Today we are going to talk about why separate accounts can help with your finances and spending plans if you are in your budgeting alone or have a partner this will help you to find ways for your money to work for you instead of always working for your money.
Brief Summary of objectives:
- Learn all about what a checking account is, types of checking accounts and how you can go open one!
- Learn all about what a savings account is, types of savings accounts and how you can go open one!
- Learn all about how different accounts can help your overall budget.
As you are setting up your spending plan / budget, the recommendations can look like you have 50% of your money that is going toward your needs, 30% that is going toward your wants, and 20% that is going toward your savings. This will help you with the categories to include as you are working toward your future goals. This is why we are going to talk about different accounts and then I am going to share the method I’ve used solo in a budget and then how we combined in our marriage for making sure our money is present in the places we need it to work best.
Challenge: Now that you understand the benefits of having separate accounts for managing your finances, it's time to take action. Start by evaluating your current financial situation and identify areas where separate accounts can help you organize and optimize your budget. Challenge yourself to take control of your finances today by setting up separate accounts for bills, spending, and savings, and watch how quickly you can achieve financial clarity!
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Introduction: Today we are going to talk about why separate accounts can help with your finances and spending plans if you are in your budgeting alone or have a partner this will help you to find ways for your money to work for you instead of always working for your money.
Brief Summary of objectives (3):
- Learn all about what a checking account is, types of checking accounts and how you can go open one!
- Learn all about what a savings account is, types of savings accounts and how you can go open one!
- Learn all about how different accounts can help your overall budget.
As you are setting up your spending plan / budget, the recommendations can look like you have 50% of your money that is going toward your needs, 30% that is going toward your wants, and 20% that is going toward your savings. This will help you with the categories to include as you are working toward your future goals. This is why we are going to talk about different accounts and then I am going to share the method I’ve used solo in a budget and then how we combined in our marriage for making sure our money is present in the places we need it to work best.
Topic 1: Checking Accounts
A checking account is a deposit account that is held at a financial institution such as a bank or a credit union.
Checking accounts allow us to have easy deposits, withdraw, or transfer of funds. They are often set-up to accept deposits from various sources such as another account, paychecks, and cash. Often our paychecks in today’s world are directly being deposited on specific times of the month. Though occasionally, you might work a job that pays you in a written check or in cash and then you might need to go make a deposit into your account.
Checking accounts are typically able to be accessed through checks, ATMs, debit cards, or even electronic transfers.
When opening a checking account, you do want to make sure you are at a bank that has Federal Deposit Insurance Corporation (FDIC) to help protect account holders against loss in the event of a failure.
Typical Features with a checking account:
- Debit cards
- Being able to write checks
- Online banking, which gives you access to managing your funds from your computer or on a mobile device, being able to view transaction history, pay bills, transfer funds, set up an account alert, and so much more.
- Direct Deposit and mobile check deposits
There are different types of checking accounts, and you need to decide which type fits which need the best.
- Standard Checking Account – this typically includes the basic features such as ATM and online banking. These are typically the ones used for everyday use that allows you to deposit money, make payments, and withdraw cash as you need. Some accounts have monthly fees or can be free with certain conditions that are met. Be sure you are aware of this for your accounts to be able to work for you.
- Interest-Bearing Checking Account – these accounts have the liquidity and accessibility of a traditional account with the benefits of earning interest on your account balances. However, these might require you to keep a higher minimum balance.
- Student Checking Account -these are designed with students in mind for low monthly fees and typically do not have a minimum requirement.
- Senior Checking Account – caters to the retirees and older individuals and they often provide perks like waiving monthly fees and giving interest on accounts.
- Business Checking Account – is for business owners that gives them a separation from personal and business in their finances and being able to track expenses.
How do you even open an account?
- Choose the bank or credit union
- Gather the documents you need such as social security number, identity, and mailing address. And typically, an initial deposit.
- Choose the right type of account
- Complete an application
- Fund your account
Make sure that you are regularly managing your account by reviewing your statements, monitoring your balance, set-up account alerts for purchase of certain amounts to send you a notice, and you can always add an overdraft protection to your account that will automatically protect you if you have a short balance of funds.
