Recommended home bank account set up – By Pat Hoey
From my personal experience and experience over the last 30 years working with clients, I highly recommend that household bank accounts be set up into three different bank accounts (which is what I do myself).
- First bank account is used for your Everyday account that you use to pay for everyday things like groceries, car fuel, eating out, drinks, clothes, gym fees, pet costs, take away, etc
- The second bank account is used for your Bills and loans account to pay for things like your home loan or rent, credit card repayment, home electricity, gas and internet costs, car repayment, mobile phone, school fees, car rego, holidays, etc
- And the third account is your Emergency account plus things for your health, savings and emergency bunny
The idea is to split your pay each week into these three separate accounts, so over time money will accumulate in the second account to allow you to pay for your bills (and third account will also go up).
The everyday will go up and down often most weeks, and when it’s down, you may have to reduce your spending or shopping or going out until your next pay. It’s important not to touch the second or third account for everyday purchases because that is needed for other things like a bill next week, or rent, or home loan, or credit card, etc
I haven’t mentioned a credit card, as I don’t recommend them, but if you need one, it should only used for emergencies.
What happens with this bank account system?
You will have some weekends or days, where you have no money to go out for dinner or drinks, get takeaway, etc – so have to make the tough but smarter decision and make dinner at home, or stay in instead of going out, or not buy the clothes on special, etc. But your second and third account will grow and when a bill is due, you won’t have to stress about how you will pay for it, as the funds should be there (which once this becomes regular, you’re on your way to financial freedom (and no more money or bills stress).
How much to put in each bank account? Ideally you should complete a 15 minute expenses budget which I have included and easy to use the spreadsheet link below, to know an estimate of what your expenses are, and where you money goes. Otherwise split your pay so 35% goes to Everyday account, 55% goes to Bills account, and 10% goes to Emergency account.
Click on the link below for the Home Budget Planning Spreadsheet:
https://Home Expenses Budget Planner (Split into three bank accounts).xls