by Yolander Prinzel

Sorry to get your hopes up, but this is not a dirty post. Oh that it were. Unless, of course, you consider money dirty. The purpose of this post is to tell you exactly how I would set up your finances if I could.

To some of you, my methods will look extreme. “Oh Yolander,” you’ll cry, “can’t we just use one account for spending, saving and bills?” No, no you can not. Okay, maybe some of you are up for that responsibility, but a lot of you probably aren’t. For many of you, I would even venture a guess that when you see a large balance in your checking account, you feel safer spending money–even though most of that balance is money you need to send to the IRS in 2 weeks. To change your relationship with money, spending and saving, I suggest the following.

Savings Accounts

I believe in multi-tiered savings. I think that you should have:

1. An intermediary savings to bridge the gap between bills that are due and invoices that are late or to help out in slow months.

2. A business savings for taxes and other potential business expenses.

3. A long-term savings account with funds in CD or bond ladders (a ladder means that there are multiple CDs or bonds in your account with different maturities so that you aren’t putting all your money in a 10 year bond. You’ll have some that mature in 1 year, some in 3-5 and some in 10. That reduces your interest rate and penalty risks.)

4.  A brokerage account with a mildly aggressive portfolio for you young uns and a more conservative blend for people in their 40’s and up. The brokerage account can be funded with extra money or some of your long-term savings.

5. A SEP IRA.

Checking Accounts

I also like different checking accounts for different uses.

1. A bill paying account. This account should be linked to your intermediary savings account and should be used for bill paying only.

2. A spending account. This is where your grocery money, gas money, and entertainment money goes. This is the only account you use for spending and should not be connected with any saving’s accounts.

3. A business checking account for business expenses and to deposit payments.

Now What?

Remember this post about where to put your money? Here I’m going to give you a road map to follow [click for a larger image (I’m aware of the spelling mistake(s) in the chart but it was too hard to put it up–I’m not fixing it)]:

Yolander Prinzel, ACS is a financial writer as well as a series 7, 66 and 2-15 licensed financial representative. With a decade of financial industry experience, she was the National Director of Marketing and the Director of Operations for The Compass Agency USA and has also been a trader for Raymond James Financial Services and a life insurance underwriter. No matter what you may think, none of her posts are advisory, they are simply informational. Only an advisor with close, personal knowledge of your financial situation can offer advice.