The average person just has one bank account where he/she manages all his/her wealth in which I personally find to be a very daunting task for two main reasons.
1. You are likely to mix up your home expenses with investments and that is just a headache to manage.
2. You will easily be tempted to spend all your money in the bank account (unless you are very disiplined) and you don’t put investing on your list.
Now, look I know its not impossible to manage both investments and personal expenses together, you could still do it, but why hassle yourself when you could go and do something better?
It is still possible to save with one account, but if you’re the type of person that normally goes through his monthly salary like butter (like most people), then you should strongly consider getting that second account. I am not talking about a savings account (where you put a certain amount of money and let it grow over the years by interest), but what I am talking about is an investment account (a current bank account which you use for investing).
So here’s Step 1 of what you should do if you want to save yourself some stress to use it on whats more important:
1. Make sure you have the right documents that the bank needs to open your account (normally ID and proof of address).
2. Go to a new bank (not one you already bank with obviously) and tell them that you want to open a new current account with them.
3. They will probably ask you if you already bank somewhere else and what you need a second account for. In that case just tell them yes, you need it to easily manage your investments/savings.
4. The rest is pretty much of the same you did when you opened your first account (just answering their questions).
So how much time will it take to open that bank account? one hour? maybe two? ok, lets say three max. But you save a lifetime of stress and a lot of money!
Step 2: After the bank account is open and active, you need to set up a standing order so that every month a certain amount leaves your primary bank account and into your secondary investment account just like you would set up a direct debit for your bills.
You may be thinking, come on Zak, I don’t even have enough money to spend, let alone save. I’m barely surviving on my income. Well, let me ask you something, If the government were to raise the taxes, would you still be able to pay them? And the answer is……YES, you would adjust your other spendings so you can pay those taxes!
So how can you afford to pay taxes but not afford to invest in your future? Is there a specific amount to put in the investment account every month? No, you can just put $10-100 a month and that should be O.K. But, try your best to put as much as you can, because those will be used to invest in your coming years, the more the better.
But the big question you may ask yourself is, “If I’m going to put $20 a month in the account, that means I will only save $240 in a year…what on earth am I going to invest in with that?”
Well, thats another topic for some other time.