5 Account Automated Budget System to Boost Savings and Improve Credit

It has been a hot minute since I have talked about budgeting methods and a big reason is, we’ve shifted the way we budget in a big way. Since I was such a proud member of Dave Ramsey’s Financial Peace community, I almost felt a shame after switching my budgeting practice to be a little different than dear, old, Dave’s. However, after walking a friend through how to set up a budget, it occurred to me that I need to share this with more people! Here is a breakdown of the 5 bank accounts we have (trust me, it’s not that complicated) and how we use them to budget less and boost our credit.

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The benefits of automation

So why have an automated budget? Well, for folks like me (who do not love spending our time crunching numbers) having your budget just work behind the scenes while you live your life is ideal. Here are some other benefits:

If you’re not a natural math-lover, I have actually created a training to make money less stressful for us visual learners/right-brained thinkers. Click here to check out the Money-Free Mind.

The cash and credit boost

First, allow me to walk you through our basic 5 account automatic budget system. Then, for those of you who feel like you are able to/wanting to use credit cards to get some cash back and boost your credit, I will add that in as a bonus at the end.

This credit card system (that I will show you last) is a simple add on to the 5 account system. That means you don’t have to implement it right away, but when you are ready to make that leap, it’s simple to do. However, if you currently struggle to stay out of credit card debt, I highly recommend reading How to Stop Over-using Credit Cards instead of leaping into the credit card budgeting method I share in this post.

Account #1: The landing zone

This budgeting method is very similar to another budgeting method made more popular by HeyBerna. She calls this first bank account “The Landing Zone” — or something like that. As much as I would love to come up with my own cool name for it, I don’t see any point in changing something that works so well!

Income checking account

This account should be a checking account where all of your income comes into. For us this is through our regular Wells Fargo checking account. We keep our Landing Zone here because this is the account we have had for over a decade and is already set up for automatic deposits! (AKA sheer laziness keeps us here.)

Purpose of this account

Having a Landing Zone checking account for all of your income will not only help by keeping all of your income in one place, but also helps you divide into your other accounts from here.

Account #2: Bills, Bills, Bills

Do you remember that Destiny’s Child song, “Bills, Bills, Bills”? I highly suggest you look it up and feel free to listen to it while you set up this system. It might be pretty obvious by the name that this account is to be strictly for paying bills.

For this checking account, we use an online checking account with CapitalOne360. Doing this takes a little longer for us to transfer money, but it has been highly beneficial, especially when it comes to setting up the cash back/credit boosting method of budgeting.

Bills checking account

Total up your bills for the month and then divide your paychecks to ensure that you are able to put enough money into the account to pay them all on time.

This can be tricky to manage at first because everyone gets paid differently.

You could simply calculate your bills for the next 2 weeks (presuming you are paid bi-weekly) and transfer that amount. This is a great way to get started, however, be aware that this method may leave you with less spending money during a time with a bigger billing cycle. Here’s more advice on how to budget your particular paycheck.

However you decide to make this work, this second checking account is for your bills!

Automating bill pay

The best way to use this account is to add up the amount you owe in your bills for the month (or every 2 weeks), transfer money to cover these expenses and then set up automatic payments through each billing company.

This way you know you’ve covered all of your bills and after making one transfer, you can rest assured that your bills will be paid on time.

What about gas, groceries and all that other stuff?

Using this account is good for monthly bills like gas, electric, mortgage, and subscriptions.

Allowing yourself to use your Bills Checking Account for things like gas and groceries may put you at risk for over-spending in these areas. Here are my recommendations for these expenses:

  • Remove these expenses in cash. The Benefits of Paying in Cash.
  • After distributing all other funds, leave this money in your “Landing Zone” account and spend wisely as to not become over-drawn

Account #3: Emergency/Long-term savings

If you have yet to full-fund an emergency fund (3-12 months of expenses) this next account should be used as an emergency savings account. Should you already have a fully-funded emergency fund, you can use this savings account for bigger savings like travel, home renovations, or future car purchases.

For savings accounts like this, I highly recommend getting yourself a high-yield account so that you can earn more money in interest the more you save. We again, use CapitalOne360 for all of our savings (including for our kids). Another great option is the Savings Builder from CITBank.

Automatic transfer

Having a designated amount set to automate with every paycheck is the best way for you to build your savings. Maybe this means a certain dollar amount every 2 weeks (like $200) or a percentage of your earnings (like 10%).

