When you are trying to get a handle on your finances, the key thing, is to keep things simple, easy to handle, easy to understand and above all, easy to make progress with.
Yes there are many hi-tech apps out there, but here are a some hidden benefits of a simple three account system. Have an account for spending, another for your bills, and finally, a savings or reserve account – nothing more complicated.
Firstly, when you are truly aware of how your finances work, the easiest way to improve your budget happens first – control of spending! Imagine having to consciously be aware or write down where you are against your own mini-budget. Check in every day and do it manually, and soon, that hidden conscience will start to control your spending habits more and more. The odd £10 here and there suddenly stops being spent, and the money fairy no longer helps herself to your hard earned cash.
Secondly, and here is the fun bit, this method is of huge benefit to couples, who, over the past have dedicated all their time and energy to those around them (typically their children). Every available resource – be it time or money seems to be absorbed, and the very thing which created the beautiful family unit – the couples’ love for each other seems to fall a long way down the agenda.
The human, life planning related step in the three account system, is to split what is ever left at the end of the month (not the reserve account), but the amount which is left in the spending account. Save (or use to pay off debt) 75% of what is left (remember, this is surplus money). Why 75% ? Well this is to make sure that there is some reward for being frugal. If you do not reward ourselves, you will quickly lose your motivation.
The remaining 25% HAS to be spent during the next month on an experience together. If the residue is £20, then you have £5 to spend together, which may be a coffee on the beach, or even just a bottle of water and a car park fee.
On the flip side, if the residue is £1000, then £250 will get you a decent night out (well at least in Cornwall it will)! The cost of the event is not the issue here (as long as you spend the budget). What is important is that dedicated time together, and there is every chance that the £5 date will be far more memorable than the £250 one. In no time, not only will your finances be far more robust, but your relationship will have become immeasurably stronger.
This is the very point where your life planning meets your financial planning. An understanding of what is deeply important to you (relationships, family, time together, sand between the toes, love etc), coupled with practical support is the key – a good plan to keep you on track in every way.
Life is not about ticking off a millionaire’s bucket list, it is about appreciating the values, feelings and emotions of everything, so that you feel truly rich – irrespective of what is in any of your three accounts.