One of the aims of personal finance is to control your
spending according to your budget. It is also part of your financial plan to
save sufficiently. An effective way to
achieve your goals in these two areas is to maintain three separate bank
accounts.
Account No.1
This is a receiving account. This is the account to deposit
your regular monthly pay. Your income for your monthly budget is based on this
take-home amount. If you do receive additional income not budgeted, it should
go to your account No.2. It is always a wise move to save an extra amount earned
and not spend it.
Account No.2
This is an important account. Your financial independence
starts here. The amount that you have budgeted for savings should be taken out
from account No. 1 and deposit here. This is the account to build an emergency
fund, savings for big-ticket items, accumulate a fund for investment, children
education and retirement. This is also the account to save enough down-payment
for your car and dream home. Your financial goals should be a strong motivating
force for you to deposit regularly the desired amount into this account.
Account No.3
This is an expense account. This is the account that you
transfer an amount from account No.1 that you have budgeted for spending for
the month. In this way, you will know in advance the amount you can spend in a
month and you just have to keep your spending limit to that amount. This
account is to cover your household expenditures, credit card bills, standing
orders, utilities, children‘s pocket money, petrol, insurance, installment
payments and the like.
Debt settlement before Savings
When you are in debt, it is a wise move to settle your debt fully.
The interest you earn for the amount saved will not be enough to cover the
interest of your outstanding debt. When you are debt free, you are stress-free
and you can save even more.
Do you think it is a good idea to maintain three accounts to
manage your money?
i only need 1.
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