Advice needed on using several accounts

Rew_3

I''m recently out of debt (thanks to Martin's Money Diet book, this site and hard work)... for the first time in over 15 years I'm now able to start working my money. I've been used to debt so all these new options are confusing me.

I read in Martin's book that splitting your money into different accounts for different reasons is sometimes a good idea, I like the sound of that and I'm now seeking other's opinions.

I can use this site to work out what specific accounts I open for each purpose, but I need help decided if I need current or savings accounts.

This is how I think I should set my money up.....

Account 1 - (My business) Current Account
(Invoices & Cheques get payed in here. I'm self employed so this is my business account)

Account 2 - (Taxman) Unsure what type is best
(I will pay money in from Acc 1 each time I get payed, so I am prepared for when I get the tax bill each year. I will only pay out of this account once a year in theory)

Account 3 - (Wages) Unsure what type is best
(After tax, I will pay myself from Acc 1 a percentage everytime I get payed. I will use this account for personal spending - food, rent, clothes etc)

Account 4 - (Holiday Fund) Unsure what type is best
(I will pay regularly into this account from Acc 3 so I can save for holiday money, flights etc. I will holiday twice a year probably, so I'll be dipping into this account a fair bit)

Account 5 - (Life Savings) Unsure what type is best
(It's now time for me to start putting money away, this money I won't touch & I can afford to pay in regularly)

It's worth noting that I don't have an ISA, it confuses me as to when I can or can't start one. If an ISA is still an option at this time of year I can only afford £1000, so I don't know if its worth it this year.

Sorry for the long message, I'm lost and need advice.

Baldur

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rb10

Rew wrote: »

Account 1 - (My business) Current Account
(Invoices & Cheques get payed in here. I'm self employed so this is my business account)

If you're likely to be in overdraft a lot, go for one with a low overdraft rate. If you're likely to have a large credit balance, then you're probably looking at getting interest on it (e.g. Lloyds Vantage), but if you can keep it down to a reasonably low credit balance, then you can probably do better with the Halifax Reward account.

Rew wrote: »

Account 2 - (Taxman) Unsure what type is best
(I will pay money in from Acc 1 each time I get payed, so I am prepared for when I get the tax bill each year. I will only pay out of this account once a year in theory)

Look on https://www.moneyfacts.co.uk/savings, https://www.moneysavingexpert.com/savings for accounts with the highest rates, that let you pay more money in. Sometimes you can get good accounts with restricted withdrawals (e.g. no more than 4 per year), but I don't know of any of these around at the moment, so it may just end up being an instant access account. Review it next year though.

Rew wrote: »

Account 3 - (Wages) Unsure what type is best
(After tax, I will pay myself from Acc 1 a percentage everytime I get payed. I will use this account for personal spending - food, rent, clothes etc)

I'd choose another current account for this one - same criteria as for (1).

Rew wrote: »

Account 4 - (Holiday Fund) Unsure what type is best
(I will pay regularly into this account from Acc 3 so I can save for holiday money, flights etc. I will holiday twice a year probably, so I'll be dipping into this account a fair bit)

As Account (2).

Rew wrote: »

Account 5 - (Life Savings) Unsure what type is best
(It's now time for me to start putting money away, this money I won't touch & I can afford to pay in regularly)

It's worth noting that I don't have an ISA, it confuses me as to when I can or can't start one. If an ISA is still an option at this time of year I can only afford £1000, so I don't know if its worth it this year.

An ISA for this one, definitely.

You can open an ISA at any time of year, the only restriction is: you can only pay in up to £3600 into it in any one tax year (to rise to £5400(?) from October if you're 50+, or next April for everyone else). Once you've got it open, you can transfer any money already in an ISA to another bank, and it'll remain tax-free, provided you use the bank's ISA transfer process.

The highest ISAs are: Barclay's Golden ISA (3.61%, but variable, so could fall) or Halifax ISA Direct Reward (3% fixed, but you must open it by next Saturday). Or see this thread on the ISA forum.

Rew_3

Thanks alot for your time. That's helped