On your way to financial freedom you must practice a system to successful build and manage your finances. You can set up separate bank accounts for different purposes to monitor your cash flow and manage expenses. Dividing your bank accounts will surely work wonders in your ability to build your cash flow and minimize expenses.
For starters especially if you have kids, you can begin with four bank accounts as opposed to the usual two bank accounts namely, savings and checking accounts. You may set-up one main account where your family’s net cash flow goes into. From that main account subdivided it to four separate bank accounts. You can have an expense account, investment account, donation’s account and kid’s account.
This is where you get the funds for your daily consumption and operation, like bills, rents and groceries to name a few. Decreasing your expense might take some time and discipline. You can start allocating 80% of your income into this account then begin to lower it as months pass by until you achieve your target percentage for your monthly expenses. The key is to lower the expense little by little rather than doing it abruptly.
To build your cash flow you must learn to invest. Relying on your jobs or business alone might lengthen the time for you to achieve your target expense per month. Allot a certain percentage of your income and put it in an investment account. This account will reflect the risk you can take whenever an investment opportunity comes your way. You can start off putting 3-4% of your income into the account and as you decrease your expense account you can increase this account. Ideally, for this account to help build your cash flow you must target to put around 50-60% monthly on the account.
This account consists of 5-10% of your income. This will allow you to give back to a good cause whether to charities or non-profit organizations you are involved in. Building your cash flow and managing your expenses shouldn’t hinder you from being generous.
This is where you put money away to build your children’s future. This is not an account to buy their clothes, food or toys but strictly for their future, either for college tuition or a future investment for your child’s future business ideas.
By subdividing your bank accounts you will be provided with individual statistics that can be measured to better divide and multiply all the cash that comes in every month. Also, this will give you a better picture where your money is going in order for you to avoid stress and avoid the emotional roller coaster of losing all your income from expenses.