Magic Spending Accounts

People have used savings accounts to save for specific things for a long time.  Simple example: put $200 per month in an account for two years to save for a $2,400 vacation.  We decided, “why not use a transaction account for a specific purpose?”

In developing our system, one of the first things we did was open a new account for Mae to use just for the spending she was responsible for (actually she begged me for this account for years and I finally saw the light).  We set up her “Spending Account” and we never looked back!

The next thing we did was remove all spending from our primary checking account and that became our “Bills Account”.  We set up my Spending Account and completely stopped using the credit cards.

Two amazing things happened once we had our Bills Account and Spending Accounts.

Magic #1: Since our bills are almost exactly the same every month and the bills are the only transactions it’s very easy to manage.  Money comes in.  Check off the bills.  Done!

Magic #2: Since we each have a spending account and we decide in advance how much we can spend, our overspending stopped.  Once the money’s gone, it’s gone!  And there’s no one else to blame!

When you go to the grocery store, how many options do you have in your wallet or purse right now to pay for your food?  Cash?  Check?  Debit Card?  Credit Card #1?  Credit Card #2?  I think in my wallet I used to have Credit Card #3 and #4 too!  It’s no wonder my system used to be so complicated and hard to manage.

Give yourself one account for paying bills and one account for spending.  Easy.  Boom.  Done!

By the way, why would you ever use debt to buy groceries?  That could be a major indicator that you need to make some changes.  I know it was for me!

The Secret Sauce:  when you give yourself permission to spend an appropriate amount of money every month, something clicks.  There is no fear, there is a sense of responsibility and a sense of value in yourself.  This simple step revolutionized how we feel about our personal finances.  Read more about that in a story from Mae (coming soon).

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