Should your spending money be in the same account as your savings? Should your emergency money be in your savings account? There must be a distinction, otherwise, you can end up over spending and over budget.
Lisa Ray, financial education specialist with Consumer Credit Counseling Service of Atlanta, states that once your paycheck is deposited into your bank account, have automatic transfers set up to send money to each account it should be in. For example, if your pay check is $2200, you should have your bill money sent directly to the “bills” account, and so on. That way, money needed for your lights and rent/mortgage will be safe in a separate account that won’t get spent or loaned out.
But first, you need a Nucleus Account. This is the main bank account where your money will be deposited first. From there, here’s a breakdown of each separate account. Feel free to add more or take away as you see fit.
Bills Account: You need a checking account dedicated solely to your living expenses. This account holds the money you need on a monthly basis. The sum of your total monthly costs should be sent to this basic checking account.
Emergency Fund Account: Another name for this account is the “Rainy Day Fund”. It’s important to put money aside for life’s unexpected events like job loss, or car repair.
Long Term Goals Account: This account is for goals that require time to save. Long term account money can be used for a vacation, a new car, down payment on a house, concert, new bedroom set, ultimate shopping spree, plastic surgery, or whatever.
Retirement Account: No matter if you’re depending on a 401K, Pension Plan or Social Security, I always advocate putting additional money away for retirement.
Investment Account: The money you set aside in this account should be used for anything that will make you more money. Examples are business ventures (big or small), inventions, stocks/bonds, investment properties or anything you see as an avenue for making additional money.
Spending Account: This is the everyday account used for gas, shopping or eating out. Do whatever is necessary to take control of your finances. Once you’ve mastered it, pass it on. Be on the look-out for future posts that breakdown how much of your income should go into each account.
Written By: Jessica Williams