A very simple banking hack could mean you can spend your money like there’s no tomorrow without having to worry about it.
The idea of having a portfolio of bank accounts conjures lucid images of shady characters with cash mountains tucked away in Cayman Island reserves, away from the prying eyes of the tax man.
For a simple and busy young dad like myself, I have found it difficult to see the value of having my money in too many places.
The great philosopher Jerry Seinfeld once said some people like to make their money “work for them”, others, like Jerry and myself, like to let their money relax.
Throughout my life I’ve found it easier to have everything right where I can see it and having to deal with as few bankers as humanly possible – although I’m sure many of them are tolerable in small doses.
However, in this week’s Cashed Up money challenge I was asked to look at a simple banking hack that could potentially save me loads of money and make my life easier.
In previous weeks of the six-week course, I looked at where my money was going and how to begin making simple savings, but now it has started to get interesting – especially for somebody like me who has always had just a couple of bank accounts.
The idea was to ‘Segregate and Automate’ my money using multiple bank accounts.
To my disappointment, this didn’t mean I had to strap money to my wife and fly her to Switzerland like the Wolf of Wall Street.
I was informed just a few standard accounts – that could all be at the same bank – was all I needed for this trick to work.
I basically had to break my expenses down into categories, such as fixed costs (rent and bills), spending (everyday pocket money for general expenses), debt, lifestyle costs (like travel and big ticket expenses) and future costs (like my savings or investments).
I was told that if I had a bank account for each of these things and automated my payments into each of them, my life would become a lot easier.
The theory is that the only account I should have to think about is my everyday spending account, occasionally checking my travel fund balance, and the rest of the accounts will take care of themselves.
Although I joked I was as laid back as Seinfeld when it came to money and where it was going, in truth I was as fretful as George Costanza after a spicy kung pao chicken, but this advice has actually helped me.
As a young dad who has family in the UK, I have been constantly conflicted about how much money I should be saving for an overseas trip (if I’m ever allowed to leave Australia again) and how much I should be spending on things to make more fun for my young child at home.
Add this to worries about how much I should be saving for a deposit and the constant influx of bills, and it was clear in hindsight that my single bank account approach wasn’t ideal.
Now I’ve found I can have a steady supply of toys and books coming in for the little one and enjoy a chicken parmy at the pub once in a while without feeling like I should be using that money to save.
Basically, I can use the money that I’ve specifically funnelled into my “spending” account and I can spend it like there’s no tomorrow, knowing my account will be refilled next week.
It’s a simple trick that requires a little bit of thought and effort to begin with, but I’m hoping it will help me spend less time worrying about money in the long run.
That means I can spend more time playing with the bubba and perfecting my rib marinade. Happy days.
Get Cashed Up
Created by financial advisor Ben Nash, Cashed Up is news.com.au’s free six-week course to help Aussies get their finances in check. Those who sign up to the budget bootcamp get weekly, step-by-step challenges to improve their financial fitness.
By the end of the six weeks, participants will have set a budget, created a savings plan, learned how to invest, and sorted their superannuation. The interactive course can be started at any time and aims to empower participants to make more informed financial decisions.
Next week, it’s all about how to set money goals and get results. Let’s do this!