YPP009: HERE’S HOW I ORGANIZE MY BANK ACCOUNTS AND I LOVE IT

In this blog post, I reveal how I managed my bank accounts during my journey to financial stability.  Now that I am a financial stable finance coach and business owner, I have added a few more accounts to the mix and included them below as well.

Set-Up of My Bank Accounts While Attaining Financial Stability: 

Emergency Fund Savings Account  

I keep about $2,000 in a money market account I refer to as my emergency fund savings account.  Because I am in the process of paying off student loan debt with great intensity, I do not save more than $2,500 in this account.  However, when I become debt-free, I will save 3 – 6 months’ worth of living expenses in this account and leave it!

This account is not to be accessed for anything other than a major life emergency that would cause your budget to be completely thrown off. The loss of a job or a major income source, major car repairs, and unforeseen medical bills are all examples of emergency situations that are appropriate for relying on your emergency fund.  

The reason why you should save a small sum of money saved before paying off debt, buying a home, or whatever else that is on your financial goal list is because you need cash to fund financial emergencies.

Main Checking Account

This is a standard checking account and with a debit card for easy access to the cash through a local ATM.  It is where the direct deposit checks from my employer goes.

Note, the cash that accumulates here should be managed by your monthly budget. Rent/mortgage, utilities, and groceries are all examples of expenses that should be managed by your budget and paid via this account.

401(k) Retirement Account

A 401(k) (or 403(b)) is a retirement savings plan sponsored by an employer.  It allows me to save and invest a small portion of my paycheck before taxes are taken out each pay period for retirement.  This money is taken out and sits in an interest-earning savings account at a bank or company of my employer’s choosing.

My employer matched my contribution up to 4% so I had 8% (4% from my paycheck and 4% from their business bank account) going into my retirement savings account each pay period.

Set-Up of My Bank Accounts As I Attain Financial Freedom As A Business Owner: 

Emergency Fund Savings Account

Nothing has changed here!

Main Checking Account

Nothing has changed here!

Roth IRA Retirement Account 

I now have a Roth IRA (Individual Retirement Arrangement) instead of a 401(k) retirement plan because I am preparing myself for the transition of working a nine-to-five to being a business owner and full-time entrepreneur.  With a Roth IRA, I am the sponsor of the retirement account.  I was able to roll all the money I saved in my 401(k) into this IRA account and I still receive some of the same major benefits.

Last month, I decided to stop contributing to my retirement account because I am determined to pay off the remainder of my student loans!  Once they are paid off within the next year, I plan to automate 15-20% of my income into this account.

Business Checking Account 

This is a standard business checking account and with a debit card for easy access to the cash through a local ATM.  It is where I deposit payments received from my clients and partnerships.  All monthly business expenses, payroll, and fees are paid from this account as well.

Business Savings Account 

This is a standard business savings account where I save 25% of all earned income for tax payments and other business goals.

I realize these methods will not work best for everyone.  However, I found these to be very helpful with simplifying and streamlining my business and personal finances.  And I hope it does the same for you.

Question: How are you currently managing your bank accounts?  Leave your response in the comment section below.

All the Best,

Tara_Signature_140

3 Comments on YPP009: HERE’S HOW I ORGANIZE MY BANK ACCOUNTS AND I LOVE IT

  1. Chelvana
    September 4, 2015 at 00:52 (2 years ago)

    This is definitely a great idea! I utilize a holiday savings account with my credit that doesn’t allow any withdrawals unail the end of September. This helps me have guaranteed funds for Christmas! Something like that could easily be used for an emergency fund too.

    Reply
    • Tara J.
      September 7, 2015 at 21:43 (2 years ago)

      Wow… great idea Chelvana!

      Reply
  2. Raya
    October 12, 2016 at 18:56 (1 year ago)

    Raya with City Girl Savings here – Great read! How a person strategically sets up their accounts can make a huge difference in their financial habits.

    Reply

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