Day 3 : Your financial planning – how you can take control over your money

Part of having a good money mindset is that you enjoy managing your finances. Or as a first step, that you manage them in the first place! The first tool we want to introduce you to here is the financial plan. We could also call it by its friendly name: the budget. This plan will give you an overview of your financial status quo. The central element is a list of your income and expenses.

Where is my money actually going?

You can download a template off the internet or create a spreadsheet. It’s helpful to divide everything into months. You’ll enter how much money comes in and how much you spend on what. If your template doesn’t allow for that, break it down into expense groups, such as rent/housing costs, groceries, cell phone, insurance, etc.

The six-account model

Something that’s very helpful for having more control over your finances is the multi-account model. In this model, you don’t have one account for everything; rather, you have several accounts, each for a different purpose. It might look like this, for example:

  • Everyday account (money that covers your regular monthly expenses)
  • Investment account (money you invest monthly)
  • Fun money account (money for the things and activities that bring you joy in life and that you like to indulge in)
  • Continuing education account (money for continuing education, seminars, workshops – anything that furthers your personal development and education)
  • Donation account (money you give away to family, friends, or organizations you care about)
  • Emergency account (particularly important: money for emergency situations)

The money in each account is earmarked. Ideally, a certain portion of your income automatically gets sent directly to each of the various accounts.

Indispensable: an emergency account

The first thing you need to do is set up an emergency account if you don’t have one already. This is where you save money to build up a nest egg. The coronavirus pandemic showed us that something can always come up despite how you’ve planned. And of course little things can always crop up at the same time, such as a car accident, a broken washing machine, AND a broken refrigerator. It just feels good when these kinds of situations are taken care of. Another reason for this emergency account is to have three or six months of financial coverage in case you become unemployed. Therefore, it should contain three or six times your minimum monthly expenses. Figure out what feels right for you. 

Investment account

The next step is to determine how much you want to put into your investment account on a regular basis. It holds true that a lot helps a lot. Because with the money you set aside for investing, you can achieve a lot over the coming years.