Stories
One salary and four bank accounts formula makes money management easy
- •Using a single bank account for all income and expenses often makes it difficult to track where money goes by the end of the month.
- •The 4-account formula helps divide your earnings into specific categories like income, bills, savings, and daily spending.
- •The Income Account receives your monthly salary and acts as a central hub to distribute funds to other accounts.
- •The Outgoing Account is dedicated to fixed monthly expenses such as loan EMIs, rent, utilities, and insurance premiums.
- •The Savings and Investment Account builds your emergency fund and SIPs, while the Spending Account handles daily groceries and leisure.
Key Questions Answered
The 4-account formula divides your earnings across four distinct bank accounts to separate functions: an Income Account for salary reception, an Outgoing Account for essential recurring bills and EMIs, a Savings and Investment Account for emergency funds and SIPs, and a Spending Account for daily living costs.
The Outgoing Account should be used exclusively for fixed monthly payments that must be paid regularly, such as home or car loan EMIs, house rent, utility bills like electricity and water, gas, internet, and insurance premiums.
You should try to gradually accumulate an emergency fund equal to at least 3 to 6 months of essential expenses in your savings account, which can be utilized in situations like job loss or sudden medical emergencies.
