We talk a lot about budgeting, saving, investing, and all the other things that go into a good financial plan, but we rarely talk about how to actually put it all in place.
In other words, how do you set up a system that sends money to the right places and keeps everything organized without you losing your mind or having to quit your job just to keep track of it all?
That’s what we’re going to talk about today.
I’m going to share the financial system I use myself and the one I recommend to clients.
This is how I set up my bank accounts and move money around to make sure that my savings goals are being met and my bills are being paid, all with as little ongoing work as possible.
The Self-Driving Financial System
I’m calling this the Self-Driving Financial System because it’s meant to be as hands-off as possible, and because I’ve been nerding out about self-driving cars recently (indulge me!).
Here’s what it looks like:
I’ll explain each individual part of this system below, but before you get overwhelmed just know that it’s meant to make your life a lot easier. Above all else, this system is meant to be:
- Effective – It directs money towards the things you care about most.
- Low-maintenance – For the most part this system runs itself, relieving you of much of the burden of handling your day-to-day finances.
- Collaborative – It fosters collaboration between you and your spouse or partner, making it easier to work together towards your common goals while also preserving some individual freedom.
So, let’s dive into the details and see how it all works!
Two quick notes:
- The assumption here is that you’re working with a spouse or partner, but the basic principles hold true for other situations as well.
- I’ve illustrated this system with multiple checking and savings accounts for multiple purposes, but you could simplify things even further by using categories within You Need a Budget instead. That’s what I actually do myself now.
Step 1: Deposit all income into one joint account
The first step is directing all your income to a single joint checking account.
You can think of this checking account as the heart of your financial system. All your money comes into this account first before being pumped out to the other pieces of your financial system.
Now, certain things like 401(k) contributions and company health insurance premiums will be taken right out of your paycheck. That money will never touch this account and…