Today, I transferred the majority of my cash assets and direct deposits into two new bank accounts. The significance being the I am helping to grow two minority-owned enterprises. I am now a proud customer of Liberty Bank & Trust and OneUnited Bank.
Last time, I introduced you all to my budgeting system. Now that you see the importance of having a budget and how it helps you to build wealth, I am going to show you how to automate your finances. I’m sure that I am not the only person that hates overdraft fees, so I’m going to show you how to eliminate them.
First there are two new terms we need to learn.
- Fixed Spending: These are bills that have a known due date and payment amount. Examples include rent, mortgage, utilities, student loans, cell phone, internet, cable
- Variable Spending: This type of spending includes items of varying amounts. Examples include, groceries, entertainment, investments, haircuts.
Now you are ready to automate your monthly expenses.
The chart above shows you how to divide your active and passive income streams into a bank account for fixed spending and another for variable spending. The first step here is to calculate your fixed expenses. Next, simply allocate the necessary amount to that account from your income. I understand utilities can vary so I suggest finding the average cost per month and adding a %10 buffer. The remaining funds should go to you variable spending account to purchase basically everything else. The investment bag is green because it is an asset, remember to always pay yourself first.