Ok, ok, I’m being a little dramatic here, however If I told you that having two bank accounts, with different banks, would ultimately make you rich – would you believe me? If I said, all you need to do is spend 30 mins on something that will change the trajectory of the rest of your financial life – would you do it?
It’s ironic how often we have the information in our hands, we understand it and know that implementing it will benefit us, yet we simply don’t do it.
Many, many years ago, when I got my first job (a video store with real VHS tapes!) I had just one bank account. It was the same CBA dollarmites account I’d had my entire life and each week I’d receive my $40 pay cheque for the couple of shifts I would do. I honestly never saved a dollar of that money, I’d spend it most weeks on whatever I wanted to do with my friends.
As I progressed, graduated high school and worked other part-time jobs while studying all of my income continued to go into this one bank account, and as always I spent what was in there almost every week. My bank balance would go from a few hundred dollars to zero on a weekly basis. The only way I ever got any large amounts of money would be during holidays where I would work loads more hours, and then I’d get a large pay cheque that I could use to purchase something big that I’d wanted, or go on a short holiday.
This continued for years and I was never really able to get ahead. I cut myself a lot of slack (read: made excuses) because I was ‘young and living life to the fullest, and I was still studying anyway so who could really save money whilst studying’… blah, blah, blah. That was all a load of crap, I certainly could have saved something, even if it was just $10 or $20 a week. I guess knew I should have a savings account or something set up, but I’d just never really gotten around to it.
A snap decision and a new bartending job changed everything for me
Having done a little travel previously, and being 6 months away from graduation I decided on a whim that I wanted to move to Canada. I applied for and received my working visa, however I knew that this time I would need to do more than save my last one or two week’s paycheques if I was going to pull this off.
At this same time I had just started working at a very trendy and well-paying bar in Melbourne on the weekends, alongside my other two jobs (why I always had 3 part time jobs going is a story for another time!) and I worked out that if I saved all the money from this new job, which was essentially extra income for me at the time, then I’d have a fat stack to go overseas with in 6 months time.
Knowing that I’d always spend whatever was in my bank account, I decided to set up a brand new bank account with a different bank, and those were the bank details I gave to the accounts people at the bar. From day one, every single pay went directly into that separate bank account and I never touched it. In Australia, our weekly payslips show the cumulative total you are paid for the financial year each week, and it was incredible seeing both the figure for that week’s pay, but also the cumulative total, as I knew that amount was what was sitting in my bank account earning interest.
This worked for me for two reasons. Firstly, I was very motivated by my travel goal so dipping into that money was not going to happen – I knew it would jeopardise my dream of living overseas (check out this short vid on the power of goals). Secondly, I put a barrier between myself and that money. By using a bank account that didn’t have an ATM card attached to it, with a bank that was different to my usual bank, it meant that I’d have at least a 24 hour wait should I decide to transfer money into my everyday spending account. This kind of thwarted the whole ‘instant gratification’ thing that I was so used to indulging in before it even had a chance to rear it’s ugly head.
My happy ending
Just in case you’re interested in how this part of my life story ended… I moved to Canada, learnt to snowboard (also life-changing for me), got two jobs again (and saved all of one of the paycheques) and continued travelling, exploring and living overseas for 3 years. I visited over 50 countries in that time. All because I now knew how to save, and as a result had the money to take full advantage of the trip I was on.
Your happy ending
I wrote this post because I want you to read it and do one simple thing. Like I said, it’ll only take about 30 mins but will change everything for you. You don’t even need to have a savings goal (or a second job!) in fact, so don’t let that hold you back.
You simply need two bank accounts, so if you don’t have a second account already go set up a new bank account, with a different bank from your usual one. These two accounts have to be with two separate banks. Choose one to use for your personal everyday spending (we’ll call this your Personal Spending Account). For this one you can keep the ATM card in your wallet.
For the other account, destroy the ATM card and instruct all your sources of income to be paid into this account (we’ll call this your Cash Hub).
I’m going to keep it really simple, so jot down a quick weekly budget to work out what money you personally need each week to go about your life. Do not include your rent or other bills. Things to include are coffee, eating out, partying (don’t pretend you don’t party most weeks!), public transport, fuel, groceries and anything else you personally spend on a week to week basis. The total becomes your ‘personal spending amount’, and you need to set up an automatic transfer from your Cash Hub to your Personal Spending Account each week. The rest of your money stays in your Cash Hub and is used to pay bills as they come due (set up direct debits where you can to avoid late fees) and anything left over is for savings.
You’ll need to double check of course that what you’re leaving in your Cash Hub will cover your rent / mortgage repayments and all your other bills, and if not cut back on your personal spending. To give you an idea, my personal spending is $250 a week and I have a really great life. For some of you that may seem like very little, and for others it may be way more than you can afford. There is no judgement, however I am sharing this with you to give you some idea of where to start. I’ve been on $250 of personal spending for about 4 years and I’m just fine with it, in fact nowadays I usually have some left over at the end of the week! #livinglarge
Step it up a notch
If you want to step things up a notch, my 8 week money makeover will take you through a complete budgeting process, followed by establishing fully automated bank accounts to ensure you have your personal spending sorted, all of your bills and other expenses covered, and most importantly, you’ve got savings and investment accounts going too.
Likewise, feel free to book in with Wealth Enhancers for a FREE 1 hour Financial Kickstart session, with a qualified Financial Coach, to help you identify your goals and what the gaps are in your current financial management strategy.