By: Caitlyn Larimore
When I was a child, I used to call the ginkgo tree in our backyard the “money tree” and, much to my mother’s displeasure, would rip leaves from the branches to use as currency at my imaginary friend’s places of business. Once robbing the tree of its leaves became a punishable offense in my household, I began to understand the value of saving—because you never know when the money tree supply is going to run dry.
I am not a financial advisor. I am someone who has worked in the creative field since I graduating college and as a result, have ridden a financial roller coaster for the better part of 10 years, allowing me to perfect my money management skills. If you are in a job transition, in an creative career, or perhaps one of those people who knows they should manage their money better but are overwhelmed with where to start, look no further.
Introducing The System: Two checking accounts, One savings account.
The debit card is both your best and worst enemy. It’s fast, convenient, and it will comfort you when you cry tears into the Egyptian cotton sheets you bought on impulse. Even if you don’t enjoy tracking all of your spending, you may still find the accounts system to be a simple way to stay within a budget.
Step One: Open a second checking account where you do your banking.
Make sure your bank requires low balances to maintain an account, or has qualifications you can meet to maintain a free account (i.e., a minimum balance, an automatic transfer, etc.). If you can’t open an account without a monthly service fee, look into opening one at a credit union or online bank where you can keep all of your accounts together and pay the least amount (preferably zero). It’s tedious, but once you get it set up, life gets easier.
Step Two: Designate one account as your “Bills” account and the other as your “Life” account.
Call it “unicorn cash fiesta” for all I care, just know which is which. Here’s a simple way to think about these accounts:
Bill Account: The Parent. In charge of everything important. Not to be disrespected.
Life Account: The Child. Given money by the parent. Gets to run rampant, drink chocolate milk and rip leaves off the tree until the parent says stop.
Savings Account: The Grandparent. Full of wisdom. Usually left alone to watch their programs.
Tip: If the debit cards associated with the checking accounts look the same, I recommend taking a sharpie to one of them so in those “there’s a line behind me, but I couldn’t find my wallet, and now I have my wallet, but my card isn’t out, and I’m holding up the line, and here take this card, any card, ahh just take my money” moments, you can select the correct card and stay on track.
Step Three: This is the worst one. Ready?
Write down all of your monthly expenditures.
I mean all of them. All of your bills, utilities, and those random $5 a month charges from subscriptions like Spotify. Figure out how much you spend on extras like gas, food etc. Most online banking apps have charges separated out (somewhat correctly) to assist in this process.
It’s not fun to acknowledge how much you spend, especially if money is tight. But this is the first big step to managing your money. Know where it’s keeping you alive and comfortable, and know where you are bleeding cash like bare feet tap-dancing on broken glass. Start by knowing the below two categories:
- The total just for bills. This number is the minimum goal and the highest priority each month.
- The estimation for variables such as food, gas, clothes, and extra expenses like Amazon Prime shipping.
Step Four: Decide how much to put in your Life account each paycheck/ month/ week, and do it.
Decide when and how much you want to put into your Life account. Do you want a weekly allowance? Do you want a specific chunk from your paycheck? Figure out what works best for you. If you transfer $300 into your Life account and don’t want to, or can’t spend more in order to pay your bills, and then you blow through it in a weekend, then you now know where to adjust spending, and that you should probably not eat out until your next paycheck.
Tip: When first beginning this dual checking account system, I recommend checking your bank accounts online every few days to help you become aware of your spending, as well as making sure you don’t overdraw your account with the smaller balance. Your Bills account should always have more than the Life account. A lot more. In fact, I recommend putting at least 85% of your paycheck into the Bills account. You shouldn’t be transferring money back and forth except for special circumstances.
Bonus Step: Automatic transfer from Bills account to Savings account.
Along with an automatic transfer to a savings account (of at least $25) usually waving a service fee, I highly recommend a monthly transfer to your savings account. Transfer as much as you can afford to put away. For me, many times it was only $25 a month. So even at my poorest, I was still managing to save $300 a year.
Creative careers, job transitions, and life in general are unreliable, scary, and inconsistent. Make it easier on yourself by being realistic about your spending and saving habits. The biggest thing is to be realistic and stay informed on how and where you spend your money, and to prepare for the moments when the money you were depending on, doesn’t show up. It will always feel easier to keep blinders on when your income is influx but we all have to learn at some point that money doesn’t grow on trees.
Photo Credit: 401 (K) 2012 / Flickr