The Bank Account Strategy So You Can Finally Stick to a Budget

If you’re anything like I was, money seems to disappear from your bank account. I would hope to save more and pay down my debt but it seemed that I just couldn’t stick to a budget. It didn’t matter what was going on in life or even if I got a raise at work, I couldn’t save money. However, once I changed up my strategy for how I set up my bank accounts, I was finally able to stick to a budget! I’m here to let you in on this strategy.

First Things First Make a Budget

If you have a budget already, take this time as an opportunity to review it and refresh it. Have you been over spending or underspending in any category? Can you make more of an effort to cut down in any of your categories? Reviewing your budget a few times a year is always a good call anyway.

If you don’t have a budget, take a look at your spending from the last month as a starter. Write down on paper, in Excel, or in a budgeting app what categories your money went to. This is everything from your car loan to groceries, takeout, alcohol, makeup, etc. Try to be specific but not so much that you are overwhelmed. You can always breakdown your categories further at a later date. Once you have your budget, take a hard look at where you can cut down on your spending. Be critical, do you really need to set a monthly budget for clothes shopping or can that be a few times a year?

Categorize Expenses into Buckets

Once you have your budget set up and your spending categories in a good place, you need to put each category into one of the buckets below. You can’t stick to a budget unless you know where your money is going.

Bills

This category is pretty self-explanatory. These expenses are monthly and have to be paid. They are coming out of your account no matter what or an unfriendly bill collector will be calling. This could be rent, electricity, internet, etc.

Other Monthly Expenses

Although bills need to be paid no matter what, there are other monthly expenses in your life you can’t avoid. You need to eat so you can’t avoid buying groceries each month. If you own a car, you probably can’t get away without paying gas each month. You should also include monthly spending money for fun activities. I’m sure your budget includes some spending money for things like a monthly movie date or a couple of bottles of wine each month. Hey, we have to enjoy our money a little bit, right?

Non-Monthly Expenses

This category is for everything else if your life that doesn’t fit into a monthly bucket but you still need to have a budget for. This could be gifts, a yearly vacation, charitable donations, etc. Try to estimate how many of these non-monthly expenses you will have in the year and see how much you will need to put aside each month. This way you will have the money for them when you need it.

Make Your Financial Goals

How much is leftover after you listed out your expenses? If there isn’t anything leftover, you need to go back and cut some expenses out of your life. You can’t afford your lifestyle. If you do have money left over after your expenses, are you happy with the amount? If not, go through your budget again.

Now the fun part. Think about your financial goals that you want to achieve. Are you paying down debt? Do you have an emergency savings? Is there a wedding in your future that you will need to pay for? Each time you put your hard-earned money towards your goals, visualize achieving them. Not only will it keep you motivated but it’s also really fun to dream about finally achieving your goals.

Organizing Your Checking Accounts

If you noticed above, the word “accounts” is plural. This is because I want you to set up two separate checking accounts. Having two separate accounts will make it extremely simple to stick to a budget.

The first one should be for your bills category. You should have automatic withdrawals on any bills you have to pay so you know what date the money will be pulled from your account and so you don’t miss any bills. Take your total from the bills bucket of your budget, this will be how much you should deposit into this account each month. If you get paid twice a month, set up your direct deposit to half of the total.

The second checking account should be for your other monthly expenses. By separating this category from the other, you won’t be spending money that should be saved for bills. Since your budget for other monthly expenses is how much gets deposited into this account, you will actually have to stick to your budget.

There are some months where a budget category such as my “restaurant” budget goes over. In this situation, I just spend less that month on another budget such as “groceries” or “bars” because I am limited by how much is in my account.

Organizing Your Savings Accounts

The first savings account will be for your final expense bucket – non-monthly expenses. By tucking away money each month, you will be prepared to pay for that yearly girls’ trip or your 6-month set of contact lenses. You get to enjoy the random fund that life throws at you while also being able to stick to a budget. I recommend having a savings account with the same bank as one of your checking accounts. This way, you can do an immediate transfer to your checking if something comes up unexpectedly.

For the big savings goals such as an reaching Financial Independence or a down payment on a house, you will need a second savings account. For this one, I recommend a higher yielding online savings account. It won’t earn you a ton of money but it will at least be considerably higher than regular savings account. I also like these better because it takes a few days to get the money out. You can’t just do a quick transfer on a whim. This extra annoyance keeps you from touching the money when you really shouldn’t be.

Pay Yourself First

This last step is crucial to your success. After going through the above steps, you now know how much you spend each month and how much you are going to put towards your goals each month. You also have the accounts in place to make it easier to stick to a budget. So, the final step you need to do to reach your goals is to pay yourself first.

As soon as you get paid, make sure that money is going to your savings and any debt you might have. You can’t spend it if it’s already gone. Once you get in the habit of paying yourself first, your financial goals will finally be achieved.

Eliza B

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