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 pays. 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's 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.
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?
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