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Here’s how I set up my financial accounts

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Ok today I’m going to break down how I’ve structured my bank accounts.

If only that sounded cooler.

Anyway, I have 3 main accounts:

1. Wells Fargo

  • Checking account: This is like the inbox of my financial infrastructure–it’s where I deposit everything first, then sort it out. My checking account earns no interest, so I move it stuff out of here regularly.
  • Savings account: I hardly use this account. It’s only for short-term money that I will need in less than a month. For example, if I’m subletting a place out and have a security deposit that I’ll refund in a month, I’ll move it here. Or if I bet someone and the bet comes due in a month, I might keep it here. The downside of this account: The interest rate sucks (it’s only 0.50%). Upside: You can transfer money between Wells Fargo checking/savings accounts in less than 24 hours.

2. ING Direct

  • Savings account: I opened an ING account It’s a normal savings account, FDIC insured, all that. The only difference is that you do your banking online (transferring back and forth, to other accounts, etc). If I need to transfer to or from it, it takes a few days (but is free).

    I keep the majority of my discretionary savings here. So from every dollar I earn, I transfer a percentage into this account. I might use money here for an emergency fund, mid-term savings like for furniture for a new place, or car maintenance that I know I’ll have to do in a few months.

3. ETrade

  • Investing accounts: These include a couple of different stock accounts and a Roth IRA. This is where all my long-term money goes!

    I used to have a money-market account, but it was only earning about 1.5% (compared to 3.30% at ING), so I closed it. Now, when I want to invest money, I just transfer it over to ETrade, where it sits until I invest it.

Ok, so that’s the logistics of how I’ve set my accounts up. I wrote so many words above, but what does it all really mean?

Build yourself an infrastructure to make it easier to save.
Here’s how: For every dollar that comes in, I allocate percentages to different accounts. For example (I’m making these numbers up), let’s say I made $100 from a paycheck. I might put

25% in savings
50% living expenses
25% recreational

And you can make it easier by having multiple accounts. I manage all of this stuff in Quicken, so even though I may have $1,000 sitting in my ING account, I can easily tell that $200 is for furniture, $300 is for an upcoming car repair, and the rest is for whatever.

It’s not that hard!! Take some simple steps:
1. Open an investment account. Start sending some % of your income there. Money should almost always flow TOWARDS your investment account, not away from it.

2. Open a savings account and use it to segment your money. Remember, an investment account is for long-term savings. A savings account is for mid-term savings–and if you can’t think of anything you’ll need in the next 5 years, trust me, you will (e.g., a car, a mortgage, a wedding, a new hairdo, who cares). If you want to do it at your own bank (BofA, Wells Fargo, etc), great. If you want to open an ING account, great. It doesn’t matter–just get your money into smaller, more manageable buckets.

3. Allocate percentages. Use your budget to figure out the maximum % of each dollar that you can allocate to different accounts.

The key point of this whole thing: Once you create this infrastructure, your money is MUCH easier to manage. It’s like using shelves on your desk–all of a sudden, your paperwork is easier and more welcoming to deal with. Once you have different accounts and a set % of money going to them, it becomes much more automatic. And like I wrote yesterday, you can start dealing with the more interesting questions, rather than focusing on logistics.

If you have questions, just ask.

PS–If you want an ING account, here’s a referral.

If you liked this article, I’ve written hundreds more articles on personal finance and personal entrepreneurship. Please check out my table of contents and RSS feed.

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  1. One thing I was unable to glean from this post was how you pay
    for things like mortgage, rent, car insurance, groceries, etc. I
    assume you use your checking because ING transfers take a few days?

  2. Right, I keep money for monthly payments in my Wells Fargo checking.

    I know it’s hard to predict how much you’ll spend every month, but after you keep a budget for a month or two, you realize the variance isn’t usually that much. I just keep a few extra hundred in there in case I go over. And if I’m going over even more for some reason, I can transfer from another appropriate account.

  3. what is the minimum balance of the ING account?

  4. No minimums, no fees on the ING.

  5. I use BofA (please keep the groans to yourself). I have both checking and savings with them. Since I am able to keep higher balances, I use an interest bearing checking account. The rate sucks but it is better than nothing. As long as the balance is over $5000, I’m fine. Everything else gets shuttled to the attached savings account. I earn 1.5-2% on that. That’s the sweep fund, which ultimately will be used to fund a trip to Japan.

    For taxable investing, I have an account w/ BofA’s brokerage arm. I’m in the process of setting up the linkage b/w that account and the checking account. That way, I can just transfer funds online, as I do with the savings account.

    In the future, depending on the level of segmentation I go with, I’ll probably add a savings account with HSBC since they were at 3.75% a week ago. We’ll see how that looks. But I like the idea of being with a big, foreign bank and HSBC is all over Asia.

  6. “I manage all of this stuff in Quicken, so even though I may have $1,000 sitting in my ING account, I can easily tell that $200 is for furniture, $300 is for an upcoming car repair, and the rest is for whatever.”

    Are you implying that you can allocate sub-buckets within an account in Quicken? How can you do this?

  7. I quickly glanced through the article “here’s how i set up my financial accounts” and wanted to share something that I started doing.

    I used to have two checking accounts: 1 for household expenses( rent, car insurance, etc ) and 1 for personal expenses (groceries, movie tickets, video games…) This worked great except whenever i went to the bank to deposit my paycheck – the bank tellers would panic not knowing how process the transaction, plus i was paying service charges for 2 check cards, 2 account fees – so i needed to simplify. The solution was to merge into one account and use two transaction registry books for the same account. You can easily tuck them both into the pockets so they overlap (book in a book…) where the staples in the inner one make it easy to distinguish between the two (this may not make sense). Then use one book to track personal expenses and the other for household expenses.

    Now I spend less time at the bank and don’t have to worry about posture problems from sitting on two checkbooks

  8. I stumbled upon the bucket method on my own, and it has been a godsend. I even do things like stash small amounts of cash in various places.

  9. I enjoy your website, I think that it is difficult to find valuable information on savings when you are just starting out. I am also a recent college graduate on my first salaried job and I was wondering if you get Roth IRA benefits from your employer, of it’s something you began because it is better to start young. If so, is the upkeep for a Roth IRA dependent on your constant surveilance? Can I leave it like a CD and have it grow over time? I am a novice at stocks and having a Roth IRA seems a bit daunting, but I want to start. Also, why Etrade and not, citibank, or your personal bank?

  10. ING Direct has an affiliates program through Commission Junction I think ING approves manually as opposed to an automatic approval to be their affiliate, but I remembered seeing your post about ING Savings Accounts right after I had opened one. I think with their banner you can get a commission of $20 or so. What do you think about blogs and affilates prormas by the way?