Managing my own budget and tracking my expenses can sometimes take a bit of time. Also, it can sometimes become a self psychological war, there are simply too many temptations to burn all the money when I just receive the fresh paycheck. It would be great to have a system that controls the cashflow between the paycheck and the budget that I have already designed.
Automations to the rescue! Here is my current automated cashflow system.
Summing it up, there are two main important points in the system: two separate bank accounts and automatic recurring transfers. Two separate accounts are needed, mainly to separate physically the money for savings and consumptions. I use my EUR savings account also to temporarily receive my paycheck at the end of the month. On the other hand, I use another bank account exclusively for all the consumptions. Automatic transfers play an important role here to allocate the budget. For example :
- Right after my paycheck is received, the fixed portion of it will be moved from my savings account to my ‘consumption’ account. In this way, there is already a clear separation of which money I should spend and which money I should save. –> use auto top-up feature of the bank account*
- At the beginning of the month, I need to pay the rent –> auto transfer* the fixed amount of rent fee from my paycheck
- At the beginning of the month, I need to save the money for different budget posts (ex: annual expenses, holiday funds, charity, etc.) –> auto transfer the money to the sub-accounts or vaults* inside my EUR ‘consumption’ account. These sub-accounts, again, are made to clearly separate the money according to the budget. When the certain need comes, I just need to access this sub-account to use the money.
Disclaimer : to be honest, this automation trick is the thing I just found these days, so I cannot tell if this is a working, bug-free, system. However, I personally don’t think something will go wrong either since it is a rather simple system. It should reduce the time spent for managing the budget, since I don’t need to manually move the money between my accounts, etc. More importantly, the automatic cashflow puts me away from that ‘self psychological war’, in other words, reducing the possibility to misuse the money that has been allocated.
*The auto top-up feature, recurring transfer order, and the sub-accounts are the features that may not be available in your own choice of bank account. I personally use Revolut**, a kind of mobile bank account, as my EUR consumption accounts. In the next post, maybe I will discuss a little bit about the advantages of using this mobile bank account.
**This is not a commercial post.