Dear Friends, 

Most of my first time coaching clients come to me with only one or two "buckets of money" (Read: one or two bank accounts). Basically, all ins and outs go through one account and it is difficult to see what being spent in individual areas of your financial life.  

I advocate you to have as many accounts that make sense for your different money needs, so long as it makes your life easier and not more complicated to manage! Keep reading for my suggestions on what kind of accounts to open and how I would use them.

An income account is where your direct deposit flows into every pay period. This account would set up auto transfers to your other accounts to fund them. I would advise not having a debit card on this bank account.

A bills account is where you would pay your bills through online banking. Skip going to each bill's website (utilities, mortgage, Internet) ...save all that time. I would suggest to not have a debit card on this account to prevent over-drafting.

A spending account is where you fund for your variable spending like groceries, gas, and all other spending. This is your debit card account - ensure that you turn off the over-drafting so you can stay within your spending budget.

An auto debit account is set up so that all those companies and memberships that pull out money at the same time every month have a specific home. This way, you can easily see ones that need to be canceled like that gym membership or free trial box subscription. 

An Escrow account is a place that you build up money to pay for quarterly or annual payment. You would fund some money every pay period to pay your annual or quarterly life insurance bill.  Sometimes clients have an escrow account for their mortgage to pay out of because one pay period doesn't cover the whole payment. You will need to take some cash from each paycheck.

Some other categories for extra accounts might include savings for emergency, vacation funds, Christmas savings, clothing funds, shoe funds or pet fund. Maybe even your special fund that you want freedom to spend up to your budget!

Lastly, you can use a credit card as a bucket of money but I want you to ensure you can stick to a budget. I would advise you to use it only for gas or for your eating out and earn some cash back while building a solid credit score. A credit card is one type of expense to give you an easy report card on your spending.

Start to get excited about having buckets and buckets of money!

Deb Bowman 

Deborah R. Bowman, CPA