Separating your money into a bills account and spending account will be the best thing that happened to your finances this year!
Having too much month at the end of your money is a common problem for many of us, especially those on monthly pay.
The December payday in particular wreaks havoc, having to stretch our wages out for anything up to seven weeks as generally we tend to get paid a bit earlier.
If you want to stand any chance of making your money last until the end of the month you are going to need two things, a budget and a separate account to ‘jam jar’ your bills.
Ever heard of the five Ps?
If not, the five Ps stand for Prior Preparation Prevents Poor Performance.
Keep this is mind when dealing with your finances and you’ll gain control over them, rather than the other way around.
First thing’s first, you are going to need a budget.
The amount of people I speak to who feel they have no need for a budget is unbelievable.
Let me banish the myth that budgets are only for tight fisted, miserly people – it’s simply not true.
A budget, in Layman’s terms, tells your money where to go before your feelings have a chance to.
If you don’t know where your money is going should you really be that surprised when you get two weeks into the month and realise you haven’t got any left?
The answer is no to that question.
Stop telling yourself you don’t earn enough, there are too many bills going out and there is nothing left to save – it’s rubbish!
Make a budget and work out what you need to pay out over the course of the month, including money for food, travel expenses etc.
Once you know what is going out it’s time for the next step, ‘jam jarring’ your money.
Set up a bills account
Jam jarring your money is simply separating your bill money from your spending money.
You have one account for all of your bills and a separate one to spend from.
This gives you a much greater control over your finances as you don’t dip into money you need to use for your bills, meaning you never miss payments or pay them late – two things that will damage your credit score.
That’s all good and well, but that alone will not guarantee your money lasts until the end of the month, however, it does take away the risk of having to rob Peter to pay Paul ensuring you never dip into your bill money.
If you need to open another account to act as your bills account and are not keen on credit checks, a great alternative to a high street bank account is a prepaid account such as the icount current account.
There are no credit checks required to open one and it works in very much the same way as a traditional high street bank.
You are able to set up Direct Debits, standing orders and one off payments – making it perfect as a bills account pay your monthly commitments.
Alternatively, if you have all your bills set up to another account and don’t want to switch them, you can use the icount current account as your spending account instead as it comes complete with a prepaid MasterCard® so you can shop online, in store and withdraw money at the ATM.
Either way, your money is separated and that’s all that matters.
Stretching your money
This is the part of the process that is going to require some honesty and willpower.
Once you have separated your bill money from your spending money have a real hard think about where the rest of it is going and what you’re going to save.
If you’re the type of person who tries to save after they’ve spent, you’re doomed to fail – trust me, I’m speaking from experience.
That’s why once your initial bill money is separated that is the exact point you need to save.
Start small, a sum that doesn’t seem too daunting and doesn’t set you off into a wild panic at the thought of missing it.
Let’s say £50 a month.
Now you must work out where that £50 is going to come from.
If you buy your lunch at work everyday, that is a great place to start.
£5 a day spent at work will free up around £100 a month.
If you already take your own lunch look at other areas that can be cut without it changing your life drastically.
Stop playing the lottery, cancel an unused gym subscription, cut down the TV package, whatever, as long as you can free up that £50.
Once you do it I guarantee you’ll find there is a lot more than that £50 that can be saved.
Get into the habit of doing this and not only will you get to the next payday without struggling, or even worse, borrowing, but you’ll also have a pot of money to use in an emergency or enough to take a much deserved holiday.
When tackling your finances it is going to take a degree of honesty and commitment.
If you have a scarcity mentality you will only see the lack of opportunity, or in this case the lack of money to save.
Switching your mindset to an abundance mentality opens up your eyes to the different possibilities and opportunities you would have missed otherwise.
You can stop yourself running out of money if you take control of your money, always have a bills account and put any plan you make into action.
The only person stopping you from doing so is you.
So what are you waiting for?
Do you have a separate bills account?