I don’t proclaim to be a financial expert or even have a background in finance or economics. I’m a science student through & through. I’ve had friends ask me how I’ve managed to buy a house being young & single (both of which I’m not anymore by the way) and still have funds to live a modest lifestyle. I must admit, I was brought up with my parents drilling into me common sense and being thrifty with my purchases. I was given a monthly allowance for which I had to pay for food, tuition fees, transport fees and any extras I might want. I learnt the hard way about budgeting (I had to borrow money from my younger brother a few times to tide me over for a bit as I was a bit extravagant with my purchases, bless his cotton socks as he never told my parents!
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I write this as what I’ve been doing for the past few years and as to what my current financial state requires at the moment. Please don’t take my words as gold as I’ve tailored this for me. If you want financial assistance or advice, please see someone qualified to assist you with this.
I recently read a number of articles here and here and realised how similar it is to what I currently do. Strange as it sounds, I currently have 4 bank accounts for different purposes. Since I’ve read these articles, I’ve modified my financial strategy to be somewhat like the articles. I’m hoping it’ll give some pretty good results in the next 6 months or so, I ‘ll let you guys know!
This is the account where my salary goes in each fortnight and this is the only account of mine which I have a card attached to it. This account is kept to a bare minimum as it doesn’t generate interest & is used for accessing cash & purchases online.
This account is pretty much a no go zone. I take about 5% of each pay & chuck it in here and not touch it. This account is online and attracts a bonus interest rate for topping up each month and making no withdrawals. Shop around for banks or financial institutions that offer high rates as this money essentially just sits there making more money. What you want is for this account to have enough money to tide you through 3-6 months if the unspeakable happens and you can’t work. Once you hit this amount for this account, I’d say good on you! Then I’d say use the extra to put towards your mortgage or a credit card debt or something that you might have accumulated. I have an opinion on credit cards, but that’s another story for another time.
This account is for the big item things that you might be saving for. For example, for me this is where my funds to buy my air con came from. Save this for big item things that you don’t usually buy and might be a one off. I keep about 5% of my pay in here each fortnight to help me save. If I get bonuses, they usually get chucked here so I can buy the bigger item things quicker! Haha. Oh and did I mention that this account is also online based but is a flexible account where I transfer the specific amount to my Everyday Cheque Account for these purchases. Oh and this money also earns a high interest rate as it sits there. Shop around for good interest rates and easy access without any fees or penalties if you withdraw your money. It definitely pays to spend an hour or 2 just browsing banks & financial institutions for the best product. If you find it hard budgeting for multiple items in the one account, you can always open more than one of these accounts to help you keep track. There are accounts which costs nothing, so have a look around!
The name of this account is pretty self explanatory. I generally dump a good portion of my pay into this account to sit in while it waits to pay mortgage & bills. This account is the same type of account I have for the Specific Savings Account so that it also generates interest. This is essentially like a offset account. My stupid bank decided I don’t earn enough (I actually surpass the threshold by at least $4k) and I don’t have enough assets to warrant for me to hold an offset account. This is a bit of a “screw you!” to the bank to try to gain some of my interest back while paying them my mortgage. I’m on a variable interest rate, so each month’s payment is a bit of a hit & miss so I tend to generally put too much in there just to be on the safe side. Now that is where it comes in handy as the extra amount there will gain interest while I wait for bills to come in & pay from that account.
I must say as all my accounts are with the same bank, I have it pretty easy with transferring things over with a click of a button. My self-restraint is generally pretty good too, so I’m not tempted very often to overspend on things. I guess at the end of the day, it really boils down to how focused you are at managing your finances and how much you don’t want to end up with no money. I’m a visually motivated person & I like creating pie charts or those thermometer type things which mark down how much I’ve saved & how much more I’ve got to go to my goal. Use whatever method you need to and always remember that you are in control & it might take some hard work but it is possible to overcome debt & live a modest lifestyle.
And that is my birthday present to you. Happy 27th Birthday to me!
Hope you enjoyed this post and please leave me a comment on what you think and if I should post more of these types of stuff or what you want me to write about!