In the old days before the internet, times so difficult it’s hard to remember what life was like, people used to have “money socks” in their drawers for saving stashes of cash for rainy days, broken appliances, kid’s college funds…you get the idea. It wasn’t always a sock mind you; it could have been a coffee tin, a pillowcase, or a good old-fashion linen bag with a big green $ on the front. The reason for filing away these Ben Franklins in various household containers was to physically separate money away for a specific purpose, not to be confused with money for bills and such.
Now we have the internet and can open up bank accounts. You can accomplish the same separation of cash much more easily and more securely buy opening up a second or third bank account. Many people do this with a savings account, which is good, but we say take it a step further and open up another account or two. These can be savings or checking accounts, as long as you use them for a specific purpose. Saving for a new car? Open a savings account and name it “Next Car” and save $50 of your monthly pay toward that goal. We are a huge fan of having an “Unplanned Expenses” fund that to contribute to a little each month.
This system allows you to be proactive instead of reactive to life. The next time you have a flat tire, medical bill, or a spur-of-the-moment trip you want to take, you’ll have the finances to handle it. Ourselves? We have a different account for “Vacation”, “Next Car”, “Unplanned Expenses”, “Mortgage/Rent”, “Spending Cash” and “Monthly Bills”. The accounts are free and they allow you to visually separate the cash instead of having $$$ in an account thinking you’re rolling in dough and forgetting most of that is going out next week because of bills.
Give yourself a big win and get a virtual savings sock.