6 financial accounts you should have as an adult ( Even if you don’t feel like being one)
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A Million Bucks by 30… wouldn’t that be awesome? Well this is actually the title of one of my favorite books. This book is such an inspiration. This guy named Corey went to college, luckily he had a full ride so he graduated without student loans (jealous? I know, me too) and managed to save $10,000 through different side gigs. Once he graduated he got a full time job making $40,000 a year at a job he hated. He forced himself to live off of $15,600 and each year started buying property in NYC. He was able to become a millionaire by 30. Through out his journey he documents the process. Every chapter he lists out how much money he has in each of his accounts. It’s pretty cool because you get to see his money grow every few months.
It got me thinking how many accounts do you really need in order to set yourself up for a prosperous future? When I was younger I only had one bank account, but now that I’m an adult I need to step my finance game up. By putting my money into different compartments It’s easier for me to stay focused on my money goals and not mix up my money. Looking at one large sum of money makes it difficult for me to decipher what money I will use for my vacation and what will I save for my groceries. Which I why It’s great to have different accounts to house your money in.
#1 Regular billing checking Account- This is the account where your money from your paycheck is deposited. From here you disperse the money into other avenues in order to pay your bills.
#2 High interest online savings account (Money Market)- I love online banks because they have higher interest rates and it also allows me not to spend my money because it takes a few business days to transfer into my checking account. Be sure to open an account that is free or has a low payment. Also be sure to check if there are any fees associated with having the account. (Some accounts charge you if you don’t have a certain amount of money inside them) I have Capital One, but there are a ton of great online banks you can choose from. Check out bankrate.com for a full list!
# 3 Purpose Driven Savings account- I keep my purpose driven savings accounts inside my online savings account that I mentioned above. I have Capital One so I’m able to create sub savings accounts with different nicknames for free. For example I have a vacation account, an emergency account, car account. Etc. Here you’re allowed to create 20 sub accounts. If you aren’t the best at saving money try to turn it into a game. How much money can I save today? Whatever money you save each day from not spending, put it into one of your savings account. One great tool has helped me save money is Digit.
I’ve literally saved over $450.00 since November just by using Digit and the thing is I don’t even notice that the money is being taken out of my account and put into a separate savings account for me. So far I’ve used some money to to my vacation to Barbados, and I’ve also used part of the money towards my student loan debt. Best thing about it is that it’s free to sign up and they send you text alerts each day. If you need to save more money without feeling it you can sign up here it literally only takes 5 mins.
#4 Emergency Account or Rainy Day account- If you don’t like the term emergency feel free to call it a rainy day fund. Experts recommend that you have 6-8 months of your monthly expenses covered in this fund, just in case of an emergency. If it’s not an emergency you’re not supposed to touch it! I need two of my wisdom teeth pulled out soon so trying to figure out if this is an emergency. Hmmmm
#5 Roth IRA- A Roth IRA is another great bucket to house your investments. It’s an investment vehicle where you can buy stocks, mutual funds, bonds, real estate or just hold cash if you wanted to. IRA stands for individual retirement account. You won’t receive a tax deduction on the money inside your ROTH IRA; however once you retire you will be able to take out your money without paying any taxes on it. Simply put the money in this account is taxed in the beginning.
There are guidelines in order to open up a ROTH IRA. According to Rothira.com
- “Single or head of household: you must earn less than $114,000 to fully contribute to a Roth IRA
- Married filing jointly or a qualified widow(er): you must earn less than $181,000 to fully contribute to a Roth IRA
- Married filing separately: you must earn less than $10,000 to fully contribute to a Roth IRA. (Note: Married filing separately can use the limits for single people if they have not lived with their spouse in the past year).
- If you under the age of 50 years old you can contribute $5,500 toward retirement in a Roth IRA. If you are married each individual can set aside $5,500 toward their retirement, even if only one partner works”
# 6 401k- A 401(k) is an employer sponsored retirement plan. Money is taken out of your check each pay period and the contributions you make are taken out before taxes. Which is great because it reduces your yearly income. So if you’ve made $45,000 last year and you put away $5,000 into your company’s 401k plan it reduces your taxable income to $40,000 instead of $45,000.
Companies usually match a percentage of what you put in (not all companies do be sure to check with Human Resources) so if you haven’t signed up you’re missing out on free money. Even if you start putting away 5% of your income and then slowly increase the amount over time you will be surprised with how little you could live off of. Probably won’t even notice the money is missing.
# 7 Brokerage account- This is another investment tool that lets your money grow for many years. There are tons of stocks, bonds, and mutual funds to choose from. You don’t have to be rolling in dough in order to start investing. Every little bit of money adds up. And if you need more help on the basics of investing there’s always my “Young Urban Investor’s e-book”
This is one way I’ve been compartmentalizing my money. It’s been pretty helpful. Are there any accounts that you use that I’ve missed? Let me know! Be sure to subscribe for more money tips!