If you struggled to stick to your budget in 2017, then restructuring your bank accounts could help you hit your 2018 money goals. The reality is, despite our best efforts, most us aren’t motivated to cross check our weekly spending against our budget spreadsheet each week!
Here’s how to do it:
– Open 1 x EXPENSE & 1 x SPENDING ACCOUNTS – together these accounts should total 60% of your income
o 1. TITLED WEEKLY EXPENSES
o 2. TITLED WEEKLY SPENDING
– Open 2 x SAVINGS ACCOUNTS – totals 30% of your income.
o 1. TITLED SHORT TERM SAVINGS (10% of my income)
o 2 LONG TERM SAVINGS (20% of my income)
EXPENSE & SPENDING ACCOUNTS:
Your first account titled WEEKLY EXPENSES is for all your direct debit expenses & bills such as rent, mortgage repayments, gym, phone, internet and electricity etc. Your income is paid into this account and all life expenses are paid out of this account.
Each week, send a small weekly spending allowance from you WEEKLY EXPENSES via automatic transfer to your account called WEEKLY SPENDING. This amount might be $500 for a single for example, with $250 a week to cover discretionary spending on things like grocery bills, movies, coffee, clothes, going out with friends and take away. This helps limit your weekly spending to the amount that is in the account for the week.
For me, separating my weekly spending amount from my expense account has really helped me keep to my weekly spending allowance. Prior to this, I had all my weekly expenses covered by one account and although, I knew my weekly discretionary spending figure off the top of my head, the temptation to spend more or slightly go over is stronger when you see a higher figure sitting in your account.
Attached to your WEEKLY EXPENSES account, should be two savings accounts.
Each fortnight, 10% of your pay should be transferred into the first savings account – SHORT TERM SAVINGS – and 20% transferred into your second savings account – LONG TERM SAVINGS.
Your SHORT TERM SAVINGS account works to save for holidays and birthdays. You could also use this account to save for your wedding costs or other short term big ticket items.
Your LONG TERM SAVINGS account works to save for big investments such as stock investments, mortgage lump sum repayments and home deposits.
Structuring your accounts this way helps to automate your savings and keep your discretionary spending on budget. It’s given me piece of mind that I’ll hit my savings goals without the stress of having to continuously cross check my spending against a spreadsheet.