These accounts normally include basic savings, advanced checking, and perhaps a Certificate of Deposit (CD) account. However, many of us probably have never considered opening and maintaining multiple savings accounts for individual and specific purposes. I have put together what I believe is a detailed list of the 10 most important bank accounts that you should have. Holding these accounts will not only help you manage your money better than you might be doing currently, but will also assist you in controlling your spending habits.
Personal Expenses Account
Your very first account is the one that your parents probably opened for you when you were a child. A personal expense account is one that we are all very familiar with, and likely have in multiplicity. This account is strictly used for maintaining your daily living and personal subsistence. This would include food, shelter, clothing, and household utilities. Since you will be paying bills more frequently in order to cover daily living costs, you will do most of your withdrawals from your personal expenses account.
Your emergency account is your second most important account. The purpose of this account is to have the financial reserves to cover emergency costs. Emergencies such as unexpected car troubles, replacements for lost or broken items, and last minute issues would be covered under this account. An emergency account will help you manage your funds more carefully, and also prevent you from constantly dipping into, and eventually depleting your personal expenses account.
With the uncertainty of our current economic climate, everyone will need to seriously consider starting a small and manageable home-based business. Every entrepreneur should have a business bank account. Whether you start small home-based business with little or no start-up cash or invest hundreds of thousands of dollars in a franchise, you will need to have a money storage center that will strictly support your business. When starting a business, the tiny amount of money that you make would go into this account. Obviously, you would begin your business part-time while working full-time on your regular job. The money that you earn on your regular job would go towards your other accounts. However, the money that you earn from your business would go directly into your business account; which you will not touch unless it is for business purposes.
Business Operating Expenses Account
This account would serve as an immediate extension of your business account. You will use this account to cover certain expenses in order to effectively operate your business. This is done by deducting a small percentage from your business account, and then depositing it directly into your business operating expenses account or BOE account. Whenever you need to make monthly payments for website hosting, maintain a marketing campaign, or invest in research and development; your BOE will become a tremendous business asset. Remember that you must put your profits into your business account first, deduct a percentage from it, and then place that into your BOE.
Vehicle Budget Account
If your drive everyday, which most of us probably do, then it will be important for you to open a vehicle budget account. This account is self explanatory. The money in this account will be used strictly to cover all of your vehicle needs such as fuel costs, repairs, inspections, insurance, registration, and cleaning. This account would be an extension of your personal expenses account, because you would use it a lot more frequently. Therefore, you may need to set aside a small percentage from your personal expenses account every month, and place it into your vehicle budget account.
An entertainment account would include fine dining with family and friends, sporting events, parties, park activities, and other types of leisure activities. Be very strict with yourself when it comes to this particular account. We all like to have a little fun sometimes, but the fun can end costing us more than we bargained for if we're not careful. You will need to discipline yourself to save regularly into this account in order to enjoy its benefits. If you don't save enough money to do certain things that you enjoy, then you will have to limit your spending from this account. If you don't save any money, then you will have to forgo it completely until you have funded the account sufficiently. As a note, you can spend little or no money on entertainment, and still have a great time. You can hike, do walking trails, sit by the ocean, or just visit neighbors. In any case, an entertainment account is a great way to provide funds for fun.
A vacation account would include air travel, road trips, cruises, hotel costs, food, supplies, and other vacation issues. You should save the minimum amount required to support your vacation habits. If your total vacation expense per year is $3,000, then you must save that amount prior to the upcoming year. In fact, you should try to save more if possible. If your vacation plans include a new destination, you should calculate the amount required to cover that expense. If your journey includes international travel, make sure to take care of passport and visas issues many months in advanced. Make sure that medical checkups and health issues are seriously addressed. While on vacation, refrain from dipping into your other accounts. In fact, it would be better to leave all checkbooks, credit and debit cards for all of your other accounts tucked away in a safe place in your home. Only use your spending from your vacation account.
Everyone should have at least one personal investment account. The purpose of such an account is to provide sufficient funding for your retirement. You will need to put several dollars per month into this account, and only touch it when you have decided where you wish to invest. Make a point of doing a substantial amount of research on different types of mutual funds and company stocks. Be very thorough when looking at these and other types of investments. When you're ready to begin, start with just a small amount of money to get a feel for how to invest. Afterwards, increase your amounts in 10% increments, and do this every month. Never stop putting money into your investment bank account. As you income grows, put more money into this account, and open more funds when you've found some that you like. It is absolutely important that we all do this as soon as possible, and stay on course.
Keep an insurance account for all of your insurance policies. Your policies would include life, health, car, house, and expensive household luxury items. Make certain to put small amounts into this account every month, and increase that amount when your income increases. Make sure to store your policies in a safe place within your home. Invest in a home safe, if you think that this is appropriate. Keep track of all of your payment due dates on a spread sheet. An insurance account will be a help when making your monthly payments.
Tax Withholding Account
This account is particularly important if you are self-employed or own a business. The best strategy for saving in this account is to first figure out which tax bracket you fit into. Then, deduct that amount from every payment that you receive, and place it into your tax withholding account. For example, if you've determined that you are in a 32% tax bracket , deduct 32% from every payment and place it into your account. Later, you will need to consult with a tax professional for an estimate of your tax bill at the end of the year. If you learn that you haven't put away enough money, deduct more from future payments and put them into your account. You always want to have this account available when tax time arrives.
You can start doing this today even if you don't have a lot of money to work with. You can begin the process by opening all ten accounts with only $20 for each account. Then, put just $1 into each account every month. Don't concern yourself about this being too small. Your initial purpose is not to pile up money. Your purpose is to get started, and get a feel for managing 10 bank accounts. If you can put more money in, then do so. However, do not put any amount of money into your accounts that you will not be able to manage successfully in the future. If you put $10 into each of your accounts this month, make sure that you can put $10 into them every month for the whole year. Do not vary the amounts that you save. Doing this will disrupt your savings flow, and ultimately kill your efforts. Be diligent with your savings plan, and remember to stay on course.