Gods Money Matters – Articles
How to Use the Bank to Achieve Your Financial Goals
It is so important to have a budget and a plan of what you will do with your money. Often however the plan fails because it requires constant discipline on a daily basis.
For example, let’s say that we’ve decided to set aside $50 per week in our budget for discretionary spending – that is spending money on ourselves… some fun money. It might be to buy coffee, or lunch or a little treat.
Learn from Granny
How do we make sure that we don’t overspend this allocation – this $50 we set aside for fun?
What Granny used to do was set aside money into separate envelopes or jars. These envelopes or jars would be labelled according to the where these funds were to be spent…. in line with the overall budget.
Today we have the potential to put in place a more advanced system. Many people today don’t want to carry around cash and so the envelope or jar system doesn’t suit them.
Setting up multiple bank accounts
What is great about today’s banking system is that we can set up bank accounts that act as a virtual envelope or jar system. In my many years as a financial planner what I’ve found works best is to set up two primary bank accounts, with a whole bunch of other online bank accounts that are connected.
The two primary bank accounts are labelled non-discretionary and discretionary… or “bills” and “fun” if you like. The bills account receives all income into it each pay, and then from this account all non-discretionary bills are paid – such as rent, mortgage, rates, telephone and so on.
Also coming out from the bills account is a set amount that is transferred into the “fun” account. This account would have a debit card attached to it and it is used for discretionary spending – such as that coffee I spoke about earlier.
Now the secret to making this really work for you is not to double dip. If you end up using all your allocated fun money in the first few days, then you have to wait until the next pay day before the account is replenished. There’s no going back to the “bills” account to get more money out.
This system ensures that you stick to your budget. I call it system discipline… I call it that because the system makes sure you maintain the discipline.
The other online bank accounts are set up for more lumpy expenses – expenses that are paid on a less regular basis, such as annually or quarterly. In my experience it is good to have accounts for items such as “holidays” and “car replacement” and “extra giving” and for “car maintenance, rego & insurance”.
Don’t forget to include the Emergency Fund bank account in your overall structure too. The Emergency Fund is vital – definitely a must for everyone!
Normally online bank accounts have no fees… So shop around to make sure your bank is giving you a great deal and then get your banking supporting your budget to give you every chance of success.