Are You Banking Incorrectly?
Ensuring you have the correct bank accounts to create your money map system is an important step to creating a solid financial foundation.
Each individual who wants to begin managing their money better, needs to understand how to open and utilize the right and appropriate accounts for everyday money management. Using accounts incorrectly or not strategically, can hinder you with your desire to build effective money habits.
Here’s some helpful tips to assist you with increasing your understanding of the uses of two (2) basic accounts each person should have in their money map system:
1. Checking Account:
Did you know you should have at least one (1) checking account? But two (2) is ideal!
You may ask, why? There is a myth many people believe about why they should not have a checking account. Some of them include: not being a business owner, not earning a certain amount or not wanting to write checks. But, a checking account is not about “writing checks” or any of those other things.
It is very important to ensure you have at least one checking account, so you can use it for things such as bills, other expenses and everyday spending.
The reason having two (2) accounts is ideal, is because you can split your expenses to allow your budgeting and financial structure to be more automated and avoid additional banking fees/restrictions from using a savings account to spend from.
For Example: One (1) checking account can be used only for recurring bills and expenses (fixed) and another can be used only for variable expenses (which is typically your everyday spending).
Funds can be automatically deposited into these separate accounts. This will help you with understanding more closely exactly how much you’re spending in certain areas vs. guessing about your spending habits
2. Savings Account:
Did you know you should have at least two (2) savings accounts? But three (3) is ideal!
You may ask, why? Having multiple savings accounts is extremely important when creating your money map system. However, the most critical savings account everyone should have to start, would be establishing your emergency fund savings. This is your first layer of “protection” from going into debt for any emergencies that may arise.
For Example: One (1) savings account can be used only for your emergency fund (read more here about emergency funds), another can be used for short-term savings (read more here about sinking funds) and another can be used for long-term savings (this can be for a larger purchase such as apartment/home, car and more).
Take some time to review your current account structure, fees you’re currently being charged and decide on possible changes you can implement.
Having the right accounts set up is extremely beneficial!
