In my 33% savings plan post I mentioned that I would cover at a later time my money funneling techniques (e.g. my financial account structure) for y’all. I figure now is as good a time as any to cover this, so here you are…
I work primarily with two financial institutions, USAA and Desert Schools Federal Credit Union.
- Checking Account: I have all of my money deposited into this account and from here I divvy out my allocated percentages to different accounts. I also pay all of my bills, with the exception of my auto loan, from this checking account.
- Savings Account: This is a mid-term savings that I have established for my short-term goals, e.g. new car purchase, house down payment, etc. This account is for anything that I plan to purchase within the next 1-5 years.
- Brokerage: This is where I send a portion of my money to be invested in stocks, index funds, mutual funds and – when I get one – a Roth IRA. Included in this is a money market fund which I have set up as my emergency fund.
Desert Schools FCU
- Checking: I use this account to pay for gas, groceries, eating out, etc. I also use it to pay on my auto loan since I received a quarter percent discount on my loan rate to set up automatic payments from checking.
As I discussed earlier in my 33% savings plan I prefer to divvy my money up by percentages. To figure out the percentages that I would use I first researched how much my monthly expenditures were by creating a budget, then I figured out my average monthly net income (net meaning after taxes… e.g. take home pay) and then I figured out how much I would like to save a month. I ran a few numbers and came up with a list that looks something like this:
- 47% – Expenditures
- 33% – Savings
- 20% – Mad Money
That’s not exact, but I think that gives you a pretty good idea of how I work my percentage-based budget. It’s really quite simple and having different accounts with different purposes really simplifies the process. I have been managing my finances this way for about a year now and it’s really helped me to manage my spending and saving more efficiently.
A few quick notes
Please do take a few hours (or even better a day) to get your finances in order. It’s important (at least if you want to gain financial freedom) to always have your money flowing INTO your long-term accounts: e.g. IRA, Stocks, Mutual Funds. Another thing which I think is extremely important is to have an emergency fund built up for – well – emergencies. It’s always stressful and terrible when bad things happen to you or your family, but not having an emergency fund built up to handle sudden deaths or transportation problems or anything else that you can imagine makes it doubly hard. “That’s what she said.” Ok that was uncalled for and I apologize; I’m just a big fan of The Office. Seriously though it’s just smart financial management to save up 3 to 6 months worth of your cost of living. If you have any questions please comment or you can always e-mail me.
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