What is the preferred way to set up personal finances?
"There's a lot of personal preference and personal circumstance that goes into these decisions.  I think that for a person starting out, what's below is a good system.  People with greater needs probably aren't reading this question looking for an answer. How many bank accounts should I have and what kinds, and how much (percentage-wise) of my income should I put into each one?  You should probably have one checking account and one savings / money market account.  If you're total savings are too low to avoid fees on two accounts, then just the checking account at the beginning.  Keep the checking account balance high enough to cover your actual debits plus a little buffer.  Put the rest in savings. Multiple bank accounts beyond the basics or using multiple banks can be appropriate for some people in some circumstances.  Those people, for the most part, will have a specific reason for needing them and maybe enough experience at that point to know how many and where to get them. (Else they ask specific questions in the context of their situation.) I did see a comment about partners - If you're married / in long-term relationship, you might replicate the above for each side of the marriage / partnership.  That's a personal decision between you and your partner that's more about your philosophy in the relationship then about finance specifically. Then from there, how do I portion them out into budgets and savings?  I personally don't believe that there is any generic answer for this question.  Others may post answers with their own rules of thumb.  You need to budget based on a realistic assessment of your own income and necessary costs.  Then if you have money some savings.  Include a minimal level of entertainment in ""necessary costs"" because most people cannot work constantly.  Beyond that minimal level, additional entertainment comes after necessary costs and basic savings.  Savings should be tied to your long term goals in addition to you current constraints. Should I use credit cards for spending to reap benefits? No. Use credit cards for the convenience of them, if you want, but pay the full balance each month and don't overdo it.  If you lack discipline on your spending, then you might consider avoiding credit cards completely." "simplicity and roi are often at odds. the simplest plan that also supports a reasonable investment return would have 3 accounts: if you want to get better returns on your investments, things can get much more complicated. here are some optional accounts to consider: besides the mechanics of money flowing between accounts, a budget helps you understand and control your spending.  while there are many methods for this (e.g. envelopes of cash, separate accounts for various types of expenses), the simplest might be using mint.com.  just be sure to put all your spending on a credit or debit card, and you can see your spending by category when you log into mint. it can take a bit to get it set up, and your bank needs to be compatible, but it can give you a really good picture of where your money is going.  once you know that, you can start making decisions like ""i should spend less on coffee"", or ""i should go to the zoo more"", based on how much things cost vs how much you enjoy them. if you feel like your spending is out of control, then you can set yourself hard limits on certain kinds of spending, but usually just watching and influencing your own choices is enough. notes:  if you have a spouse or partner, you should each maintain your own separate accounts. there are many reasons for this including simplicity and roi, besides the obvious. if you feel you must have a joint account, be sure to clearly define how it should be used (e.g. only for paying the utilities) and funded (x$ per month each). particularly with your house, do not do joint ownership. one of you should be a renter and the other a landlord. some of these statements assume you are in the usa. on a personal note, i have about 20 credit cards, 2 checking accounts, 2 ira's, 2 brokerage accounts, and 3 401k's. but i consider myself a personal finance hobbyist, and spend an absurd amount of time chasing financial deals and tax breaks." "You don't state where you are, so any answers to this will by necessity be very general in nature. How many bank accounts should I have and what kinds You should have one transaction account and one savings account. You can get by with just a single transaction account, but I really don't recommend that. These are referred to with different names in different jurisdictions, but the basic idea is that you have one account where money is going in and out (the transaction account), and one where money goes in and stays (the savings account). You can then later on, as you discover various needs, build on top of that basic foundation. For example, I have separate accounts for each source of money that comes into my personal finances, which makes things much easier when I sit down to fill out the tax forms up to almost a year and a half later, but also adds a bit of complexity. For me, that simplicity at tax time is worth the additional complexity; for someone just starting out, it might not be. (And of course, it is completely unnecessary if you have only one source of taxable income and no other