Last year when I talked about about how to stop living paycheck to paycheck – passive income, I started putting into practice one of the key concepts by splitting up my fixed and variable expenses. By doing so I was able to differentiate my re-occurring bills from every other expense. My wife has even said, and I quote, “It was the best thing we've ever done with our finances. I don't know why we didn't do it sooner.” I had to do a double take when I heard that one! :)
Seriously, though it has been a huge convenience of breaking these accounts up. It is also helping fuel me on working my passive income streams into my regular 9 to 5 income by helping pay down my mortgage principal and continuing to invest in silver by buying Morgan Dollars. Graphically, here is how it looks.
Along the way I've found there a lot of benefits for having two checking accounts for fixed and variable expenses. Here are my reasons for setting up two checking accounts for these two expenses.
Guarantees Funds Will Be Available To Pay All My Bills
Before we had two checking accounts we struggled with ensuring that our single checking account had enough money in it. For instance, when our mortgage payment would come due the 1st of the month (our largest bill) we'd sometimes need to transfer money from our checking account, because we'd overspent the previous month. Do ever have this problem? Sure made it stressful when we'd look at each other, and feel like the blame is on the spouse (can you say – PRIDE!?!).
Takes Less Time To Manage My Finances
Prior to implementing these changes I probably spent about 3-6 hours a month working on our bills and transferring money. Now I probably spend 30 minutes per month (tops). By automating the specific dollar amount to both accounts and setting up automatic withdrawals for fixed expenses it makes it so much easier.
I admit it. I struggled with getting overdrafts prior to implementing this two account system. It wasn't pleasant experience. How could I (someone who's suppose to be good with money) get overdrafts? For me it was a big dent in my character. However, since moving to this new system over 8 months ago we haven't once gotten an overdraft. Ultimately this is saving us money ($30 a pop!), and lowering our financial stresses!
Motivates Me To Save $$$
This new system has really enhanced my motivation to save, because week over week I'm able to watch our #2 account grow. This growth is a direct result of the variable expense choices we make everyday. Anywhere from going out to Jimmy John's for lunch or buying a new pair of jeans at the mall. With this motivation it has allowed us to funnel money into our passive income investments which could be anything from tax liens to shares of Apple stock to Morgan Silver Dollars.
Overall, we've been more than happy since switching to two checking accounts for our family's bills & expenses. I'd especially suggest it if you are trying to create passive income streams. Have you considered setting up two checking accounts (one of fixed expenses and one for variable expenses)? Do you already have multiple checking accounts for specific needs? How do you like it?