How many account does this 19-year-old student has?

The answer is 4. Different accounts are meant for different purposes.

1. Expenses Account
2. War-chest
3. Emergency Funds
4. The Dream Account

Let me break them into different parts now. Whenever, I receive a sum of money, be it my salary I’ve received from my part time job, some extra cash from occasions like Chinese New Year, I’ll allocate them into portions whereby it will go into my various different accounts.

Expenses Account

This account is used for general expenses like food & beverages, clothing, transportation etc. Expenses should only be spent from this account. As such, if this account is running low, I will have to ensure that my spending is lesser until my “next paycheck” comes in. However, I do realize that even in this account, I manage to accumulate a little savings here as I do not empty my expenses account totally every month. For this account, I’m using my POSB Savings Account I had since I’m a kid. This is because POSB/DBS offers great convenience in locating their ATM for easier withdrawal.

War-chest

Funds that are allocated into this account will be used for investment purposes. No withdrawal will be made by this account. Dividends received from shares I own will be credited into this account as well as payments for shares transaction. I make it a point that I’ll transfer a certain percentage of any “cash inputs” I’ve received to this account. I’ll maintain a certain balance for reserves to be deployed in a depressed market.

Emergency Funds

The emergency fund is an account used to set aside funds needed in an event of any personal financial dilemma. It will be dependent on the average living expenses over a period of time (3-6 months).  The account will be reviewed accordingly when I progress with age, as I would have larger expenses. This will also mean that I’ll need a more funds in that account to be able to sustain myself for 3-6 months. At the present moment, the emergency funding account has sufficient amount of money that will be able to sustain myself for at least 3 months. I do plan to slightly increase the funds in the account so that it will allow me to sustain myself for 6 months. This is not a lot of money, as my expenses are pretty low currently. The funds in this account must be a liquid asset.

The Dream Account

This is an account whereby the funds that are inside will be used to buy the “want” things or for expenses such as a vacation. The percentage of allocation to this account is lesser as compared to the other account. The day this account hits a certain amount which Is sufficient for me to get what I “want”, that will be my reward day.

It’s a pretty simple system. I personally feel that with this system, I’m able to do things I want without having to worry if I have sufficient for the latter. Why do I need to complicate myself and create so many different accounts for myself? 

Well, because it provides me with the comfort to shit in peace, knowing that:

-      If I’m in a deep-shit, I’ve my emergency funds to back me up.

-      If my investment turns sour, it will not cause me to jump down from a building

-      When I’m getting my “wants” or going for a vacation, it does not break my bank

Peace of mind is indeed priceless.