Sounds too good to be true huh? Like the promise of diet cheesecake or hangover-free wine.
But I spent a whole day with a guy last week, who I can only call the Money Whisperer, and he explained how it was possible. Plus, he was so full of good sense that I had to share some highlights with you.
Steve Crawford, from Experience Wealth, has built a whole business wrangling the errant wallets of ladies like us (or me, at least). Gen X and Y, mainly professionals, often in media and finance. We all earn good money but somehow it slips through our fingers faster than we’d like.
So, he is a Money Coach. That’s actually a thing (that people pay for, not just me scolding you for free). I’ve told him he has to do an interview at some point, but in the meantime, let me paraphrase one of his concepts.
Banking – sooo boring. Or is it?
I know, setting up bank accounts sounds so dull. But it’s all about earmarking money in a way that makes things more organised, and less tempting.
This is essentially how I do my banking, and while I am not perfect, it certainly keeps me in line. Steve has helpfully refined it and given it better names. I, however, made that fancy little graphic.
These are the key elements:
Main account – your pay goes in here and pays all those annoying fixed costs, like rent and bills. You pay the Boring Bills straight out of here, with direct debits.
Storage – this is money you know you’ll need later, but not right now – in other words, short-term savings. This is the most ‘sensible’ account – the one that grown-ups have because they know car rego is due in January and they don’t want to put in on a credit card. I’d also argue this is the hardest one to nail – but still, we have to try!
Hot tip – have this one with a different bank, so you don’t see it and remember it every time you log on to internet banking.
Savings – This is the long-term stuff – the home deposit, the potential share portfolio, or the emergency fund (real emergencies like your car breaking down, not needing to buy new moisturiser so you can get the Clinique gift-with-purchase). This should be in a high-interest account with no card access – meaning you can’t get drunk and dip into it at 3am in the casino.
Spending – This is the guilt-free account. Sadly, you can only put money in there after filling up the other three. Sucks, I know. BUT – whatever is in there is totally guilt-free. Spend it on hookers and coke, if you feel so inclined. Jokes! We don’t need to pay for sex. Or coke, for that matter.
This account is like when your mum let you have ice-cream for dessert, but only after eating all your vegetables at dinner.
Once you’ve done the sensible things, then you do the fun things.
How much goes in each account?
That’s quite a detailed discussion for another time. But briefly:
- make sure you work out the Boring Bills stuff properly – and don’t forget to shop around if they seem unpleasantly high
- give yourself a decent Storage buffer, as that’s where the big costs often come from
- be realistic with Savings – even just a little bit is far better than nothing at all
- make Spending somewhere between what you’d really like to play with. and what you realistically can afford.
And if this all sounds like a great idea but you don’t where to start, you should give Steve a call. He will make rude jokes about Sydney people (he has a habit of saying #sosydney in conversation), but other than that, he’s the real deal.