Two Checking Account System

hi my name is Charlie I'm one of the cofounders of three thrifty guys for years I've been extremely frugal and very tight with my money I was raised by Great Depression as' parents and grandparents that were always pinching pennies but soon after I graduated college I realized that that just pinching pennies wasn't enough for a while I was struggling with getting overdrafts not have enough money at the beginning of each month to pay my mortgage or or just having too much time that was spent towards my finances that's when I came with the seven-step automated system of automating my finances to help me divide my bills up in different categories so let's get started if you were like me then more than likely all of your paycheck is going into one checking account and all of your expenses are coming out of that same account so your mortgage payment your grocery bill and your daycare all come from the same account on top of all that you're more than likely living like most Americans living paycheck to paycheck so your checking account has little to no wiggle room hypothetically here's an example of what my finances look like when we were living paycheck to paycheck and everything was going into one account more than likely yours looks very similar to this with some variances as to the percentages so if you want to stop living paycheck-to-paycheck and have your money start working for you then start by this automate all your bills so you can spend more time on the things that matter to you and if you want to visualize your money flowing in and out of different accounts then start with this easy seven step program to automate your finances to get started you need to write down all of your fixed expenses this is everything from your mortgage student loans car payment garbage hauling tithing and any utilities that can you can get on an even payment plan I prefer to report all my fixed expenses in Microsoft Excel personally but it really doesn't matter you can write it all down on a sheet of paper and total all up the point is to have all your recorded items in one area in addition on the same street make sure you write down what day the fix expenses is scheduled to be withdrawn this will help you make sure that you have enough in your account at the time of withdrawal lastly I highly recommend you get as many payments on even payment plans as possible this is especially helpful for utilities not a necessity but will help you with your overall long term goals so I'm moving along in our example here's how it might look after you total all your fixed expenses in our above example you can see how my total monthly fixed expenses is 2100 and $71 and totals for about 47% of my expenses at this point don't worry about the variable expenses but just focus on getting your total fixed expenses accounted for now using the same fixed expense sheet figure out how often you get paid if you're paid monthly then it would be twenty hundred and seventy one dollars and fifty two cents divided by a one obviously 2871 but if you're paid every two weeks bi-weekly then use twenty eight hundred and seventy one dollars and fifty two cents divided by two which your total would be fourteen hundred and thirty five dollars and seventy six cents as shown here or weekly would be twenty hundred and seventy one dollars and fifty two cents divided by four equals seven hundred and seventeen dollars and eighty-eight cents this is a neat pretty easy step and doesn't require a lot of time pretty basic math once you've figured out your total expenses now here's where the rubber hits the road I want you to use your primary checking account that you already have set up to pay all of your fixed expenses or unlikely most you are already automated bills are paid from this account so if you don't have have certain fixed expenses that aren't automated then take the action here to make them automated whether it be with your bills bank pay service or through automated payment plans with your creditors in moving to step four shop around for a high-interest checking account that does a charge for ATM withdrawals I recommend using another bank then where you have your primary fixed expenses coming out of it doesn't necessarily need to be another bank but it helps keep a clear delineation of fixed expenses versus variable expenses in addition in choosing a separate bank that it keeps you from having all your eggs in one basket if something goes awry at your primary bank graphically now your money flow should look like this with fourteen hundred and thirty five dollars going to your fixed checking account and everything else to your new variable high interest checking account so now you've done the hard legwork in calculating and automating all your bills then you can change your employer's direct deposit Paul see your first transaction should be to change your direct deposit for fourteen hundred thirty-five dollars every two weeks to your fixed checking account and whatever is left over should go to the variable account in order to ensure that you have enough cushion in your fixed expense account then make sure you have an extra fourteen hundred thirty-five dollars equal to 1by weekly paycheck this will help ensure that you don't have any overdress and get have all your bills automated moving to step six the hard work is behind you now it's time to have some fun since your bills are broken out between fixed and variable expenses then you can focus on reducing your fixed expenses so let's take your cell phone bill for example if you're able to reduce your cell phone bill by $100 per month then you can reduce your bi-weekly direct deposit by $50 or $100 divided by two with every dollar that you save on your fixed expenses then it just adds to your variable account even more because all of your fixed expenses are broken out then it provides you extra motivation to save your fixed expenses and it's fun to watch your variable account grow so because you've done all the heavy lifting in steps one through six then now is a time to enjoy the fruits your labor and sit back and watch watch your high interest variable account grow as you stay motivated to reduce your fixed expenses as a result then you can spend more time on the things you want to spend your time on and not worrying about your finances graphically your variable account will look something like this if you're spending less than you make each week then over time this account will grow in your existing system of having just one checking account you have no knowledge if you're making any progress from week to week and it isn't motivating like a - checking account system is then on the flip side you can see the fixed expense account is completely on autopilot with your direct deposit siphoning a set amount each pay period your bills are being paid automatically and you won't have any overdraft to sweeten the deal even more you'll have some months that will have an extra pay period like May in in the example above with that extra fourteen hundred and thirty five dollars twice a year then you can put that money towards paying more on your mortgage or just leaving it in your account to pay for Christmas presents at the end of the year the whole system is a win-win so hopefully at the end of this series you'll no longer feel frustrated a shade of the overdrafts the management of your finances and if you if you do put in a little bit of legwork at the beginning in order to automate your finances you'll find that it's very rewarding at the end so I hope you enjoyed this video series and be sure to subscribe to our YouTube channel thanks

Channel: Three Thrifty Guys

Views: 120,939

Rating: 4.6866708 out of 5

Keywords: how-to, personal finance, budgeting, manage money, money management

Id: wZCZY2Cf1yg

Length: 8min 46sec (526 seconds)

Published: Thu Jan 07 2016