check my blog.
I figured this out after creating a budget spreadsheet and sorting through it.
Think of all the local bills you pay each month.
Account A
trash
water/swer
phone
cell
cable/satellite
electric
all of these could be paid electronically. If these bills cost $750/month, and you get paid 2X a month, have $375 from each check go into an account with free online banking, and pay these bills from this account.
Account B
Car
Student Loans
Credit Cards
Other short term debt.
If the budget for these is $2000 a month, then open a savings account and set up automatic payments for these bills from this account. Send $1000 from each paycheck into this account.
Keep in mind these bills "go away" over time, so this $1000/month accumulates once this "mid term debt" is paid off.
Account C IRAs and mortgage. I lump these together because these are long term "projects" which go away over a longer period of time. If monthly budget for mortgage is $1500, and you can budget $500/month for IRA, the total budget for this account is $2000/month. Send $1000 from each paycheck to this savings account.
The IRA would max out in the 8th month (August). So in Sept, oct, Nov and Dec, the IRA adds $2000 to this account. I use this to replace emergency fund. If a $500 expense comes halfway thru year, you could stop IRA payment for month if needed.
Account D If groceries, gas, hair and going out is $300/month, send $150 from each paycheck to a 4th account. Withdraw this money as cash on payday. When it's gone, you have to wait until the next payday for this portion of budget.
Your payroll department will give you a direct deposit form.
It will ask you amount/account. Account D is the "primary" account.
Send $750 to account A (give acct #/routing #)
Send $1000 to account B (give acct #, routing #)
send $1000 to account C (give acct #, routing #)
send remainder to primary account (account D acct #, routing #)
If you get a raise, you see it in account D, which is where your disposable/spending cash is.
If your rates for something go up, you'll see accounts A-C running at a deficit.
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