Topic 2: Savings Accounts
Savings accounts are a good place to put money for a later time and separate it from your day-to-day spending cash. They are places for interest-earning potential for your account balances. This is a good place to put your emergency funds and shorter-term goals for savings such as a vacation or home renovation.
Types of Savings Account:
- Certification of deposit: are typically used to help you earn competitive rates, but this is if you do not need access to the money right away. As in It might be five years before you are gaining access to the money you earned on a CD.
- Regular savings account: these are more for the immediate. These might just be out of sight enough and are usually available at a bank or credit union. You are typically limited to about six monthly withdraws on the money or otherwise you are charged a fee to access.
- High Yield Savings Account: are going to typically give you a better high yield savings return, but they a lot of times do not have physical branches.
- Money market accounts offer a higher yield, and you typically can write checks or have a debit card access to these accounts. Though you typically need to have a higher minimum deposit to open a money market account.
Topic 3: Why do you have different accounts set-up
Put simple one account to manage all your money isn’t helpful because then you have no separation in your bills, spendable money, savings, and however else you have budgeted your spending plan. If it is helpful for you to have a minimum number of accounts I recommend at least three accounts: one for bills, one for spendable money, and one for savings. And if have the availability to split how your paycheck gets deposited, then split them among each of these. This will help you go ahead and have your money set and begin to limit the stressfulness around taking control of your finances.
Bills can include housing (rent, mortgage, property taxes, maintenance, repairs, insurance), utilities (gas, electricity, fuel, cell phone, water, and internet), transportation (car payments, public transportation, or related vehicle expenses), childcare, insurance (health insurance, car insurance). These are what you sit down and define as your bills. Entertainment subscriptions might fall into this account because these are monthly charges that happen regularly. You are able to define what comes out of the account, but once you have decided what this account is it is making sure you do not use the money in this account for anything more.
Savings account. I would recommend that you have a high yield savings account so that your money is earning money while it is sitting there for you. This account simply can be for you to put your emergency savings into. In this account, work toward having 3-6 months of monthly expenses in your account. And then set-up another savings account that has your short-term goals such as: Christmas money, the upcoming vacation, or you define what this savings account is for.
Spendable account: this account has maybe your grocery funds, gas funds, and just your general spending on wants from the money.
Personally:
- We have a grocery account that funds our grocery trips, convenient store stops, and eat out. This is one that we use together and was the first account that my husband and I opened together. We opened this account so that we could both equally contribute to how much we were putting into eating out and grocery each month. It helped us to both feel like we were giving equally to the relationship.
- We have a date account which is different this is for intentionally planned dates eating out, movies, or just an intentional date.
- We have a tool account. This account is designed for my husband, who is a mechanic and needs to be able to know exactly how much money/funds he has available at any given point to purchase the tools he needs for work without any conversation between us. This helps for him to not carry owing on the tools that he needs to do his job.
- We have our bills account which has our gas, auto bills such as internet, car insurance, UFC Fight pass subscription, apple storage, and then we pay our credit card for some auto payments. The bills account is the pitstop for money to go into its working waffle square.
- We have a mortgage account and this is only for our monthly payment to come out. I prefer this so that I know this account is always ready and never have to worry about using the wrong money on accident.
- We have our high yield savings account that has our emergency fund, plus this is the account that offers loans we make to ourselves from. We can borrow from here if we decide we need something and just create a monthly payment to ourselves with interest built in.
Then we both have accounts that are more for our own uses and savings accounts as well.
What I found was having our own methods in budgeting established and communicating to bring them together has been a journey for sure, but it means we both have a buy into how we are budgeting and working toward our goals. I am very detailed with an excel spreadsheet and prefer to move the money manually, but there is so much help in the automation of having your funds in the specific places you need it to be in.
Recap: By setting up multiple accounts, you can better manage your money, achieve financial goals, and reduce stress. Each account serves a distinct purpose, making it easier to track and control your finances. Whether single or partnered, this method provides a clear, organized, and efficient way to handle your money.
Call to action: Now that you understand the benefits of having separate accounts for managing your finances, it's time to take action. Start by evaluating your current financial situation and identify areas where separate accounts can help you organize and optimize your budget. Challenge yourself to take control of your finances today by setting up separate accounts for bills, spending, and savings, and watch how quickly you can achieve financial clarity!