specific reason to separate income streams.) how much (percentage-wise) of my income should I put into each one? With a single transaction account, your entire income will be going into that account. Having a single account to pay money into will also make life easier for your employer. You will then have to work out a budget that says how much you plan to spend on food, shelter, savings, and so on. how do I portion them out into budgets and savings? If you have no idea where to start, but have an appropriate financial history (as opposed to just now moving into a household of your own), bring out some old account statements and categorize each line item in a way that makes sense to you. Don't be too specific; four or five categories will probably be plenty. These are categories like ""living expenses"" (rent, electricity, utilities, ...), ""food and eating out"" (everything you put in your mouth), ""savings"" (don't forget to subtract what you take out of savings), and so on. This will be your initial budget. If you have no financial history, you are probably quite young and just moving out from living with your parents. Ask them how much might be reasonable in your area to spend on basic food, a place to live, and so on. Use those numbers as a starting point for a budget of your own, but don't take them as absolute truths. Always have a ""miscellaneous expenses"" or ""other"" line in your budget. There will always be expenses that you didn't plan for, and/or which don't neatly fall into any other category. Allocate a reasonable sum of money to this category. This should be where you take money from during a normal month when you overshoot in some budget category; your savings should be a last resort, not something you tap into on a regular basis. (If you find yourself needing to tap into your savings on a regular basis, adjust your budget accordingly.) Figure out based on your projected expenses and income how much you can reasonably set aside and not touch. It's impossible for us to say exactly how much this will be. Some people have trouble setting aside 5% of their income on a regular basis without touching it; others easily manage to save over 50% of their income. Don't worry if this turns out a small amount at first. Get in touch with your bank and set up an automatic transfer from your transaction account to the savings account, set to recur each and every time you get paid (you may want to allow a day or two of margin to ensure that the money has arrived in your account before it gets taken out), of the amount you determined that you can save on a regular basis. Then, try to forget that this money ever makes it into your finances. This is often referred to as the ""pay yourself first"" principle. You won't hit your budget exactly every month. Nobody does. In fact, it's more likely that no month will have you hit the budget exactly. Try to stay under your budgeted expenses, and when you get your next pay, unless you have a large bill coming up soon, transfer whatever remains into your savings account. Spend some time at the end of each month looking back at how well you managed to match your budget, and make any necessary adjustments. If you do this regularly, it won't take very long, and it will greatly increase the value of the budget you have made. Should I use credit cards for spending to reap benefits? Only if you would have made those purchases anyway, and have the money on hand to pay the bill in full when it comes due. Using credit cards to pay for things is a great convenience in many cases. Using credit cards to pay for things that you couldn't pay for using cash instead, is a recipe for financial disaster. People have also mentioned investment accounts, brokerage accounts, etc. This is good to have in mind, but in my opinion, the exact ""savings vehicle"" (type of place where you put the money) is a lot less important than getting into the habit of saving regularly and not touching that money. That is why I recommend just a savings account: if you miscalculate, forgot a large bill coming up, or for any other (good!) reason need access to the money, it won't be at a time when the investment has dropped 15% in value and you face a large penalty for withdrawing from your retirement savings. Once you have a good understanding of how much you are able to save reliably, you can divert a portion of that into other savings vehicles, including retirement savings. In fact, at that point, you probably should. Also, I suggest making a list of every single bill you pay regularly, its amount, when you paid it last time, and when you expect the next one to be due. Some bills are easy to predict (""$234 rent is due the 1st of every month""), and some are more difficult (""the electricity bill is due on the 15th of the month after I use the electricity, but the amount due varies greatly from month to month""). This isn't to know exactly how much you will have to pay, but to ensure that you aren't surprised by a bill that you didn't expect." The absolute best advice I ever received was this:  You will need three categories of savings in your life: 1) Retirement Savings  This is money you put away (in 401-Ks and IRAs) for the time in your life when you can no longer earn enough income to support yourself. You do not borrow against it nor do you withdraw from it in emergencies or to buy a house.  