The answer
is 4. Different accounts are meant
for different purposes.
- Expenses Account
- War-chest
- Emergency Funds
- 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.
Peace of mind is indeed priceless.
