If you are used to receiving a paycheck at the end of every month, your spending style is likely to be aligned with what you see as your bank balance. But when you are living out of your savings, seeing a big number in your account balance can give you a false sense of security.
A simple way to avoid this trap is to maintain separate bank accounts for each of the following:
Personal expense account – Food, Clothing, Entertainment, etc
Company expense account – Employee salaries, Goods purchase, Recurring expenses, etc.
Company earnings account – Any money remitted to the company goes here.
Money source account – Savings, Investments, etc.
Managing your Bank Accounts
Transfer a fixed amount into your personal expense account at the beginning of each month. Estimate how much you would need to survive each month and transfer the amount to this account. (This could vary based on your base lifestyle)
A special advisory for shopaholics – Don’t carry around any credit/debit card apart from the one you use for personal expenses. Also, if you want a credit card, apply for it before leaving your job.
Refill the account corresponding to your office expenditure to a fixed amount at the beginning of every month. For example, if your monthly estimate is 30K, and you put 30K in April. Say, you have 4000 remaining at the end of the month. Transfer another 26,000 at the beginning of May to refill it.
Use Cheques/Bank transfers instead of cash wherever possible. This way the transaction will be visible in your bank statement making it easy for accounting. For the inevitable cash transactions, keep a few cash vouchers handy.