2) Catestrophic savings  This is money you put back in case of serious events. Events like: prolonged job loss, hospitalization, extended illness, loss of home, severe and significant loss of transportation, very large aplliance loss or damage. You do not take trips to the Bahamas or buy diamond rings with this money.  3) Urgent, relatively small,  need savings. This is the savings you can use from time to time. Use it for bills that arise unexpectedly, unforseen shortfalls in your budget, needed repairs such as car repairs and small appliance repairs, surprising fines, fees, and bills.  Put 10% of your income into each category of savings. 10% intro retirement savings, another, separate, 10% intro Catestrophic savings, and yet another 10% intro urgent, small need, savings.  So, as you can see, already 30% of your income is already spoken for. Divide up the remaining 70% intro fixed (I recommend 50% toward fixed expenses) and variable expenses. Fixed includes those things that you pay once every month such as housing, utilities, car payment, debt repayment, etc. Variable includes discretionary things like eating out, gifts, and  splurges.  Most importantly, partner with someone who is your opposite. If you are a saver at heart partner with a spender. If you are a spender partner with a saver.  There are three rules to live by regarding the budget: A) no one spends any money unless it is in the budget B) the budget only includes those things to which both the saver and the spender agree C) the budget can, and will, be modified as the pay period unfolds.  A budget is a plan not a means to beat the other person up. Plans change as new information arises. A budget must be flexible. The urgent use savings will help to make  the budget flexible.  Edit due to comments: @enderland Perhaps you do not have children living with you. I am a saver, my wife is a spender. When it came time to do the budget I would forget things like the birthdays of my children, school fees due next pay period, shopping for Christmas gifts, needed new clothes and shoes for the children, broken small appliances that needed to be fixed or replaced, special (non reoccurring) house maintenence (like steam cleaning the carpet), gifts to relatives and friends, exceptional assistance to relatives, etc.  As my wife was the spender she would remind me of these things. Perhaps  you do not have these events in your life. I am glad to have these events in my life as that means that I have people in my life that I care about.  What good is a fat savings account if I have no loved ones that benefit from it?
"The first red-flag here is that an appraisal was not performed on an as-is basis - and if it could not be done, you should be told why. Getting an appraisal on an after-improvement basis only makes sense if you are proposing to perform such improvements and want that factored in as a basis of the loan. It seems very bizarre to me that a mortgage lender would do this without any explanation at all. The only way this makes sense is if the lender is only offering you a loan with specific underwriting guidelines on house quality (common with for instance VA-loans and how they require the roof be of a certain maximum age - among dozens of other requirements, and many loan products have their own standards). This should have been disclosed to you during the process, but one can certainly never assume anyone will do their job properly - or it may have only mentioned in some small print as part of pounds of paper products you may have been offered or made to sign already. The bank criteria is ""reasonable"" to the extent that generally mortgage companies are allowed to set underwriting criteria about the current condition of the house. It doesn't need to be reasonable to you personally, or any of us - it's to protect lender profits by aiding their risk models. Your plans and preferences don't even factor in to their guidelines. Not all criteria are on a a sliding scale, so it doesn't necessarily matter how well you meet their other standards. You are of course correct that paying for thousands of dollars in improvements on a house you don't own is lunacy, and the fact that this was suggested may on it's own suggest you should cut your losses now and seek out a different lender.  Given the lender being uncooperative, the only reason to stick with it seems to be the sunk cost of the appraisal you've already paid for. I'd suggest you specifically ask them why they did not perform an as-is appraisal, and listen to the answer (if you can get one). You can try to contact the appraiser directly as well with this question, and ask if you can have the appraisal strictly as-is without having a new appraisal. They might be helpful, they might not. As for taking the appraisal with you to a new bank, you might be able to do this - or you might not. It is strictly up to each lender to set criteria for appraisals they accept, but I've certainly known of people re-using an appraisal done sufficiently recently in this way. It's a possibility that you will need to write off the $800 as an ""education expense"", but it's certainly worth trying to see if you can salvage it and take it with you - you'll just have to ask each potential lender, as I've heard it go both ways. It's not a crazy or super-rare