The bonus account (AKA the EMERGENCY emergency account).

While it is good having a savings account tied to your main checking account so you can make quick transfers in case of emergency, it can also be a little bit too tempting.

When you have a savings amount sitting in your savings account, it can become too easy to transfer because you want to go out to dinner or buy a new sofa.

That’s why I recommend a secret bonus account for those of you who struggle with this type of impulse-transfer. This “secret” account is a savings account through your main bank that is attached to your Landing Zone checking account.

However, I highly recommend keeping a limited amount of money in this account (like $1,000) so that you can cover quickly in case of emergency, but aren’t able to get into your “big stash.”

Long term saving feel impossible?

If you are notorious for struggling to save money, then I highly recommend checking out Money-Free Mind. One of the biggest road blocks to financial success is the ingrained mindsets we have around money. Taking the time to dive into and shift our money mindsets can have lasting change in our wallet and our sanity.

Account #4: YOLO Savings

Finally, we’re getting to the good stuff, right? I know, I’m sorry but we have to talk about all of those adulting things before we can fully dive into the fun stuff like saving for totally-useless stuff in the adult world. Things like amazing life experiences.

This YOLO Savings Account is for all things fun and enjoyment. The thing that really stinks is most people don’t actually save for the fun stuff! Heck, people might not even be aware of the awesome feeling of having money set aside to just do cool shit.

What goes into a YOLO Savings Account?

Whatever the begeezes you want. That’s what goes into this account. If you are working to build your emergency savings, you might save for trips and vacations in this account. If you’re already saving for that stuff, then this account might be for smaller YOLO things like concerts, a new guitar, or treating your significant other to a fancy dinner at that place that you know no one thinks you could get into.

I suppose you could make it a little more practical and use it as a type of Sinking Funds account as well where you save for things like birthdays and Christmas.

How much do I save?

The amount you save in this account can vary depending on what your current savings goals are. If you wan to go to a big concert in 3 months and tickets will be $300, you’ll want to save $100 per month in order to have saved enough!

Of course, not all savings goals will be realistic in a short period of time if you continue to stick to paying your bills and automating your Emergency Savings.

When you have a big/fun YOLO purchase you want to make and you don’t think you can save for it in time, I highly suggest looking into quick-start side hustles to help get you there!

Account #5: Free-for-all Spending

Wanna got to the mall? Dinner with a friend? Mini shopping-spree? This is your time to shine.

The final of the 5 accounts is a “fun spending” account. One catch here is that I don’t actually use an account for this. Instead, I use the Cash App and you can get $5 free when you sign up here!

What is the Cash App?

The Cash App is an app that you can transfer funds into and you can request a debit card to use just like you would a debit or credit card.

One super hand thing with the Cash App is that you are also able to check the app on your phone to see how much money you still have remaining. For example, if you put $100 in for 2 weeks, and you’ve gone out to eat and bought a new shirt, you can check the app to see you still have $45 left.

This can be a much better method of money management rather than trying to keep track of your spending in your head.

Let’s break it down

Ok, I get that this might seem crazily complicated … or a little confusing. That’s why I have a visual on hand! PHEW! You can download it below!

Our family's 5 account automated budget method might not be totally Dave Ramsey approved. The credit booster definitely wouldn't!

What about the cash-back credit boost?

So how doesn’t this cash-back credit boost come into play?

The good news is, it’s basically the same with one added change. Just take these few steps:

  • Open up a cash-back credit card, (we use CapitalOne Quicksilver.)
  • Continue to contribute money to your Bills Checking Account
  • Set up a few of your bills to be paid with your credit card every month
  • Automate credit card payoff at the end of every month (this money will already be in your Bills Checking Account).

I first started coming around to the idea of taking advantage of not only a credit boost but also cash-back benefits after reading Ramit Sethi’s book I Will Teach You to Be Rich. If you are interested in learning more ways to benefit from credit cards, I highly recommend picking up this book. Click here to open a Capital One Quicksilver card.

Here is an updated visual with the credit boost/cash-back.

Our family's 5 account automated budget method might not be totally Dave Ramsey approved. The credit booster definitely wouldn't!

Have something to add?

What were your takeaways here? Anything that you do that makes budgeting easier? Please take a moment to share in the comments!

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Our family's 5 account automated budget method might not be totally Dave Ramsey approved. The credit booster definitely wouldn't!