Pay Down Debt Easily By Creating Multiple Savings Accounts

Getting out of debt often seems impossible because the process doesn't happen overnight. You need to put together a plan that you will stick to over multiple years. JoAnneh Nagler was stuck with $80,000 in debt and paid it off by separating her savings into specific accounts:

Photo by discpicture (Shutterstock).

I came up with a simple division of bills and daily needs, from food, fuel, dry cleaning, and household items. And then ways to make savings meaningful by creating free multiple savings accounts. In my household, we have a travel account, car repair accounts, short-term savings accounts for unexpected expenses, and money for Christmas and the holidays. You have to make savings real for yourself. If you want an outlet shopping day, great, make an account for that.

Debtors usually are mindlessly spending on [what they think of as] daily needs. We might spend $US300 on a bulk warehouse and expensive wine. We have no accountability. Now, with a spending plan, you learn to prioritise what you need and love. It's not a constricting tool-it's an eye-opening tool.

When all your money is one place, it's tough to manage. Actual separation may involve a little more management, but it forces you to look at specific budgets for specific things. If you've failed to get out of debt in the past, this approach looks like a great way to keep you on track.

How One Woman Wiped Out $US80,000 in Credit Card Debt [US News]


    I have multiple savings accounts already.. There's my car ashtray, the bowl next to the front door, under the cushions in my couch, and a $10 credit voucher at a Mexican joint. Yeah, I'm pretty much Donald trump...

    St George actually told me this could make getting a Home loan later difficult, and recommended having fewer accounts.
    Of course, showing you can save significant amounts still trumps all

      St George are wrong about a lot of things.

    I love doing this. I have a certain online savings account that lets me create as many accounts as I want. And now I have a "health insurance" account, an "education" account, a "holiday" account, a "bills" account, and even a "new car" account. And ever pay a certain set amount goes into each one.

    Even if you don't have a debt to pay off, the glory of a system like this is that when you finally have enough to buy a new car, taking it out of the "new car" account feels so much LESS like spending your hard earned savings than it would feel if you took it out of a generalised savings account. Because you already had this money allocated to a car.

    Likewise, when I pay the kids school fees each year, I don't get the feeling that I'm dipping into my savings, instead I'm just spending the money I'd collected. It's all just psychological trickery, because $1 is $1 no matter where it's from, but it works.

    I've done this for years; my credit union lets me create multiple accounts for free, and will do things like divide my pay into different accounts, and

    Does anyone know if you can create 'sub-accounts' for a home loan offset account with any lenders? I'd like to be able to keep track of what I am setting aside (especially for the less freqeunt bills like rates and electricity), but I also like to have all my money in my offset account.

      NAB have a "portfolio' facility that allows this. I have my loan structured this way. Works nicely.

      (Full disclosure - I work for a company that has worked with NAB in the past and recommended these products to clients. I don't get paid for promoting the product, I'm just a happy customer)

    ...specify a particular account just for direct debits etc.

    But what stops you from just taking the money out of the other accounts? That's the part that screws me...

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