request - lenders backing out based on appraisal results should be absolutely normal to anyone in the finance business. To do this, you can just state plainly the situation. You paid for an appraisal and the previous lender fell through, and so you would like to know if they would be able to accept that and provide you with a loan without having to buy a whole new appraisal. This would also be a good time to talk about condition requirements, in that you want a loan on an as-is basic for a house that is inhabitable but needs cosmetic repair, and you plan to do this in cash on your own time after the purchase closes. Some lenders will be happy to do this at below 75%-80% LTV, and some absolutely do not want to make this type of loan because the house isn't in perfect condition and that's just what their lending criteria is right now.  Based on description alone, I don't think you really should need to go into alternate plans like buy cash and then get a home equity loan to get cash out, special rehab packages, etc. So I'd encourage you to try a more straight-forward option of a different lender, as well as trying to get a straight answer on their odd choice of appraisal order that you paid for, before trying anything more exotic or totally changing your purchase/finance plans." Account statements and the account information provided by your personal finance software should be coming from the same source, namely your bank's internal accounting records. So in theory one is just as good as the other. That being said, an account statement is a snapshot of your account on the date the statement was created, while synchronizations with your personal finance application is dynamically generated upon request (usually once a day or upon login).  So what are the implications of this? Your account statement will not show transactions that may have taken place during that period but weren't posted until after the period ended (common with credit card transactions and checks). Instead they'd appear on the next statement. Because electronic account synchronizations are more frequent and not limited to a specific time period those transactions will show up shortly after they are posted. So it is far easier to keep track of your accounts electronically. Every personal finance software I've ever used supports manual entries so what I like to do is on a daily basis I manually enter any transaction which wasn't posted automatically. This usually only takes a few minutes each evening. Then when the transaction eventually shows up it's usually reconciled with my manually entered one automatically.  Aside from finding (infrequent) bank errors this has the benefit of keeping me aware of how much I'm spending and how much I have left. I've also caught a number of cashier errors this way (noticing I was double-charged for an item while entering the receipt total) and its the best defense against fraud and identity theft I can think of. If you're looking at your accounts on a daily basis you're far more likely to notice an unusual transaction than any monitoring service. "The basic equation taught in day one of accounting school is that Assets = Liabilities + Equity. My first point was that I looked at the actual financial statements published as of the end of the 2nd quarter 2017, and the total liabilities on their audited balance sheet were like $13 billion, not $20b. I don't know where the author got their numbers from.  My second point: Debt usually needs to be paid on prearranged terms agreed upon by the debtor and the debtee, including interest, so it is important for a business to keep track of what they owe and to whom, so they can make timely payments. As long as they have the cash on hand to make payments plus whatever interest they owe, and the owners are happy with the total return on their investment, then it doesn't really matter how debt they have on the balance sheet.  Remember the equation A=L+E. There are precisely two ways to finance a business that wants to acquire assets: liabilities and/or equity. The ""appropriate"" level of debt vs equity on a balance sheet varies wildly, and totally depends on the industry, size of the business, cash flow, personal preferences of the CEO, CFO, shareholders et al, etc.    It gets way more detailed and complicated than that obviously, but the point is that looking at debt alone is a meaningless metric. This is corporate finance and accounting 101, so you can probably find tons of great articles and videos if you want to learn more." To me, this question is really about setting and meeting goals. The process is the same, whether it's about exercising regularly, or saving, or whatever. You need to have clear, personally-relevant reasons for doing something.  