Personal finance expert and author Tiffany "The Budgetnista" Aliche believes the answer is actually pretty simple. She spoke at OneUnited OneTransaction , a conference about closing the racial wealth gap, about her best budgeting tips. First, set up a checking account to pay your bills, Aliche said. You'll use the money in this account to pay for housing, utilities, insurance, your car loan — any bill you have to pay.
Aliche recommended that you do not get a debit card for this account. This way, you won't be tempted to spend your bills money on other things. When you want to spend money, you can use your other checking account. This checking account is for everything other than your bills. You could use it for entertainment, meals at restaurants, or gifts for friends and family.
Go ahead and attach your debit card to this account, because the money is primarily for spending. An emergency fund is money you only use when the unexpected happens. Maybe you lose your job, or your car breaks down, or you receive a huge hospital bill. You only touch this money if there is an emergency, so it's wise to keep it in an account that's separate from the ones you use for bills or other savings goals. Most experts recommend setting aside three to six months of necessary expenses in your emergency fund.
The rule of thumb is that you should have six months' expenses if you are a one-income household and three months' expenses in a two-income household.
Finally, there's an account for other big savings goals. You might use this account to stash away money to buy a car , make a down payment on a home , or go on a vacation. If you use a bank that makes it easy to save for separate goals , you could even create individual savings buckets for each goal in one account.
Aliche called her budgeting method "split it before you get it. By splitting up your paycheck before it hits your bank account, you won't be tempted to spend money you don't have. You'll also consistently work toward your savings goals without even thinking about it. To split it before you get it, you'll need to do the math beforehand. Figure out how much you put toward all of your bills each month, what you need in an emergency fund, how much you'll need for a big purchase, and how much you have left over.
If your employer can't divvy up your paycheck for you, Aliche said there's a simple solution: Ask them to deposit the full paycheck into your bills checking account. Then you can set up the transfers yourself. Your bank probably has a tool for setting up recurring transfers each time you get paid so that you don't have to remember every time.
Over her five years of covering personal finance, she has written extensively about ways to save. Disclosure: This post may highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you.
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World globe An icon of the world globe, indicating different international options. Having multiple bank accounts can make it possible for you to have consistent access to the cash you need for everyday expenses while enjoying the best interest rates available in the marketplace.
The key, of course, is figuring out which combination of accounts makes for the ideal match between your financial goals and your lifestyle. There are, however, ways to help you determine which bank account combinations will offer the access you need to immediate cash while helping you make the most of your funds held in reserve. Your checking account acts as the gateway to your monthly finances. Your everyday checking account can bring you benefits for your regular spending.
With a wide array of banks competing for your business, you have the luxury of choosing between the benefits of brick-and-mortar banks with local locations close to your home and online banks. Make sure that your primary checking account has benefits like mobile and online banking, a low opening balance requirement and manageable monthly fees. Many banks waive monthly account fees when you use direct deposit for your paycheck or keep a minimum balance.
Many online banks offer extended benefits for their checking accounts like ATM fee refunds, waived overdraft charges and more. Adding a second checking account to your financial mix might be the last thing on your to-do list, but it makes sense in a few specific situations like tracking business income and expenses and having the access you need to your money.
As of , A second, separate checking account can make all the difference. Adding a second checking account also can help you budget by keeping your business expenses accounted for separately from your personal expenses. By logging into a single account and seeing the expenses related to your business, you also can quickly determine where you may need to cut back or modify spending during months where income ebbs.
On April 15, as stimulus checks began landing in bank accounts across the U. A savings account is an essential component of a sound financial strategy.
You may choose a savings account at the same bank as your primary checking account or explore the many popular online savings accounts available. Skip to content Advertiser Disclosure Advertiser Disclosure: The credit card and banking offers that appear on this site are from credit card companies and banks from which MoneyCrashers. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear on category pages.
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