In my first budgeting attempt, I set the right financial goals and was motivated to reach them. I changed my money mindset and began saving money. I cut expenses and was contributing 12 percent of my salary to my company’s 401(k) plan. However, I found myself not achieving most of my goals and I still didn’t feel in control of my money. I believed my budget was ineffective. I felt like a failure, so I abandoned the spending plan.

Over the years I’ve learned that I was not alone. My family and friends, along with countless people I’ve met, understood the importance of having a budget, and some of them had taken the time to create a budget, but they had either failed to implement the plan or to stick with it long term.

At an event in Lowell, Massachusetts, I had a conversation with Leo, a mechanic and single father. Leo had taken an important step by managing his finances with a budget, but he was still unsure of how to execute his plan.

“I have a budget, but what do I do next?” asked Leo.

“It’s time to use it,” I responded.

“How do I do that?” he said.

A lot of time is spent explaining the importance of budgeting and going through the steps to create a budget, but the lesson falls short in teaching people how to execute their budgets and integrate them into their daily lives.

Leo, like many others, is left to figure out how to make a budget work. A budget is only valuable if it’s executed and can only work if it’s implemented.

In my first attempt at budgeting, my spending plan was great, but I didn’t have the right execution strategy to make it work long term. I needed a better way to manage money. I needed to visualize my progress and have control.

When I created the YOLO budget, I developed a strategy to automatically execute the spending plan and provide flexibility in how money is used. I believe that each dollar serves a purpose, and that if you use it for its intended purpose you’ll be able to progress much more quickly toward your vision for your life.

After using the YOLO budget framework you learned about in Chapter 5, you should have a realistic budget that accounts for your real income, expenses, goals, and spending. To help with plan execution, use the purposeful money strategy to apply your budget to your spending and banking habits. In this chapter you’ll learn about the dual checking accounts method and the purposeful savings method, which together will keep you mindful of your priorities, enable you to enjoy the present moment, and help you to achieve your future goals.

Dual Checking Accounts Method

The dual checking accounts method separates your fixed expenses from your variable expenses. Fixed expenses are things such as mortgage or rent, car loan payments, utilities, and health-care and other insurance premiums. Fixed expenses are typically the same amount month to month. On the other hand, variable expenses are those that vary from month to month: For example, one month you may spend more on grooming and another month more on entertainment. There is also more spending flexibility within the variable expense category.

A few years ago I started using two different checking accounts for my expenses. I called one checking account my expense account and designated it for my fixed monthly expenses; the second I called my spending account and designated it for my variable expenses. My rent and car payments, for example, came out of the expense account. My spending money came out of the spending account.

It was easy to separate my expenses and using this method reduced my stress. I no longer worried that an unplanned ATM surcharge of $3.00 would cause an overdraft fee because a scheduled automatic payment had been processed. Using this dual checking account method, I gained control over my spending and banking habits because I had accounts set up for specific purposes.

As an unexpected positive result of having two checking accounts, I found myself more actively engaged in lowering my expenses. It became a competition of sorts to see how much more I could save by making changes to my fixed and variable expenses. I had an incentive to lower them. The additional money in my fixed account contributed toward reaching goals sooner, and the additional money in my variable account increased my available spending money.

After calculating your cash flow and getting specific details about your expenses, you will have two expense amounts—fixed and variable. To use the dual checking accounts method you will need to have two separate checking accounts, preferably at the same financial institution. Use the following steps to set up your dual checking accounts:

1. Open two checking accounts. One account will be used for fixed expenses and the other account for variable expenses.
2. Name these checking accounts accordingly (e.g., fixed and variable, or fixed expenses account and spending account).
3. Have your entire paycheck deposited into the checking account designated as your spending account via direct deposit.
4. Transfer the amount needed to cover your fixed expenses for the month into the checking account designated for fixed expenses.

You’re most likely getting paid weekly or biweekly; therefore you’ll need to transfer the correct amount per paycheck to cover your monthly fixed expenses. The remaining money in the checking account designated for variable expenses are funds you can spend more freely.

This dual checking account method will save you time and money by keeping your expenses separated and organized. Knowing that your fixed expenses are covered will give you peace of mind, and the money in your variable checking account can be spent as you wish with no guilt.

The Purposeful Savings Method

Every dollar you save should be saved for a purpose. If you’re saving money without a purpose in mind, you’ll find yourself less motivated to reach your savings goals.

With my first budget, I decided my financial goals were to save for a home, a car, and retirement. At that time I didn’t have a lot of money saved and I didn’t have a proper method for saving money. I decided back then I would just save as much as I could in one savings account. I said to myself that the money saved in that account would be used for either a down payment on a house or a new car. I was proud of the amount of money that grew in that savings account.

Back then, I was advised to open a separate savings account with a different financial institution. The reasoning was that it would curb the temptation of using the savings for any purpose other than what it was intended for. The inconvenience of having a separate savings account outside of my primary financial institution meant I had limited access to the cash, keeping it safe from my mindless spending ways.

