Having a solid plan in place helps reduce anxiety and stress over managing your money. In my previous post I shared some insights on 5 Ways to Simplify Managing Your Money. Once you have a basic account to handle your cash flow, it’s time to level up and remove barriers to keep your money moving in the right direction.
First off, remember the big picture: You are exchanging your limited time and valuable skill set in exchange for currency to use for the things that matter most to you. As my father always said, “Everyone wants their hand in your pocket. Choose carefully who gets a piece of your money.”
Your primary bank account functions like a waterfall, some seasons the water will be gushing forth while other seasons will be a light trickle. Be prepared to thrive in both. That’s where your plan comes in.
- Set up a second account at your bank – either another checking account or savings account – with no monthly fees
- Begin to transfer funds over to the account as you are able, such as extra cash from overtime, tips, tax refund or gift – with a goal of building up a personal hedge of protection for the lean times ( 1-3 x monthly bills)
- As you use funds from the account, be sure to build it back up for those unexpected high heating bills, doctor visits or flat tires
- Think of it as a retention pond for your primary account – sweep excess money over when things are going well and sweep back as needed to prevent overdraft fees or late fees on bills
- Use your bank’s mobile app to make the transfer immediately – that’s why it’s important to have it at the same bank
- Monitor your progress over several months to determine if you need to adjust your strategy. Remember, the more you can build up will allow you to carry higher deductibles on your car insurance or health insurance – saving you even more with lower premiums
- Once you get a comfortable flow, you’ll be ready to level up again and add an account for your short term goals – trips, special events, holiday gifts, classes or any specific focus you want to accomplish
- Take your time researching automated savings options that allow you to start slowly and keep the funds at arm’s length – it takes a few days for funds to transfer back to your bank account when you need it
- Automated tools such as Acorns, Digit and Qapital help remove barriers to saving by making it simple, clear and informative
- Building a solid strategy is important – it’s critical to have a safety net account connected to your primary bank account for a foundation to build on
It’s exciting and motivating to get a money management plan put in place, especially one that is simple and clear. Saving money for things that matter becomes easier to visualize once you have designated accounts in place.
I’d love to hear what you’re doing and how it’s working for your unique journey. Wishing you #FinancialWellness today and always.