Salary in second account helpful?

Ak400

Hi all, 

as I have posted previously I am struggling with overdraft most of my salary goes on rent, my sons nursery fees then paying off loans. I have some savings but not much left in another account.

i just wonder so that its easier for me to see what’s going in and out, is one idea I ask for my salary to be paid into my second account instead? Then I can pay whay I need to into the main account to cover bills, and try and see how I can then tackle the overdraft? 

It’s an idea in my head which seems a good one but I am not totally sure so just wondered if there are any pros and cons to this approach 

elsien

Two accounts can certainly work. To do so effectively, you need an accurate budget if you don’t have one already so that you know how much to transfer to cover your bills. 

I also shove money for savings into a savings account as soon as my wages hit the bank account because if I leave it to the end of the month. I’ll probably have spent it.

Have you a done up-to-date SOA at all?

And if you’re in your overdraft, make sure that your second account is in a bank that has no relationship with your current one.

Mark_d

My suggestion would be to avoid the two account set-up.  Using just one account would minimise your overdraft usage...and I suspect that the interest rate on your overdraft makes it the most expensive debt.

I recommend the pen and paper solution.  Write down how much you spend on different things each month and then see what costs you can cut out and which you can reduce. As a starting point, my list includes - mortgage, broadband, council tax, tv licence, water, home insurance, elec/gas, gym, groceries, boiler cover, magazine subscription, mobile phone.

RAS

Do a proper Statement of Affairs. You need to make proper allowances for clothes, medical and dental, holiday, if only VFR, Christmas and other celebrations, travel and transport even if you cycle everywhere, and entertainment. If you've got a mortgage, you definitely need a house maintenance allowance as well. Add up how much you spent on these annual items and put aside 1/12th each month.

And then set aside an amount towards an emergency fund so you can replace the cooker or boiler if they blow up etc. 

Scrap the magazine subscription and look to drive down utilities, mobile, broadband and travel costs. 

Ak400

Thank you, I agree I definitely need a SOA, but would having my salary paid into another account then transferring enough for bills and every month throwing a bit at the OD help me budget and separate income and expenses? I feel seperating these two will help me budget? 

elsien

It's whatever works for you  - works for some but not for others. You can try and change back again later if it's not going as planned. 

Martico

Agree with Elsien - if you think that'll work well for you, then go for it. It can't do any harm

RAS

Do just check that there wasn't some sort of requirement when you opened the account that requires you to pay your salary in, or a specified minimum per month. Some also require a minimum number of monthly DDs paying out.

kimwp

The disadvantage of having your salary paid into a different account from the one your bills go from is that you are removing the automation and will have to move money every month to make sure your bills are paid. If you are busy or distracted that month, your bills won't get paid. Personally, if you want to manage your money through various accounts, I would have:

Account 1: salary in and essential bills out plus anything you definitely want to pay eg rent. Also a standing order to account 2 with the money for spending on food, clothes etc and anything else you want to closely control.
Account 2: as this is for the spends you want to closely control, you should frequently review this and maybe use a bank that allows you to split the money into different pots eg week 1 food shop, week 2 food shop.

You can do the above by opening a new bank account and moving your salary and essential bills. Or opening a new account and moving the other outgoings. I think the point made above about overdraft cost is a good one - you should think it through, but perhaps keeping salary and bills in the account with the overdraft and moving your bill direct debit dates to a few days before your salary is due would reduce your overdraft cost by keeping as much money as possible in there. Having your second account for daily spend means that you don't think you have more money than you do because a bill hasn't been paid yet - the second account will only have what you can spend that month.

Plus diarise when offer periods end and renewals are due. At these points, look for the best value options for your needs. 

Personally, I effectively do the above by having all my bills and savings go out of my account a few days after my salary goes in. And when I want to closely control my spend, I use an app called fudget, which allows you to create different entries and add items as you spend, showing what you have left in each entry.

I very much second the recommendation to do a detailed SOA.

elsien

kimwp said:

The disadvantage of having your salary paid into a different account from the one your bills go from is that you are removing the automation and will have to move money every month to make sure your bills are paid. If you are busy or distracted that month, your bills won't get paid. Personally, if you want to manage your money through various accounts, I would have:

Account 1: salary in and essential bills out plus anything you definitely want to pay eg rent. Also a standing order to account 2 with the money for spending on food, clothes etc and anything else you want to closely control.
Account 2: as this is for the spends you want to closely control, you should frequently review this and maybe use a bank that allows you to split the money into different pots eg week 1 food shop, week 2 food shop.

You can do the above by opening a new bank account and moving your salary and essential bills. Or opening a new account and moving the other outgoings. I think the point made above about overdraft cost is a good one - you should think it through, but perhaps keeping salary and bills in the account with the overdraft and moving your bill direct debit dates to a few days before your salary is due would reduce your overdraft cost by keeping as much money as possible in there. Having your second account for daily spend means that you don't think you have more money than you do because a bill hasn't been paid yet - the second account will only have what you can spend that month.

Plus diarise when offer periods end and renewals are due. At these points, look for the best value options for your needs. 

Personally, I effectively do the above by having all my bills and savings go out of my account a few days after my salary goes in. And when I want to closely control my spend, I use an app called fudget, which allows you to create different entries and add items as you spend, showing what you have left in each entry.

I very much second the recommendation to do a detailed SOA.

You do an SOA. You include all the bills that will be coming from that account. You work out how much you need to transfer each month with a bit extra for a buffer and you set up a standing order to go out as soon as your wages come in. Which you amend as needed to make sure all the bills are covered. It's not difficult. 

kimwp

elsien said:

kimwp said:

The disadvantage of having your salary paid into a different account from the one your bills go from is that you are removing the automation and will have to move money every month to make sure your bills are paid. If you are busy or distracted that month, your bills won't get paid. Personally, if you want to manage your money through various accounts, I would have:

Account 1: salary in and essential bills out plus anything you definitely want to pay eg rent. Also a standing order to account 2 with the money for spending on food, clothes etc and anything else you want to closely control.
Account 2: as this is for the spends you want to closely control, you should frequently review this and maybe use a bank that allows you to split the money into different pots eg week 1 food shop, week 2 food shop.

You can do the above by opening a new bank account and moving your salary and essential bills. Or opening a new account and moving the other outgoings. I think the point made above about overdraft cost is a good one - you should think it through, but perhaps keeping salary and bills in the account with the overdraft and moving your bill direct debit dates to a few days before your salary is due would reduce your overdraft cost by keeping as much money as possible in there. Having your second account for daily spend means that you don't think you have more money than you do because a bill hasn't been paid yet - the second account will only have what you can spend that month.

Plus diarise when offer periods end and renewals are due. At these points, look for the best value options for your needs. 

Personally, I effectively do the above by having all my bills and savings go out of my account a few days after my salary goes in. And when I want to closely control my spend, I use an app called fudget, which allows you to create different entries and add items as you spend, showing what you have left in each entry.

I very much second the recommendation to do a detailed SOA.

You do an SOA. You include all the bills that will be coming from that account. You work out how much you need to transfer each month with a bit extra for a buffer and you set up a standing order to go out as soon as your wages come in. Which you amend as needed to make sure all the bills are covered. It's not difficult. 

Ah, I thought op meant manually transferring.