This is an ongoing three-part series that will document how I run my financial universe. It will cover how I manage my money, how do I invest and put my money to work and how do I keep myself on top of it all. Hope you enjoy reading it and pick some important tips on the go.
I have multiple bank accounts, four to be exact. Friends and family think of it as my quirk among other things. But I know it’s not. I have multiple savings accounts not because I love them or it makes me feel “adult-y”, but because that is how I keep myself accountable on multiple financial goals. It took me a good one year to figure out that I am not good with accumulating all my money in one account and mentally dividing the pile for various money goals. So instead I opened 3 more banks accounts besides my usual checking account and now I sleep in peace knowing exactly how far I have come on any goal and how much do I need to go. This is how my Financial Universe operate:
- Salary Account: The mother of all accounts. I receive my paycheck in this account and all other bank accounts are linked to this account and the fund transfers are automated. So when my monthly salary is credited on 1st of every month, on 2nd the automation kicks in and my money flows into all other 3 accounts. The balance is the money I am left with to spend on my personal expenses (Commute, Entertainment, Books, and miscellaneous costs) and the bill payments (Electricity, Mobile, cable etc).
- Fuck Off Fund Account: Since I am a big fan of Fuck Off Fund/Emergency Fund/War Chest, this was the account that I first opened to separate my savings and spending. I add money in this account at every opportunity I can no matter how small the amount maybe. This is the Holy Grail account – the most respected Bank account in my eyes. Its my primary safety net against any unexpected cost or emergency. Its my I-CAN-BE-AN-ADULT-AND-HERE-IS-THE PROOF account. The balance of the account equals to the size of my self-respect – bigger the balance, bigger self respect. Simple as that.
- Investment Account: I heavily invest in equities and mutual funds so every month a small percentage of my salary goes into my investment account. My monthly mutual funds SIP deduction happens from this account. If I buy equities, I pay from this account. If I receive dividend, it is credited in this account. Basically all transactions related to my investments happens in this account.
- Vacation & Shopping Fund: Me and boyfriend take at least 2 big vacations every year. And we both go dutch. In the past whenever we talked about planning for vacation I would scramble and panic to think where do I fund my vacation from and then my monthly budgets would go on toss or I would not contribute to my savings and divert that money towards vacation expenses. So last July I had this idea to create an account for my Vacation and Big ticket shopping (furniture for example). So I created an account where I deposit some money every month irrespective of whether I have any vacation coming up or wanting to buy a big-ticket item. When time actually comes to go on vacation or shop or buy any big ticket item I simply check the balance and declare my budget. During vacation I use this account to swipe all my expenses and never feel guilty of contributing less to my savings for that month or using a credit card.
Of course I have my other short-term saving goals such as Wedding Fund, Europe Trip Fund, Future Home Fund and Maybe Future Kid Fund. But for all these goals I have one account which is a Recurring Deposit (RD) in one of the above bank account and the funds are automatically transferred. So I never had to open a separate account for it yet. Maybe I will in near future.
People think that having multiple banks accounts must be cumbersome but in reality it is not. Automation and technology makes everything easier. Once the automation of fund happens, I check the balance and simply update my google sheet which has all the information of my financial universe. One time activity every month. Simple as it can be.
On the positive side, having multiple bank accounts have made me more accountable towards my goals and brought more discipline in me. All the above accounts also earn me some money in interest so that can’t be bad, can it? It has also reduced all the stress of not knowing how to go about saving/investing. It is one of my most recommended tip to anyone who will listen – separate the spending and saving accounts and see the magic happen.