I have settled on a super simple system of 4 core accounts. I use this to automate and dumb-proof my personal finances.
Open 4 checking accounts with your bank:
- Central Account
- Tax Account
- Savings Account
- Spending Account
Direct your salary and any other income to be paid into the Central Account.
Then sit down for 10 minutes and set up the following standing orders:
- Automatically send enough one twelfth of your forecast annual tax bill to the Tax account. Promptly ignore this account and forget the cash exists!
- Determine your desired savings rate, and send that % of your income straight to the savings account.
- Transfer a fixed pre determined amount to "Spending Account"
Then do all of your day to day spending and bills out of your Spending Account
Use Savings to fund tax advantaged accounts, like the Pillar 3a in Switzerland, or Lifetime ISA / ISAs in the UK. Or, invest the cash, or put it towards your saving goals.
If you start to get a surplus of cash into your Central Account, deploy it when you find productive uses for it.
If you want to learn more about this idea, check out the book Profit First by Mike Michalowicz. The book is about this sytem for business, but it’s just as apllicable to personal finanancial management.