As we get older, the one thing we all should learn to do is manage our money wisely. I can’t tell you how many times I’ve looked at my credit card statement and wondered how my balance got so high. It happens, but I correct myself and keep going being cognizant of how much money I have to spend. I’ve developed some habits that have really helped me keep my unnecessary expenditures under control, one, in particular, would be spreading my eggs into different baskets by opening several bank accounts. Sounds a bit much, I know, but it is necessary and makes life easier.
What I would recommend:
- Bill Account: This account is for bills ONLY, this includes bills charged to a credit card because you will still have to pay that money back, eventually. Bills paid in cash such as car note and student loan payments can be directly withdrawn from this account.
- Spending Account: This account is for variable expenses such as gas, groceries, eating out, etc. I say these expenses are variable because you can control how much money you allocate to those things. It is important to carefully plan out how you are going to use this money to avoid negative balances. Once the money runs out, it’s gone. Discipline plays a great role in managing this account because you can often be tempted to transfer money from your other accounts. Don’t do it. You’ll thank yourself later.
- Basic Savings Account: I call this a basic savings account because it is an account that everyone should have. This savings account is the account you can easily get to in case of EMERGENCIES, such as needing a new car battery, or an unexpected, but the absolute necessity of a purchase. Having this cushion will bring you peace of mind when life happens because it will.
- Long-Term Savings Account: This account is usually used for saving for large or long term purchases such as a new car or a house. I recommend opening a high yield savings account because they earn more interest than your typical Bank of America, Wells Fargo, or Regions savings account. There are a plethora of online Banking options such as Marcus by Goldman Sachs, Personal Savings by American Express, or HSBC. Most of which offer between 1 and 2.75 percent of interest and only require $0-1 to get started. However, if your local brick and mortar bank provides such options, take advantage of them. You can set up a separate direct deposit or have a percentage of your basic savings account sent to this account.
Now that you have designated places for your money, it is easy to see cash in and outflows and to watch your money grow. Go forth and conquer your finances.