Updated: Aug 5
Setting up your banking is by far one of the most, or if not the most important thing to do in my opinion, to become financially stable. This can either make you, or break you, but the bottom line, you have to care and take action, and also monitor your accounts regularly.What I mean about caring. You have to take an interest, and care about your financial position, and take control, and action. You have to know, what you have in the bank, at all times, what’s coming in, and what’s going out. For me, I like to keep my banking accounts simple and easy. Here is what I’ve done.
I have 5 accounts, and not all at the same financial institution. I use 2 Financial Institutions. One bank is basically for my everyday living. The other is for my basic savings and emergency funds (3 months’ worth of cost of living expenses min). For my savings bank, I make this harder to get at when I’m out and about. Doing this eliminates what I call impulse buying, with funds designated for other purposes. The biggest mistake most people make is having 1 or 2 accounts, where there is no designation to them, and are used for everything. The paycheque goes in, and it gets spent because the funds are always available. Let’s face the facts, if you have money in hand or available, most people with spent it, and only stop when it’s all gone. This will usually happen before the next pay comes in, and you are high and dry, panicking.
Here is my banking setup that works for me, and what I do with them. I use a basic chequing account, where I can do numerous transactions, at little cost. From this account, I will pay my everyday living expenses, everything from keeping a roof over my head, food on the table, paying my regular everyday bills ie cell phone, internet, tv, vehicle payments, insurance… I have this account set up so I can use it with my debit card under the chequing option at the terminal when purchasing things.
My next account is an account I use for my play money. These are funds that I designate as basically disposable. These funds I will use for entertainment like going out and doing things, small impulse purchases, or just for whatever. Once this account empties, that’s it until my next pay. My fun times are over, no exceptions, and it doesn’t matter how small of a purchase it would be. This account I also attach to my debit card under the savings option at the terminal. Both of these accounts I keep at 1 bank and are on the same bank card. I will use the 3rd account at this bank as my account which all income will get deposited into. I will then distribute the funds to my other accounts accordingly. This account I will have no access to at the debit terminal, I will do everything through internet transfers from this account to get the funds to my other accounts. This account I have set up as a savings account where I am allotted several transactions a month at no or minimal cost.
At another financial institution, I use this bank as my savings bank. The first account, I will have set up as my emergency funds account. Here I will keep a minimum of 3-4 months living expenses in it at all times. Let’s face it, throughout life, stuff happens, and I have had to use these funds on numerous times to live. This will also help me to keep me in a position where I don’t have to touch my investments, and keep them intact, and not withdrawal on them at a loss, and let’s face it. It always seems like your investments are down when you have to withdraw funds in an emergency situation. Though this account will be attached to a debit card. This card I do not carry with me at all. You cant spend money that you don’t have access to when your out and about, can you. I will keep another account at this bank for large purchases. I hate debt with a passion, so much so that I will not go into debt for anything outside of purchasing a home, a vehicle, or for investing (All will be explained in its own blog). What I do, is say I want to travel somewhere for a vacation, or make a big purchase, or do some changes around the house or buy a toy. I will take the cost of these purchases, and make payments on it to myself, into this account, instead of making payments to a credit card or high-interest loan or even a line of credit, and then paying off the debt, remember, I hate debt with a passion. I will then make the purchase paying cash, and cash is king. This takes planning, and discipline, as it can and will take time, sometimes several years depending on the purchase. But you know what, imagine the power you feel when you go to make this large purchase and pay cash, depending on the purchase you can negotiate a lower price. The biggest problem with this, is you have to overcome the mindset of I want it now. Once you overcome this I want it now mindset, You have overcome the biggest mindset and hurdle in securing your financial future, at least in my opinion.
You Must Gain Control of your Money, Or The Lack of it, will Forever Control You