Quite a decent number of people can confidently say that they have at least two bank accounts linked to their BVN. One opened because your company required it. Check. One opened for the kid’s college funds. Check Check. Another opened for side business.
Check Check Check. Yet another opened when the ‘bank marketers’ made you open one to hit their targets.
Check Check Check Check Cheeeeck!
So, you have all these bank accounts and you are wondering if they will just make you spend more? Will t trick your brain into thinking that because you have money in different places, you can keep on spending? The simple answer to this question is ‘Not unless you don’t manage them well.’
Here’s why your several bank accounts can be utilized to control your spending and how you can manage them.
What Having Multiple Accounts Can Do For You
Having multiple bank accounts is somewhat similar to the Envelope Budgeting System. How does the envelope budgeting system work?
- Divide percentages of your income into separate spending categories (e.g. savings, groceries, utilities, entertainment)
- Keep a labelled envelope for each category and put the budgeted amount inside.
- Manage it by spending only cash until the budget period runs out
- Save what might be left
It is a simple yet incredibly effective way to manage your money and monitor your spending behaviour. This is equally possible with multiple bank accounts.
They can help you:
Track your Expenses
Keeping one single account for your income, expenses and savings is not an advisable way to manage your money. You can’t properly keep track of what’s happening to your money. However, with different accounts for specific purposes, you can know your income and expenses.
Maintain your Budget
This is very useful especially if you are new to budgeting or have challenges sticking to your budget. Keeping budgeted amounts in separate accounts creates room for financial discipline. You know that once the money in this account depletes, you’ll have to wait until the next pay check.
Control your Spending Habit
The good thing about this is, you cannot possibly overspend. It is however important to set a rule for yourself that once your spending account runs out, you won’t go borrowing from another account.
Save Towards Multiple Goals
You may have several financial goals: short term, long term or the more specific target goals. Keeping an account for your different saving goals and watching as they grow closer to their target can be very fulfilling.
How do you manage your accounts?
**Create a budget **
It all starts with a budget. If you don’t have one yet or you are new to budgeting.
Delegate the accounts
Decide on the category each account will be used for. For example, this savings account will be used for long-term savings only, etc..
**Track them and keep it simple **
There are several money management apps and spreadsheets that you can use to track your different accounts. If you are the more traditional type, use a financial journal instead.
open more accounts than you can manage at a time
Start with a controlled number of accounts. You can start with three accounts: Income/ Savings (where money flows in from), Bills/Expenditure (Daily necessities). As you get used to it, you can add more accounts, but always stick to what works best for you.
Don’t keep a debit card for all your accounts
This is a no-no. Keep debit cards for just the accounts delegated to expenditure and especially do not keep one for your savings account(s). If you already have one for it, go hide it.
Modify as you see fit
You can’t always get it right the first time. There will be a lot of trial and error, so be ready to make adjustments to your system, as you go.
In the end, your personal finance is personal to you.
Culled from: RENMONEY BLOG