Automating my finances
So like many people, I have one source of income, a salary and like pretty much every adult in the world, I have multiple things to pay for and often I find myself out of money by end of pay week. Trying to work out a way to make the paycheck last a bit longer, I recently joined a few Facebook pages and listened to podcasts about wealth and money management, and one thing I learned from them is that, it is not that I don’t have enough money, it is that I am not very good at managing it. So, over the next few weeks, I developed a system that basically manages itself and in doing so, makes sure I am saving, paying my bills on time and allowing myself a bit to play with. It has also allowed me to have money for unexpected emergencies like car break downs.
Disclaimer: Before I go further, I just want to stress that I am NOT a financial adviser nor claim to be a money guru. This is just what worked for me and It DOES NOT apply to your situation or goals. I am only posting it here because I found it useful for my situation.
The first thing I did was take a look at where my money was going. I downloaded a few statements over the months and put them in categories.
I then opened a few bank accounts online which is where each of the funds will go to when I get paid each fortnight. I kept the account I already had as my main one where my paycheck would go to, and from there each of the other accounts would get funded automatically by setting up a reoccurring transfer. Now, looking at the image above, you are probably thinking that there are a lot of bank accounts and cards I would need to be carrying around. Well, to tell you the truth, I only ever need to have my spending card with me because that is the only one, I would need to be using on a daily basis. The only other card I need is the fuel card which is kept in my car and only used when I need to fill up the car. The rest don’t need a card or you constantly checking to see what is in it. if you like you can have the emergency accounts and leave them at home to be used when and only when it is an emergency, Ice Cream and shopping online at 12 Am are not emergencies.
What happens to each account?
Joint family saving: I contribute to a family fund my sister, mom and I set up last year for any unexcepted family emergencies. Each of us contributes an equal amount and only mom can make withdrawals when absolutely necessary.
Long Term savings. This is exactly what it says, a savings account. This is in a completely different bank to my spending, so I don’t have instant access to it.
Spending: I give myself an allowance for things like shopping, my morning coffee, occasion visit to the movies or dinner.
Expenses: After calculating what my expenses were, I set up debit payments wherever I could which takes me out of the equation, so I don’t need to worry about due dates etc.
Fuel: I have also set up a fuel card, which is kept in the car and I only have access to it when I need petrol for the car.
Emergency A: This is sort of a barrier between the spending account and the main emergency fund (emergency b). It is to be used when/if I run out of spending money and before I take any money from my main emergency account.
Emergency B: This is for unexpected, out of the blue expenses that I had not planned/budgeted for like taking the car in for a service and thinking it will only cost $100 only to end up with a $300 bill.
So, there you have it, my way of trying to be an adult and get things under control. like I said, everyone’s situation is unique to them and there is no one solution for all. So, when thinking about your own finances, experiment with a few ways and create a system that works for you. Go back every few months or so and make adjustments as your situation changes.