It was out of sight and out of mind.

I didn’t have an ATM card attached to this savings account, and transferring money from that online savings account to my regular checking account took additional steps, and days to finalize. It was a purposeful inconvenience meant to keep me from withdrawing my savings.

Before I could buy a home or a new car, I began thinking of different ways to spend the money I was saving. When I wanted to buy something, the minor inconvenience did not keep me from using money in that savings account. I thought I was still doing okay because I’d continued to save money in that account. Unfortunately, when my financial situation changed I also found myself using the money in that savings account to pay for my living expenses.

Later on I realized that I had the right idea in saving money, but that I had executed my savings plan incorrectly. In the future I was going to have to define exactly what the money was going toward—and the more specific, the better.

Having a separate savings account that I allegedly couldn’t touch was only a temporary fix. I used that solution to address an undiagnosed money mindset problem. There is merit in having a savings account that is more difficult to access, but when you’re forcing yourself to save you’re fighting against yourself, and you’ll end up losing.

If you’re saving money in an account that you’ve told yourself you cannot touch, answer this question:

Is this an attempt to force yourself to save?

Forcing yourself to save is definitely not the same as having a strong desire to save. You’re not addressing the mindset that enables your financial behavior of using your savings at any given moment and for any reason.

As you’ve read this book, you’ve reshaped your money mindset and now understand the importance of awareness. You’re now aware of how you’re saving, what you’re saving for, and the reason you’re saving. Knowing what you’re saving for is important, but knowing why you’re saving is key to savings success. If it’s for security, then an emergency fund is a priority. If it’s for a home, then saving for a down payment is a must. If it’s for relaxation, then a vacation club account is in order.

Be mindful that you’re saving money for specific purposes—things that add value to your life. This purposeful approach to saving for the things that matter can help you achieve financial goals far sooner.

As I improved my money mindset and changed my financial behaviors, I took this awareness and opened separate savings accounts with my credit union.

I started with club savings accounts for vacation and holiday spending. With a club savings account I could contribute to the account at any time, but I was unable to touch the money until a specific date in the future. Because I knew I was saving for an all-inclusive resort vacation and Christmas presents for my family, I was encouraged to save $1,000 in each account. This purposeful approach to saving led to additional accounts with the same credit union.

I identified my goals: annual vacation, home ownership, luxury car, holiday presents, emergency fund, and savings accounts for my nieces and nephews. There were no account fees or minimum balance requirements, so the decision to have multiple savings accounts was easy.

My paycheck was deposited directly into the checking account designated for variable expenses. I also set up automatic transfers so that each payday money would be deposited into my fixed expenses checking account, to cover fixed monthly expenses, and into the following savings accounts:

• Emergency fund: $100
• Vacation club: $25
• Christmas club: $40
• Dream home club: $200
• My sexy car club: $100
• Nieces and nephews: $10

The rest of my paycheck that remained in the checking account designated for variable expenses I used for purchases.

The separate savings accounts offered the perfect visualization method to keep motivated with my savings goals. I could watch the accounts grow, and I knew exactly how I was going to use them. When I had additional money available, I would add it to one of the savings accounts. I found myself adding more into the vacation club, which aligned with my desire to have a lifestyle with lots of travel.

Since the money was immediately and automatically transferred each payday, I had little temptation to spend more than I could afford. For example, I wouldn’t dare take money from my vacation club to buy a new pair of shoes. I valued travel more than a new pair of shoes.

I developed the purposeful savings method, which is based on my experiences with budgeting, to help others achieve their savings goals through a specific strategy. This savings strategy relies on your increased awareness of your values and financial goals. My money philosophy regarding savings is this: I’m saving money to spend money in the future.

When you accept this philosophy, you’ll understand that how you spend money today can impact your ability to spend on something much more enjoyable in the future.

Think of everything you’re saving for as something you’ve already purchased. It’s similar to a layaway program, in which your item is placed on hold and only available to you once you’ve paid the full amount. This is a delayed gratification technique that uses the anticipation of a favored outcome to increase your enjoyment. When you anticipate getting something you really want, the waiting game can be much more exciting than the actual ownership. Think about the anticipation leading up to your birthday when you were a child. You knew you were getting gifts, but you also knew you’d have to wait until your birthday. That waiting period was exciting. When you opened your presents you were joyful, but weeks later the excitement might wane.

You are saving for a purpose, and you get to define that purpose. When you use the purposeful savings method, you’re mindful of what, why, and how you’ll save. For example, you might decide to set up an emergency fund based on the following goals:

• What. To save six months of living expenses to cover a period of unemployment or underemployment.
• How. By automatically depositing $50 to an emergency fund each payday.
• Why. To buy peace of mind and security in case of a period of unemployment or lost wages.

In this example, you’ve identified your purpose for saving. You understand that the money you save in an emergency fund is providing you peace of mind and security. This awareness will keep you from mindlessly using the fund, because you understand its actual value in your life. It’s important to remember the reasons you save in order to stay on track and remain motivated.