It’s the new year. At the start of each new year I like to go over our finances and see if I can make any changes. It’s important to do this regularly. Your circumstances change and you could easily get into difficulties if you don’t accommodate these changes in your budget.
Don’t put all your eggs in one basket
One of the main ways that I can keep a close eye on where our money goes, is by having multiple bank accounts. You may think that having all your money in one place makes it easier to keep track, but it doesn’t!
Splitting our money into different accounts actually makes it much easier to assign where our money goes. We have different accounts for different purposes. If this is all sounding a bit confusing, don’t worry. By the end of this post, you will understand exactly which accounts you need and how to set them all up so that your money automatically transfers to the correct place.
How many accounts do I need?
This is most likely the one account you already have. This could currently be your only account, but by the end of the post I hope to convince you that, in order to help you keep better control of your finances, you need to split up your money and separate it out.
Keep this account, but only use it for your paycheck to be paid into. After that you’re going to automate the process of transferring it out into the other accounts you’ll be opening.
This is your most important account, if you want to keep yourself out of debt. If you only open one other account after reading this post, make it this one!
Your bills need to be paid. No exceptions. If you want to work out how you can cut down your costs, you can read more about that here.
If you haven’t already done this, then set up a direct debit for all your regular bills. Energy, council tax, mortgage/rent, insurance (life/health etc), internet/phone/TV and anything else you pay regularly each month.
Top tip: set up a DD for your energy, you’ll over pay in the summer months, but then you’ll be in credit for the expensive winter months. That way you’re spreading out the cost and you know exactly how much you’re spending each month.
Do you have this one account that will make it easier to pay your bills and stay out of debt? #frugalliving Click To Tweet
This is the fun one! Once all your bills have been paid and you’ve transferred what you need into your savings accounts, the rest is for fun! If you want to go one step even further, you could split this into two – one for groceries/fuel and the other for general spending money.
I like having this money separate because then I can easily see how much I have left to spend during the month. If it’s all mixed in with savings, bills and other costs it’s harder to sort it out in my head. This is the account I carry a debit card around for in my purse as it’s where I make any purchases from.
If you haven’t already got an emergency fund then you need to make this your priority for the first half of this year. This is the fund you will dip into if an emergency occurs e.g. unexpected car expenses, boiler repairs, house damage (roof tiles blown off during a storm etc). If you don’t have an emergency fund to dip into, this could easily spiral you into debt and you really don’t want that.
It’s so easy to get started with your emergency fund. At the start of each month, transfer some money into your emergency fund (or, even better, automate it so that your fund grown on autopilot). You might need to cut back on your spending money for a few months. Or sacrifice your general savings, while this fund grows to an amount you’re happy with.
If you dip into this fund for any reason, make sure you replenish it as soon as you can.
Once you’re emergency fund is built up, it’s time to start saving for more fun things. Like holidays! I suggest this goes into a separate savings account so you don’t accidentally dip into your emergency fund. For the same reason as keeping your money for bills and your general spending money separate, having your essential savings and your ‘fun’ savings in different accounts really will help stop you from dipping into what you shouldn’t!
How do I automate the transfer process?
I’ll be writing a more detailed post about this later in the year, but for the basics read on…
You’ll need to spend about 15 minutes setting this up. But once it’s done, that’s you set up until you decide to make any changes.
All you need to do is work out how much needs to go into each account, then set up a standing order from your paycheck account into each of these accounts. That’s it. Then all your money will be where it needs to be as soon as you get paid.
Which of these 5 essential bank accounts do you not have yet? #frugalliving Click To Tweet
I hope that’s been helpful for you to get your 2018 finances off to a great start. If you haven’t already got your free printable budgeting worksheets, get those right now by using the form below. Happy budgeting! 🙂