food, gifts, clothes etc). But I saved for individual bigger projects and had a medical bill fund that I kept a set amount in each year. I really hate bills...can you tell. LOL! I even used to pay my daycare 3 months in advance, so I didn't have to pay it monthly. Over those 3 months, I would save the next three months. 

I have a main account for frequent transactions, a small savings account linked to that account which I treat as an emergency account, and a separate savings account at an online bank for longer term savings and projects. For example, I recently had to have my deck rebuilt (it was the exit from our back door and it was falling apart) so I transferred funds from the online bank to my main account. 

My online bank is Ally. It had a really good interest rate when I signed up but that dropped a lot over the past year (it is still higher than my brick and mortar bank). I would recommend it. It is free to create an account and easy to transfer in and out. What you might really like is that you can create buckets for your separate goals within the one account. But personally, I just throw all my money into the general account and withdraw from it as needed for whatever projects come up.

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I have one savings account that would be used to pay for major repairs or emergencies.  I have a estimated budget of what I think I will need over the next few years in that area, realizing that the water heater may last longer than I think but an unexpected heating problem may arise--so I don't expect that I will be able to predict well which expenditures will be paid with which exact dollars on a particular time schedule.  Emergency repairs are emergencies and just have to be done.  Anythink like painting, cosmetic updates, non-crucial repairs would not be done if the savings account would drop below 3-6 months of living expenses.

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3 hours ago, Carrie12345 said:

 

Yeah, I’m not afraid of the skill.  It’s the oddly shaped weight I want no part of!

Tank and bowl are usually separate pieces. There are probably some one-piece ones out there, but any toilet I've ever seen comes in two parts. They're still heavy enough for a decent workout, but not cumbersome and off balance.

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In my budget, I have Home Maintenance & Repair (needs), Home Renovations & Updates (wants), and Appliance Replacement categories. I fund all of them as much as I can each month, but if something comes up in the need categories and the funds are short there, I scavenge from the wants category, along with any other "want" categories to cover the shortage. Last resort is the e-fund or taking on debt (credit card or loan) depending on size of the cost and how quickly we could cover it.

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