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Cleaning the Money Clutter with Sunny Wishart

Divorce can be emotionally and financially overwhelming. That's why I'm teaming up with Sunny Wishart, president and founder of A la Carte Financial and a certified financial planner. We’re covering how to understand all things money without feeling ashamed, overwhelmed, or embarrassed.

We're discussing:

  • How many bank accounts you should set up.

  • When should you begin to kind of get some of your money separated and organized? For what?

  • What's automatic withdrawal?

You're going to need to go to the bank. You're going to need to call the bank manager. You're going to need to make some phone calls. And we're here to kind of give you a high overview, look at what you might want to consider getting after right now. Let’s take it from the top.

You can't create a financial plan until your cash flow is under control and having nice, tidy banking is going to make sure that happens.

It's okay to have a lot of bank accounts, but it's not okay to have a lot of bank fees. When you’ve got banking fees for all these accounts and money is just being transferred all over the place, how can you make heads or tails of your monthly cash flow?

I have a system that I strongly recommend to every household, but if you're in the transition, your first step is to separate your banking. You need to uncouple everything. That's step one.

Once that is done, here's the ideal structure:

Once you have uncoupled and you've set up your own household money for yourself, you're going to have one checking account and we call that the funnel. That account is at the top of my structure and that's where your paychecks go. Any money that comes in goes into that account and all money that leaves your house comes from that one account on the top.

Then we have all these other little branches where your money needs to go. If you're not creating this funnel account, you are never going to have a true sense of what comes in and what goes out because you won't see your bottom line. A good method can be to split your paychecks. For example, 60% going to your main account, 40% going to the other accounts. Any other money that comes in, like tax returns, whatever, goes to other accounts.

Then, you’ll bring it to the funnel.

You need to have a finger on all money coming into the account so that you can then allocate it towards all those other accounts afterward. Otherwise, you don't have a true picture of what you're spending, just what leaves the house.

From there you can allocate.

You’ll need a savings account, which we all need when we have things. If you have a home, you have kids, a pet, or a car, things are going to happen. You need a little bucket of money there to make sure that that's covering any big things or larger take-in things that come up. Note: A larger ticket doesn’t have to mean an emergency like the roof blowing up - some people get hung up on this for a true emergency. This could just be to put new brakes on your car. That's okay.

You're going to make sure that any credit products are being paid each month. And then you have, say, your savings component wherever you're saving your money with all coming out of this top final account.

Create separate savings accounts and label them on your online banking.

I personally like having several separate accounts underneath there, as long as they're free. Don't be paying fees on all these little accounts. I like to label them so that I know what I'm spending on vacations.

I like to have a gift account because I find those really creep up on me and when Christmas rolls around, I have to frontload hundreds of dollars. So, I have a little gift account set aside so that for the whole it evens out throughout the year and I don't get stuck when I'm buying the turkey dinner or gifts under the tree. I label it: gift account. So when I log in, I know what this money is for. Streamlining to the funnel account is really step one.

Set up automatic withdrawals:

I love just everything running automatically. I know that I have X amount coming in every month and then I have my fixed expenses. I know that X amount runs my fixed expenses. Your fixed expenses are everything to keep the lights on in the home or everything that you know will be coming out each month. I include the internet in fixed expenses because we all need the internet these days. We can't work without the internet. So that's a fixed expense. Car and home insurance is a fixed expense. So everything that, you know, comes out automatically each month. Just lump it all into one amount, $3,000 a month to pay my mortgage, taxes, and bills, just lump it in and set it aside.

What's left? Those are your variables.

That's the money that can be changed. So that’s your gym membership, your weekly grocery bill, whatever else you have going out, that money can technically be changed in a pinch.

We all have a level of lifestyle. If you start pulling up an online budget sheet and when you start building it and say, “Well, this is what I need because I built this sheet”, that is not how you build a budget, and that will fail you. Start by looking at last month. Those are your lifestyle expenses. What did you spend last month? That is the level of lifestyle you're accustomed to supporting.

For example, say last month I spent $3,000 on lifestyle expenses, variable stuff, and then $3000 on fixed expenses. Make it as automatic as possible because it's a brain drain manually paying your cell phone bill every month or manually paying your power bill. You know you have to pay the bill. You know, it's approximately x dollars a month. Just have that lump sum figured out and in the account and you make sure it comes out of that funnel account, it's all running. Just understand what they are and add it all up and have it running like a well-oiled machine.

That way, the only thing you're going to be responsible for are those variable spends. So that amount that you spent that you looked at last month, making sure that month over month that they're approximately the same because you know that your income is supporting that. And if your income is not supporting that, then you have to reduce it. And that's the bottom line.

So to summarize:

  • Uncouple your money.

  • Get your funnel going. Create the funnels, starting with the checking account at the top.

  • then have your savings account for your variable expenses. For all the one-off things that catch you off guard, like a vet bill or a car bill. But don’t think of it as an emergency fund - people tend to get hung up on the word emergency and you won’t end up using it. It's just to cover the one-off extra expenses.

  • And then you can have little accounts, as long as there are no fees, for gifts or for vacation or whatever you want.

  • Get your automatic withdrawals going.

It takes a bit up front, but once everything's set up and it runs smoothly and then something else that's important is don't forget to keep your eye on the numbers.

It’s also important to check out your statements on a regular basis because sometimes someone can get a hold of your credit card number and start using it. And if you're not paying attention, you may not notice for a while. And we don't want that to happen.

So keep your eye on your numbers and you've all got this.

If you're liking what we're talking about today, Sunny can work through the “Clean the Money Clutter” program with you. You just have to reach out to her at r of A la Carte Financial.

And until next time, here's to you first!




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