Executing Your Spending Plan
Creating a monthly spending plan is a great way to get in control of your money and reach your financial goals. However, it would be unrealistic to try and track all of your spending and keep track of whether or not you’re sticking to your plan.
Luckily, I have a simple solution to automate your spending plan and help you stick to your goals! It may take some work up front, but once your plan is automated, it will require very little work from you.
To automate your plan, we will follow two steps:
Create different savings accounts for each of your savings goals and spending buckets
Set up automatic transfers to send money to each savings account when you get paid
If you haven’t already read my article on creating a spending plan, read that first.
Using Multiple Savings Accounts
First, check with your current bank to see if they allow you to create multiple savings accounts. If not, then I recommend creating an account with Capital One. Capital One allows you to have up to 25 different savings accounts and easily transfer money between them, all for free.
My old bank did not offer multiple savings accounts, and even charged monthly fees if I didn’t keep a balance of at least $300. If you’re in a similar situation, I would highly recommend switching to Capital One.
Note: You can have accounts open with multiple banks. If you open an account with Capital One, you aren’t required to close your other bank account.
If you decided to create accounts with Capital One, I’ll go over the instructions below. If you’re going to use a different bank, still follow along since the steps should be similar.
Creating Capital One Accounts
Click here to begin creating accounts.
Although this is optional, I recommend first opening a 360 Checking account. The benefit to having a Capital One checking account is you can easily set up automatic transfers, and the money will move instantly. Click on the 360 Checking account to read more about it or click Apply Now to open a new account. Fill out the application, which should only take a few minutes.
To create your first savings account, click here to return the product page. Click on the 360 Performance Savings account to read more about it or click Apply Now to open a new account.
Repeat this step to create as many 360 Performance Savings accounts as you need. Referring back to your monthly spending plan, I recommend the following:
Step 1: Obligations and Expenses
Create one savings account to account for all of your obligations and expenses.
Step 2: Retirement
No savings account is needed since IRA payments can be paid with your checking account.
Step 3: Savings Goals
Create a separate savings account for each of your savings goals.
Step 4: Spending Buckets
Create a separate savings account for each of your spending buckets. If you have a lot of spending buckets, you may want to combine some of them so you'll have fewer savings accounts.
Naming Your Savings Accounts
Once all of your accounts have been created, click on your profile image in the top right corner, then select Account & Feature Settings from the menu. Click the pencil icon to rename each of your savings accounts.
For steps 3 and 4 of your monthly spending plan, the accounts should be named after specific savings goals or spending buckets.
Creating Automatic Transactions
Now that your savings accounts have been created and named, click on the Capital One logo at the top of the screen to go to the Account Summary page. This summary page will show your balance for each of your accounts.
Click on View Account for one of your savings accounts. From here, click on the Automatic Savings Plan button.
This is where you can view all of your recurring transfers. To create your first one, click Create a Savings Rule.
Referring back to your monthly spending plan, your first savings rule should be for your obligations and expenses. The amount should be whatever your total is for step 1 of your spending plan.
I like to set up my automatic transfers at the same frequency that I get paid. If you receive monthly paychecks, choose monthly here. If you get paid twice a month, choose every other week. Remember, if you're setting up your transfers for every other week, make sure you divide the amount on your monthly spending plan by two.
For the starting date, choose the date of your next paycheck. If you want to be safe, choose two or three days after you get paid.
Finally, choose which accounts to transfer from and transfer to. If you didn’t set up a Capital One checking account (which I highly recommend), you can link an account from a different bank here.
Note: If your savings rule happens to be scheduled before you get paid, and you don’t have enough in your checking account to cover it, there won’t be any penalties or fees from Capital One. The transfer will simply be ignored.
Repeat these steps to create automatic transfers for each of your savings accounts.
When the time comes to pay for expenses (ex: rent is due), simply transfer the money from the appropriate savings account to your checking account to pay the bill.
To complete a one-time transfer, go to your Account Summary page. Click on View Account for one of your savings accounts. From here, click on the Transfer Money button.
Fill out the amount, account to transfer from, account to transfer to, and the date.
Congratulations, you now have an automated spending plan!
When you get paid, your money will automatically be split into different savings accounts based on your goals. You can now easily keep track of your total monthly expenses, your savings goals, and your spending buckets.