How I structure my money by bank account
Creating the perfect plan for your money is more than deciding how much money you will spend each month. It is also opening the right bank accounts and structuring the movement of your money in a way that supports your financial goals.
I’m a big advocate of using multiple bank accounts. Each of my accounts serve a specific purpose that aids my progress towards my financial goals. I can spend wisely, automate savings towards specific goals, and fully understand where my income is coming from.
Find out how I structure my bank accounts below, and perhaps you’ll be inspired to do something similar too!
Which accounts do I use to spend money?
American Express Credit Card
I use my American Express Credit Card for all of my daily spending. Whether it’s to pay for my train to work or to buy groceries at Tesco, if the shop provider takes Amex, then that’s exactly how I’m paying for it.
You might be thinking,
“Hang on a minute. Why would you use a credit card for your day-to-day spending? Why wouldn’t you just use a normal bank account? “
The answer is fairly simple.
American Express offers some of the best benefits for spending on your credit card. I currently own the Platinum Cashback Credit Card. This means that at the end of every year, I am rewarded with cash back depending on how much money I have spent. In other words, I get rewarded for spending money that I was going to spend anyway.
Spending on my credit card every month also helps me improve my credit score. How? Because I always pay the money back before my statement due date. To do this, I make sure that I’m only spending money on my credit card that I can afford. This way, I earn the rewards of using my credit card while avoiding paying any interest. At the same time, I am improving my credit score because I am paying everything back on time. Why would I want to spend with any other card?
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Santander Everyday Current Account
I use my Santander current account for any spending that I can’t use my credit card for. This is because my Santander card is currently more widely accepted than my American Express credit card. Despite this, I don’t often have a reason to spend on my Santander card, so I use it rather infrequently for this purpose.
My Santander current account is where I receive my 9-5 income. All my fixed bills, savings, and investments are automated from this account so that by the end of each month there is nothing left. I also use the money in this account to pay off my credit card.
The Santander Current Everyday Current account offers cashback when you spend with certain retailers, but this is not a benefit I have taken advantage of. This is because the retailers’ selection is very limited and they are not companies I use. For this reason, the American Express cashback offer is better as you get cash back no matter where you spend your money. If a good offer ever does arise, I will take advantage of my Santander cashback, but for now I am better off spending with my American Express card.
Which accounts do I use to save money?
Moneybox Lifetime ISA
If you’re unsure what a Lifetime ISA is, it is an individual savings account that allows you to save up to £4,000 a year towards your first home and/or retirement. The government gives you 25% of what you deposit each year, which means you can earn up to £1,000 of free money each year.
Opening the Moneybox Lifetime ISA was one of the best financial decisions I made. Before I opened my Lifetime ISA, I was saving towards my house in a normal savings account, so I wasn’t receiving any bonuses or benefits. Now, I will receive free money every year for saving an amount towards my house that I had always planned to save.
This year, I have already deposited the maximum amount of £4,000 into my lifetime ISA and received the full bonus of £1,000. Next year, I will do the same!
One thing to note about the Lifetime ISA is that if you withdraw money for a purpose other than your first home or retirement, you will receive a 25% withdrawal penalty. Now this may initially seem like a nightmare, but it’s actually a great deterrent that will keep you on track towards your goal.
For me personally, I have zero temptation to withdraw any money early as I don’t want to pay the penalty. This means that all the money I put into my Lifetime ISA never comes back out. In other words, the minimum amount of savings towards my first home is set in stone.
Moneybox 32 Day Notice Account
As mentioned, the maximum Lifetime ISA contribution is £4,000 a year. If I want to save more than £4,000 a year towards my new home, I need to save the additional money elsewhere. I opened up the Moneybox 32-Day Notice account for this reason.
The Moneybox 32-day notice account is a savings account that doesn’t allow instant spending of your savings. Once you make a withdrawal request, there is a 32-day waiting period before your money becomes available to spend.
This is one of the main reasons I chose to open this account. It makes saving so much easier, as I can’t act on a sudden urge to borrow money from my savings for something unimportant. By the time the money becomes available to spend, the feeling will have probably passed.
By choosing this account, I also earn higher interest in comparison to how much I would earn with a 0-day notice account. Right now, I am considering upgrading to Moneybox’s 120-day notice account . Although my notice period will increase from 32 days to 120 days, my interest will also increase from 1.5 AER to 1.7 AER. I doubt I’ll need to withdraw any money in a hurry, so this seems like a fairly decent offer.
I specifically chose to stick with Moneybox because I wanted all my savings for my house to be in one place. My Lifetime ISA account is with Moneybox, so it makes sense to open up a savings account with the same provider. This means that I am able to see my combined balance and progress towards buying my first home in one place.
Santander Savers Account
There really aren’t many benefits to me owning this savings account. I simply use it to save towards my short-term financial goals, such as a holiday abroad or a new TV. I earn fairly bad interest, but as my savings usually doesn’t stay in this account for more than a few months, I’m not too bothered.
Where do I receive my side hustle income?
Monzo
I use my Monzo current account for all things side hustle. This means that all my side hustle income goes into this account, and all my side hustle expenses come out of this account. This makes it easy for me to differentiate between my personal spending and side hustle spending, as they are managed in completely different accounts.
I specifically chose Monzo for two main reasons. Firstly, because Monzo lets me categorise my income and expenses. This makes it easy to understand where my side hustle income is coming from, and where it is going.
Secondly, I can separate my money into different saving “pots.” These pots will come into use when I eventually earn enough from my side hustle income to start paying taxes. They are also useful for saving towards my business goals, such as a new website.
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