It's one thing to make a budget and stick to it. But how do you keep your money organised while it is waiting to be used? How do you stop it getting mixed up with money meant for other things? My solution to this is separate bank accounts. I currently have two current accounts. One of them is my 'house account' which has all my direct debits set up for house things, such as rent, council tax, utilities, phone, Internet etc. I currently put £680 into that account each month because that is my total budget for all those 'house' things each month. Obviously some things are variable and not the same every month like electricity so the whole £680 is not always used. I also have a £200 fee free overdraft and I keep an extra £100 in there just in case some bills are more than expected I have a buffer. At the end of every month I look at this account and bring the balance back to £100, sweeping up any extra money that might be in there into my savings or making it back up to £100 if there was an unexpected bill. Having that buffer in there gives me a peace of mind that I'm not living down to the wire and if something goes wrong all the other bills will still be covered.
My second current account is more of a personal one. But as I try to work in cash I rarely use it. I keep the balance of that one at £500 and that is mainly for emergencies. For example in case I get stuck somewhere and have to get cash for a taxi, or a hotel room or car repairs. Anything really that is an unexpected expense but I need to pay for now. Or if you are out shopping and something on your forever list (you know that list that has things you would like on it but they are luxuries not essentials!) is on sale at an unbelievable price, there is a buffer there to be able to purchase a bit of an impulse buy. Or you see the perfect birthday/Christmas present for someone...you get the gist! This account is also made back up to £500 at the end of every month so too much spending can make the next few months very stretched which helps to keep any unnecessary spending in check.
So I have two current accounts to keep things separated but I also have several savings accounts. Interest rates are so ridiculously low at the moment that I just see my savings accounts as pots I keep my money in not as any way of it growing and making money. My first savings account is just an online saver that I keep a balance of £1000 in. This is basically so I have money there ready for any big purchases like holidays. I recently booked some flights which cost about £500 and it was so easy to have the money there ready and waiting. So my savings next month will go into this account to make it back up to the £1000 before topping up any others. It's good because I'm owing myself money rather than a credit card or overdraft!
My second savings account is that whole 'three months income' one. As my income is just minimum wage I only had to build that up to £3000 before that was done! Again it's just an online savings account but if I don't make any withdrawals I get a ever so slightly higher interest rate. So I could get a whole 25 pence if I don't take any money out, imagine what I could buy with that!
Now when those are 'full' any extra money at the end of the month goes into an isa. Since the government increased the amount you can put into savings tax free, isa's have become a bit redundant to me but this is a slightly (for me) crazy one. It's partly a stocks and shares isa so some of the money used is gambled on the stock market. This account is used for very very long term. It will hopefully be a deposit for a house, but the deposit I would need is so ridiculously huge that I will probably never be able to save enough, therefore this account doesn't worry me because I won't be needing the money anytime soon, the markets will not go down forever and I will hopefully earn a bit more than standard interest rates on my savings having the money in this account.
I also have a credit card. I only have about £800 credit on it so I couldn't go mad but I mainly use this for online purchases because it gives you a bit of security should anything go wrong. It also doesn't charge me to use it abroad so when I go on holiday I usually load it up with some money and it's like just having a debit card with you in whatever currency you are in fee free. I pay it off in full when the bill comes in, I don't spend money I don't have on it. Using it will also build up a good credit rating for me if I ever get to apply for a mortgage or loan in the future.
That's it that's where I keep my money! I have bits and bobs in other accounts from childhood and premium bonds, but I quite like knowing that there is the odd few hundred pounds here and there should I ever desperately need it! I don't have a lot of money but sorting it out this way gives me peace of mind, knowing that if something terrible happened I would be able to cope (hopefully)!
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