| Do you save your money? If you do, how many | | | | Put the money for anything you're paying that is |
| bank accounts do you put your money in? | | | | related to your car - petrol, grooming, road tax, |
| If you're like most people, you probably have just | | | | servicing, etc - into this account. |
| one single account or two at the most. | | | | You have to estimate how much you're paying for |
| Personally, I have a total of seven bank accounts - | | | | each of the listed items on a monthly basis and |
| four savings accounts, two current accounts and one | | | | simply put that amount into this account every |
| fixed deposit account. | | | | month. |
| You may think I'm crazy or you may think it's too | | | | For example, if your yearly insurance premium is |
| tedious to manage that many accounts. But I can | | | | $1,200, then simply save $100 in this account every |
| assure you this is the best way to manage your | | | | month so that you'll have the money ready when the |
| money and it's definitely worth every ounce of the | | | | time comes for renewal. |
| effort. | | | | For other car expenses that do not have a fixed |
| The reason I have my money in so many accounts is | | | | sum, like petrol or car servicing, you just have to |
| to ensure I'm not spending more than I should, that | | | | make an estimation and save the amount according |
| I'm able to pay my credit card bills on time, that I'm | | | | to your estimation. |
| putting enough money aside for rainy days, and that | | | | Initially, you may under-save or over-save for these |
| I have surplus to invest. | | | | expenses, but it's ok. Over time, you'll have a more |
| However, I'm not saying you should have seven | | | | accurate estimation. To be safe than sorry, choose |
| different accounts like me. What I'm saying is you | | | | to over-save. |
| should decide the number of accounts based on your | | | | 5. Miscellaneous Account (Savings Account) |
| own needs, with each account catered for a specific | | | | Life is not just about work and saving for the future. |
| purpose. All I'm doing is to give you an example to | | | | We all need to pamper our loved ones and ourselves |
| follow. | | | | from time to time. Just don't overdo it and you'll be |
| In Singapore, banks will usually charge you a monthly | | | | fine. |
| service fee (usually S$2) if your daily average balance | | | | Whatever my income is for the month, I'll put 10 per |
| falls below a minimum amount. But I'm more than | | | | cent of it into this account. You can choose |
| happy to pay this fee because the advantages I gain | | | | whatever amount you're comfortable with, but I'd |
| from properly managing my money more than offset | | | | suggest no more than 20 per cent of your income |
| the small amount of fee I need to pay. | | | | for this account. If you need to go below 10 per |
| Having said that, I still choose more savings accounts | | | | cent, do it! |
| than current accounts because the required daily | | | | You can use the money in this account for travelling, |
| average balance for savings accounts is much lower | | | | buying a new tv, new clothes, new bags, new shoes, |
| than current accounts, which is easier to meet. | | | | etc. |
| And the reason for having current accounts is | | | | I'd also use this money to buy gifts for birthdays, |
| because I need to issue cheques at times for both | | | | weddings, anniversaries, Valentine's Day, and during |
| my business and personal purposes. | | | | the festive seasons. |
| So remember to check with your banks the minimum | | | | A lot of people tend to give priority to pampering |
| balance required and the service fee they charge. | | | | themselves because human beings have a great |
| Now let me explain how I manage my money with | | | | penchant for instant gratifications. |
| my multiple accounts. | | | | So the purpose of this account is to control over |
| 1. Central & Business Account (Current Account) | | | | pampering yourself. |
| Currently, I have only one source of income, which is | | | | UNDER NO CIRCUMSTANCES should you use the |
| the commission I receive from brokering real estate | | | | money in other accounts for what this account is |
| deals as a real estate agent. Every month, all my | | | | intended for. |
| commission income will be deposited into this account | | | | If the money in this account runs out, then just |
| before I distribute them to other accounts | | | | STOP pampering yourself until it's been topped up. |
| accordingly. | | | | And DO NOT succumb to the desire to put more |
| But before I do that, I'd save between 15 to 20 | | | | money than you should into this account. Otherwise |
| percent of the amount in this account as my real | | | | that would defeat the purpose. |
| estate business monthly expenses. After which I'd | | | | 6. Emergency Fund Account (Fixed Deposit) |
| transfer the remaining amount to other accounts | | | | Many personal finance gurus advocate the setting up |
| through Internet banking. | | | | of this fund and I absolutely agree with it. |
| For this account, I'd usually be able to avoid the | | | | By far, this is the most important account because |
| service fee because my balance in this account would | | | | we are living in a world full of uncertainties and we |
| usually meet the minimum requirement, except | | | | have to always be prepared for the unexpected. |
| occasionally. | | | | And since this is the most important account, always |
| 2. Personal Expenses Account (Savings Account) | | | | allocate a portion of your income into this account |
| As a self-employed, you're essentially your own boss. | | | | first before any other accounts until you've reached |
| Nevertheless, you still need to pay yourself a fixed | | | | your target. |
| monthly salary. | | | | While some experts say you should keep aside |
| This fixed amount is mainly to control your monthly | | | | enough money to sustain for at least 6 months |
| expenditures so that you won't overspend. The key | | | | should you unexpectedly lose your job, I personally |
| is to allocate an amount that's enough to cover your | | | | prefer to keep aside enough money to sustain |
| basic necessities and perhaps a little extra for some | | | | myself for 12 months. |
| leisure activities. | | | | I'm not there yet, but I'm steadily accumulating it. |
| You may need some discipline to stick to only | | | | Some experts also say that the amount should be |
| spending the amount available in this account because | | | | the multiplication of your monthly income rather than |
