How To Automate Your Finances and Never Run Out Of Money

Managing your finances can be a daunting task, especially if you're not sure where to start. One effective way to take control of your finances is to split your paycheck into different accounts. This method ensures that you're allocating your money in a way that aligns with your financial goals. In this blog post, we'll discuss how splitting your check into bills, spending, sinking funds, and emergency funds accounts can help you automate your finances.

Why You Should Try It

The philosophy behind splitting your paycheck into different accounts is to automate your finances and ensure that your money is being allocated in a way that aligns with your financial goals. By setting up separate accounts for bills, spending, sinking funds, and emergency funds, you can manage your money more efficiently and avoid overspending.

This method also helps you avoid missed payments and late fees by setting up automatic transfers and payments. By automating your finances, you'll be able to take control of your money and work towards your financial goals with ease.

Before Anything

First, confirm that your job allows you to split your paycheck. Check your employee portal or the online software you use to look at your paychecks and W2s. If you don’t have that, you may have to ask the department that handles checks to manually do this. But if they also can’t, you may have to have the bank do this.

Once you discover what entity will automatically split your check, create two checking accounts for bills and spending and two savings accounts for sinking funds and emergency funds.

You will also need to decide on the amounts or percentages of your paycheck that will go into each account. The numbers chosen are subjective. Only you can determine the amount of money that should go into each account that will allow you to cover any cost and save. For example, here’s my breakdown:

• Bills: 53%
• Spending: 20%
• Sinking Funds: 15%
• Emergency Fund: 12%

Bills Account

The first account you should set up is your bills account. This account should be used to pay for all your fixed expenses, such as rent, utilities, and subscriptions. By setting up automatic payments for these expenses, you'll never have to worry about missing a payment. You can also set up automatic transfers from your primary account to your bills account on payday (if you cannot automatically split the check). This way, you won't have to manually transfer money each month.

This is the first account you should allocate money for. Just get the value of all fixed expenses and find what percentage of your check it takes up after taxes. Got the number? Good, now add an extra 5%.

Emergency Fund Account

The final account you should consider is your emergency fund account. This account should be used to save for unexpected expenses, such as medical bills or job loss. Financial experts recommend having at least three to six months' worth of living expenses saved in your emergency fund.

The Emergency Fund is the second percentage or amount you should allocate for. This number is dependent on how aggressive you want to be. Please consider your remaining accounts when coming up with this number.

Spending Account

The second account you should consider is your spending account. This account should be used for your variable expenses, such as groceries, entertainment, and shopping. By having a separate account for your spending money, you'll be able to track expenses more easily.

This is the third account to consider. How much do you reasonably spend every month? Find that number and the corresponding percentage.

Sinking Funds Account

The third account you should set up is your sinking funds account. This account should be used to save for irregular expenses, such as car repairs, vacations, and holidays. By having a sinking fund, you can avoid taking on debt when these expenses arise. You can set up automatic transfers to your sinking fund each payday, so you'll always be saving for these expenses.

The last percentage and one you don’t have to guess about. What is left? All that money is saved up here.

Conclusion

Automating your finances can be a game-changer when it comes to achieving your financial goals. By splitting your paycheck into different accounts, you can manage your money more efficiently and avoid overspending. Setting up automatic transfers and payments will also help you avoid missed payments and late fees. With these tips, you'll be well on your way to financial success.

And remember, nothing here is set in stone. Adjust as needed to fit your life. Do you need more spending money? Adjust. Have you your emergency fund goal and don’t need to put in as much anymore? Adjust. Your life has changed in any way? Adjust.

It’s all about you. So try this at let me know how it goes by sending me a DM on Instagram!

▶️ Introduction

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🤔 Why You Should Try It

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😎 Before Anything

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💸 Bills Account

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🚨 Emergency Fund Account

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🤑 Spending Account