Want to stack money for a home down payment? This is how I did it!

When trying to save for a down payment on a home it can often be overwhelming. The sticker shock of 3.5% down on a $350,000 home turns many people away leaving them feeling defeated. The fact is, you must control your money or your money will control you. I'm going to share a budgeting practice that I personally use that has helped me stack my savings for buying a home and even investing.

It is essential to manage finances with care, ensuring that you have enough money to pay bills, save for unexpected expenses, enjoy life and secure your future. One way to manage your finances is to use two checking accounts to help you save money, budget effectively, and monitor your spending. I call this the "Purse-Wallet Method".

Why have two checking accounts?

Purse Account: One account is used exclusively for your non-discretionary expenses like rent, utilities, insurance, credit cards, and other recurring bills. I call this checking account my "purse". It's a good idea to have this as a "high yield" checking account with a higher return rate of interest than other checking accounts.

Wallet Account: The other account is used exclusively for your discretionary expenses like groceries, gas, entertainment, shopping, dining out, etc. I call this checking account my "wallet". It's a good idea to have this account with a banking institution that has some sort of cashback program that pays you every time you swipe your card.

So how does the "Purse-Wallet Method" work?

All of my income is either directly deposited into my "purse" or I make regular cash deposits into this account. When I first get paid or depot cash into my "purse" I immediately pay my bills. The power of having these bills off of your back lowers stress levels and this is very impactful on our day-to-day decisions.

Then I break my budget down to a weekly mico-level. It's easier to manage your money when you're looking at a smaller period of time versus a long period of time. Based on my goals, I then decide what kind of lifestyle I want to live over the next week. Do I want to want to live carefree at $500 per week? Do I want to tighten up to save for something bigger in life and live on a tighter budget at $250-$300 per week?

So far this seems pretty simple, right? Here is where the discipline comes in. You MUST then live within the means and budget you have set for yourself. Plan for your weekly meals earlier in the week, plan your driving so you're not making multiple trips, and save dining out for the weekend. Find a routine that works for you and stick with it! If you reach the next week and still have money left over, great! Roll that leftover money into the next week's spending budget.

If you follow this method properly, get into a routine, and practice discipline on your spending you should see your "purse" balance growing. Set a small milestone for what you want your "purse" balance to get to. Start small because once you hit that first milestone it will motivate you to hit your next milestone, and then the next milestone. I always say that small battles win the war. Before you know it, you'll be at your target savings goal. There is nothing more satisfying than setting a goal, working hard towards that goal, and achieving said goal.

Here are some benefits of using two checking accounts for saving money and budgeting:

Simplification

Having two checking accounts can simplify your finances because you can allocate money instantly to the right place. This way, you can keep track of spending more efficiently and make informed decisions based on your financial goals.

Savings

With two accounts it's easier to monitor your savings since you won't mix up the funds.

Emergency Fund

You can use your "purse" as an emergency fund. Experts recommend that you should have 3-6 months of living expenses saved up as an emergency fund. This way, if something unexpected happens, like an illness or job loss, you can still pay bills without feeling the financial strain.

Budgeting

With two checking accounts, you can easily track your spending and stay within your budget. Set a spending limit for each week based on the lifestyle you are comfortable with and the goals you're trying to achieve. You'll also get a much closer look at your spending habits because that is all you'll see in your "wallet" account.

Avoiding Overdraft Fees

It's easy to overspend and overdraw your account, leading to overdraft fees. With two checking accounts, you have better control over your spending, and you can avoid these fees. You can also set up alerts to notify you when you're getting close to the overdraft limit.

In conclusion, using two checking accounts for saving and budgeting is a smart way to manage your finances. Set up the accounts, allocate the funds correctly, get into a routine, and stick with it to achieve your financial goals. Remember to track your expenses, prioritize your bills, and spend your discretionary income wisely. With discipline and consistency, you'll be on the path to a healthy financial future in no time. The sacrifices you make now will all be worth it when you're enjoying a cold drink on the porch, patio, or deck of your new home.