3 Reasons to Separate…. your Money!

Everyone strives for financial stability and security but far too few approach money management the right way. Many people see budgeting as a burden or impossible feat because they expect long-term results from short-term commitment.

When trying to budget and ultimately save money, it is often more effective to maintain a savings account separate from your spending account. This added level of control on your finances will prepare you for greater saving, and even wealth creation for financial security well into retirement and beyond.

Three important reasons to separate your accounts are:

1. Out of sight, out of mind

Keeping your savings account separate from your spending account adds a level of restraint to your spending. If you only see your weekly spending amount available while you’re in the department store, you will be less likely to buy that pair of shoes knowing that you still need to buy the groceries and fill up the car for the week. If you spend out of your savings account, the day after pay day can often be a disaster for your personal budgeting.

If you can’t trust yourself to avoid frequent transfers out of your savings account, consider setting up an automatic transfer at a set time each week. That way you won’t need to worry about doing any manual transferring which could mean a little extra in times when you’re feeling less disciplined to stick to your budget.

2. You save for different reasons

Regardless of your motive to save money, separating your accounts provides transparency into your progress on each goal. By not spending out of your savings account, any pay rises, bonuses, extra pay or tax refunds can be added to savings and not added to your weekly or monthly spending. This provides motivation in seeing the goal getting closer, regardless of whether it is debt reduction, a savings goal or just getting your mortgage down to a more manageable level. It is also means you will be less likely to dip into your savings when you can see the achievement of your goal getting closer.

3. It’s often a team effort

Many couples separate part (and sometimes all) of their accounts and never sit down to collectively review where their money goes each month. While mortgages and household expenses might be getting paid on time, it is often the case that spending can still be out of control when families work separately on their money management. Simplifying the structure so that all income goes into one savings account and all spending comes out of one spending account can often mean a more focused approach to short and long term goals.

In planning for your financial future, having your savings and spending structured properly and working for you can often mean a much better chance of achieving your financial goals.