Write down: Exactly why you want to save. It may seem trivial, but if you can't visualize the prize it's hard to stay motivated. How much can you afford to save? Use something like Mint.com to find out your real monthly expenses, as opposed to what you think you're spending. Also, don't get overzealous... leave yourself some money for small luxuries and unexpected expenses so you don't feel like a miser. Saving should be a joy, not torture. Automate the saving process. Set up an automatic transfer to move the amount you figured out in step 2 to your savings account on the same date you get paid. This is very important. By saving early you ensure there will be enough money to save. If you wait until the end of the month, there will usually not be anything left. Don't you dare touch your savings! (Except in a real emergency) If you must dip into your savings, immediately create a plan to put it back as soon as possible. Also, get into the habit of reading personal finance books, blogs, sites, etc. I recommend authors like Robert Kiyosaki, and Suze Orman. Good luck! "While I know some people prefer handling things more ""manually"", I really like automating everything possible. To the greatest extent possible, my deposits automatically go into my Checking account and my bills automatically withdraw from it. That way, I never have to worry about accidentally paying a bill late, and my financial life just runs mostly on its own. There are a couple things to be wary of when automating one's financial life:" Build a trust. I have a trust account under my name and 3 dependents, FDIC confirmed we're good to 1m. Then I have personal accounts for the 4 of us and a corp account, all at the same bank, each also insured. "What I've found works best when working on my personal budget is to track my income and spending two different ways: bank accounts and budget categories. Here is what I mean: When I deposit my paycheck, I do two things with it: It goes into my checking account, so the balance of my checking account goes up by the amount of my paycheck. I also ""deposit"" the money from my checking account into my various budget category balances.  This is separate from my bank account balances.  Some of my paycheck money goes into my groceries category, some goes into clothing, some into car fuel, entertainment, mortgage, phone, etc.  Some goes into longer range bills that only happen once or twice a year, such as car insurance, life insurance, property tax, etc.  Some goes into savings goals of ours, such as car replacement, vacation, furniture, etc. Every dollar that we have in a bank account or in cash in our wallets is also accounted for in a budget category.  If you add up the balances of our bank accounts and cash, and you add up the balances of our budget categories, they add up to the same number. When we make a purchase, this also gets accounted for twice: The appropriate bank account (or cash wallet) balance gets reduced by the purchase amount. The appropriate budget category gets reduced by the purchase amount. In this way, we don't really need to worry about having separate bank accounts for different purposes.  We don't need to put our savings goal money in a separate bank account from our grocery money, if we don't want to.  The budget category accounting keeps track of how much money is allocated to each purpose.   Now, the budget category amounts are not spent yet; the money in them is still in our bank account, and we can move money around in the categories, if we change our mind on how to allocate them.  For example, if we don't spend all of our gas money for the month, we can either keep that money in the gas category, or we can move it to a different category, such as the car replacement category or the vacation category.  If the phone bill is more than we expect, we can move money around from a different category to cover it. Now, back to your question: We allocate some money from each paycheck into our furniture category.  But the money is not really spent until we actually buy some furniture.  When we do, the furniture category balance and bank account balance both go down by the amount of the purchase. All of this can be kept track of on the computer in a spreadsheet.  However, it's not easy to keep track of so many categories and bank balances.  An easier solution is custom budgeting software designed for this purpose.  I use and recommend YNAB." "The key for your friends is a robust and detailed form of budgeting. There are plenty of website resources to help them through that process and you should steer them there rather than go through it with them yourself. Of course you should show willing to answer questions and help if asked. The budgeting exercise will require quite some effort and diligence to track historical and current actual expenditure (keeping a detailed spending diary is an excellent way to start). This must be coupled with a lot thought about ways to trim at various degrees of severity. For example it means analysing all utilities deals to make sure they're on the most suitable package. It is also an ongoing, iterative process - not a one-off. The only way in which you giving money to them would be of help is if they have borrowings and the cost of servicing that debt via interest is what's tipping their budget from positive to negative. Only if they are averaging a cash surplus each month can they make headway. Otherwise, the underlying causes of their woes are not being addressed, existing spending habits continue and they are merely deferring the changes they need to make. Your friends have to adopt LBYM - Living Below Your Means. That's simply a modern version of Mr Micawber's famous, and oft-quoted, recipe for happiness: ""Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."" Discussion forums like this make interesting reading: http://boards.fool.com/living-below-your-means-100158.aspx?mid=30971651&sort=collapsed"