A definition of financial wellbeing I have been using refers to a feeling of certainty and empowerment around your money, both now and for the future. Setting up an effective money management system is certainly one way of helping achieve that and gaining valuable peace of mind.

This episode outlines how you can better manage your money with a simple yet effective system.

1. Additional Bank Accounts - Opening an additional bank account can be easily achieved by either contacting your existing provider or perhaps opening a new one with one of the online banks such as Revolut or Starling in the UK. I suggest having 2 current accounts plus a savings account.

2. Pay Yourself First - Regular listeners will know that this is a recurring theme on the podcast, but it’s an important principal so it bears repeating. Rather than waiting until the end of the month and hoping there is a little money left to move to savings, after all the bills and everyone else has been paid, make yourself a priority. I am going to ask you to set up an automated transfer for two amounts. The first is for savings, the second for Walking Around Money.

Let’s concentrate on savings first. Take a proportion of your income and move it to a new or existing savings account. How much, well that depends on your circumstances. In some ways the habit is more important than the actual amount. Because you are showing yourself and the universe that you are now taking control of your finances and honouring your financial future by paying yourself first.

As a rule of thumb aim for 10% of your monthly income, more if you can but less is ok if that is what your current circumstances will allow.

The second transfer is for your Walking Around Money, or WAM. This is discretionary income which is not already allocated for bills, food or credit card repayments for example. Again, knowing your numbers is crucial here because by understanding how much you need to cover your monthly costs, you will also know how much you have left to spend as you please. You can transfer your WAM either monthly or weekly to your newly minted second bank account. Then only use this account for your day to day spending, secure in the knowledge that it will be topped up again at the end of the week.

3. Using Your Primary Bank Account -  Your original bank account is used to receive your monthly salary and from it you pay all your bills and regular expenses. You feel secure knowing that all your expenses are covered and automated. Then you can leave that account to happily run along in the background, with just the occasional check to make sure you have included everything and there is always a small positive balance. Meanwhile you have a growing savings account thanks to your regular contributions and a weekly allowance which you are free to spend as you like.

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