| there is definitely temptation to spend the money in | | | | expenses, but I think a multiplication of your monthly |
| your other accounts when the money in this account | | | | expenses is good enough. |
| runs out. | | | | For example, if your income is $3,000/month and |
| The way to counter this is to have just one ATM | | | | your monthly expenses are $2,000, an emergency |
| card. You should destroy all the other accounts' ATM | | | | fund of $24,000 (12 months of expenses) is good |
| cards or simply tell the banks not to issue you one. | | | | enough. |
| I understand there's also the credit card temptation. | | | | And saving $24,000 is easier than saving $36,000 (12 |
| So let's move on to the next account. | | | | months of income), although it's still pretty challenging. |
| 3. Credit Card Payment Account (Savings Account) | | | | Nevertheless, it's not mission impossible. |
| You may already know by now that credit card can | | | | Keeping aside 12 months of expenses is just my |
| be a dangerous financial tool. But that is only true if | | | | preference. You may choose a figure you're more |
| you abuse it. | | | | comfortable with. |
| On the contrary, it can be a great wealth | | | | But the recommended minimum is 6 months of |
| enhancement tool if used properly because you can | | | | expenses. |
| accumulate bonus points with your purchases. And | | | | There are investors who keep their emergency fund |
| you can use these points to redeem for free | | | | in investment instruments like bonds, stocks, money |
| products and services like shopping vouchers, dining | | | | market funds, etc, but personally, I prefer to keep it |
| vouchers, extra flyer miles, petrol vouchers, etc. | | | | in cash. |
| I have since accumulated a few hundred dollars | | | | So you have to decide which is the best instrument |
| worth of petrol and this helps me to save even | | | | to safe-keep your emergency fund. Take note, the |
| more money! | | | | keyword here is safe. |
| The money in this account is to pay for all my credit | | | | 7. Investment Account (Savings Account) |
| card bills. This is a very important account because it | | | | This is a must-have account because if you don't set |
| ensures that I have the money to clear my credit | | | | aside money to grow your nest, you'll forever be |
| card bills on time so I don't have to pay exorbitant | | | | struggling financially. |
| interests to the issuing banks. | | | | But why is this not the most important account? |
| This is how I make sure I'd have money in this | | | | Because you should invest only with money that you |
| account to pay for the bills on time. | | | | can afford to lose. |
| Whenever I make a payment using one of my credit | | | | As a matter of fact, this will become the most |
| cards, I'd transfer the payment amount from one of | | | | important account once your emergency fund |
| my other accounts to this account the moment I | | | | account is fully funded. |
| reach home. | | | | You should start investing only after you've |
| If the item I bought were for personal use, I'd | | | | accumulated at least 6 months worth of expenses in |
| transfer the exact amount from my personal | | | | your emergency fund account. |
| expenses account to this account. In doing so, the | | | | Before that happens, save money in this account |
| amount in that account would have been reduced | | | | simply for your insurance. You can use the money in |
| and in such case, I won't overspend because I now | | | | this account to pay for your insurance premiums, as |
| have less money in the expenses account for my | | | | insurance should be part of your overall investment |
| disposal. | | | | plan. |
| If the item were for business purpose, then I'd | | | | However, when you're ready to invest, do your due |
| simply transfer the money from my Central & | | | | diligence to research thoroughly the kind of |
| Business account to this account. | | | | investments that suit your financial appetite before |
| Never delay transferring the money or you'll forget | | | | you commit to any investments. Do it like how you |
| about it. That could be dangerous. Always transfer | | | | would before you buy your first car. Never make the |
| the money once you get home. If not, do it the next | | | | mistake of putting your money into something you |
| day at the latest. | | | | do not understand 100 per cent. |
| Remember... it is extremely important to clear your | | | | You may need some time to conduct the research |
| credit card bills on time because this habit can make | | | | and analyse all your available choices of investment |
| or break you. And also to always stick to spending | | | | instruments, so it's good to build your investment |
| only whatever you have in your personal expenses | | | | arsenal while you carry out your due diligence so that |
| account for the month. | | | | when you've identified the right investment |
| 4. Car Expenses Account (Current Account) | | | | opportunity, you can grab it right away. |
| Apparently, you need this account only if you own a | | | | So there you have it. This is the system I use to |
| car. If you do not own a car, then just include your | | | | efficiently manage my money. It has served me very |
| monthly transport expenses in your personal | | | | well so far. |
| expenses account. | | | | As mentioned earlier, you may not need as many |
| I separate my car expenses from my personal | | | | accounts as I do, or perhaps you may need more! |
| expenses because if I combine the two expenses in | | | | Whichever the case, there are four accounts you |
| one account, I may spend more than I should on my | | | | must surely have. They are the Personal Expenses |
| personal consumption like entertainment or new | | | | Account, Credit Card Payment Account, Emergency |
| clothes, and leaving little money to pay off my car | | | | Fund Account, and the Investment Account. |
| loan, insurance, etc, at the end of the day. | | | | With these four accounts in place, I'm sure you'll do |
| There's always temptation to spend more when you | | | | well in managing your money, unless you start losing |
| have more money at your disposal. | | | | your discipline. |
| The principle to having this account is the same as | | | | Start implementing the system right away and you'll |
| having the credit card payment account, which is: | | | | see the positive effects it'll bring to your financial |
| CLEAR YOUR DEBT ON TIME! | | | | health. |