S01_E04 - Willpower and Structuring your Accounts

https://www.patreon.com/Jellyman_Investing
Welcome to another episode here at Jellyman Investing where we'll be talking about building your foundation. That means, learning how to structure and automate your accounts so that you don't over spend, you have a better understanding of where the money is flowing and most importantly, slowly and steadily build your savings to the coveted 6-12 month target.

Before I get on with this episode, a reminder that I have a Patreon page where you can read articles, download spreadsheets, get internet resources, watch tutorial videos and even chat with me. It's free to join so sign up today. The link is:

Patreon.com/Jellyman_Investing

Also, a disclaimer, that I am not a financial advisor, please consult with a professional before making any financial decisions. On with the episode.

---------------------------------

In the past, many people, including myself, managed finances through a single bank account, making it hard to track spending, bills, and savings. This approach often leads to overspending and unclear savings growth.
The game-changer for me was learning about account structuring and automation from "Barefoot Investor." Automating finances reduces reliance on willpower and provides clear visibility on each account's growth.
Most banks offer multiple accounts through their apps. A basic structure includes four accounts, but customization is encouraged for individual needs.
1. Everyday Spending: For daily expenses like lunch and transport.
2. Enjoyment: Allocating funds for leisure without overspending.
3. Short to Mid-term Goals: Saving for things like weekend trips or special purchases.
4. Emergencies: The most crucial account for unexpected, large expenses. It's important to prioritize this fund to avoid setbacks.
For instance, if unexpected expenses average around $1,000, aim to save $2,000-$3,000 in the emergency fund. Once this target is met, allocate more to other accounts.
Many people spend their paycheck without saving effectively. Scheduled payments in banking apps can help allocate specific amounts to each account based on income and expense understanding.
This system resembles the Japanese practice of using labeled envelopes for budgeting. Expanding beyond four accounts for specific expenses like bills, insurance, or pets ensures funds are always available for each category. Surplus funds in these accounts act like mini savings accounts, gradually growing.
This practice is crucial regardless of income level, from $2,000 to $50,000 a month. Efficiently moving money to where it's needed prepares you for more complex financial ventures like investing and real estate.