Create Money Pots and Organize Your Money

Welcome to 2021! A bright and shiny new year stretches out in front of us. Have you figured out what you want to do with it? Any resolutions in place yet? Or do you firmly believe every new dawn brings you the chance to change you life as you see fit?

Whichever philosophy you adopt, I’d like to suggest that you organize your money in a way that best suits your lifestyle.

You know how your recurring monthly bills arrive every other day? It could be a bill for a utility like electricity, heat, or water. On the other hand, it could be bill for some service that you makes your life a little bit easier, like a housekeeper, or lawn service. Maybe it’s a subscription for some kind of pampering service, like a wine-of-the-month club or food delivery. Whether by email or by snail-mail, there always seems to be some utility/service provider out there who wants to receive some portion your hard-earned money:

• $13.99 for Netflix;
• $400 to heat your house;
• $14.95 for your Audible books;
• $104.71 to keep your mobile phone turned on;
• $57.85 to keep the weeds away;
• $60-$140 for your wine subscription;
• $115 for your gym membership;
• $Y-amount for product/service-of-your-choice.

You get my drift. Between you, me and the fencepost, it’s more likely than not that you have way more monthly subscriptions than the few I’ve listed above. Who do you know who has only one streaming service? I know people who pay for cable on top of Netflix, Crave, and Disney+!!!

And even though you agreed to pay for each of these utilities and/or services, are you ever truly and deeply excited to actually get the bill? Does your heart leap with joy when it’s time to pay for what you’ve ordered? Or is it more often the case that you ask yourself where the money is going to come from in order to cover the cost?

It’s been my experience that the fun is in the having of the whatever-it-is, not in the paying for the whatever-it-is.

Here’s another couple of questions for you. And you need not share your answer with the class if you don’t want to. I just want you to be brutally honest with yourself… Are you ever caught off-guard by these payment demands? Are the words “I thought I just paid for this!” a part of your daily lexicon?

If so, then I have the perfect solution for you.

Introducing the money pot.

Sadly, it is not the one at the end of the rainbow. Nope, these nifty little caches of coins are ones that you will fill yourself. You create money pots to segregate your funds based on their intended purpose.

A money pot is the place where you set aside money from each paycheque to pay for various things. In this particular circumstance, you should create a money pot dedicated to your recurring bills. If you use your money pot correctly, I promise that you will never again have to scrounge around for money to pay your monthly bills.

Money pots are an integral part of your financial armamentarium. Think of them as stopover points for your money. The money arrives via your paycheque, stays in the money pots for a little bit, then leaves again to pay for its intended purpose. If you create a dedicated money pot for your recurring bills and use it as intended, its balance will fluctuate without ever growing significantly. Money will go in – bills will arrive – money will go back out to pay them.

Where does the money come from?

You’ll fund this money pot by adding up your monthly recurring bills then ensure that this amount of money finds its way into your utilities/services money pot every money. If you receive atleast 2 paycheques each month, then you can automatically transfer half of that amount to you money pot. If you’re paid monthly, then the full amount comes out of your paycheque and goes straight into your money pot.

Let’s say your monthly recurring bills are $1000 each month and you’re paid every two weeks. You’ll set up an automatic transfer of $500 every two weeks. That money will be sent to the money pot dedicated to your monthly bills. By having these funds set aside, you can pay your recurring bills as they arrive. You have the comfort of knowing that your money pot will be replenished every 14 days. No more scrounging around for the cash to pay your bills!

From this point forward, your automatic transfer should be automatically funding your money pot every time that you are paid. To be blunt, set things up so that your paycheque goes into your chequing account and then some of it is automatically transferred to your money pot. Recurring bills land in your inbox or mailbox and you pay them immediately from the money pot.

You know what else is great about this system? You’re in control of the size of your monthly bills. If you want to shell out less each month, then you can do so. And if you think your life needs a little something extra each month, then you’re in charge of that decision too. The amount of money going into your money pot is entirely up to you.

Divide and Conquer for the Win!

It’s been my experience that having one stash of cash from which to pay everything makes it rather easy to delude one’s self. The precise details of the delusion vary but, at its heart is the false belief that a large balance in one’s chequing account means that all the money therein is suitable for spending willy-nilly. Don’t feel bad if you’ve ever succumbed to this fantasy. You’re human and this illusion is particularly seductive.

Frankly speaking, the majority of mere mortals aren’t particularly good at ensuring today’s wants do not take priority over tomorrow’s needs. It’s okay to admit it – wants are generally more fun that needs! 

You’ve heard me talk about sinking funds before. Once you’ve identified your priorities, you direct your money to paying for them by relying on automatic transfers. The money pot for your recurring monthly bills is a sinking fund designed to handle the very short-term demands on your money. You’ll use the funds within the money pot to pay for the routine bills that come around every 30 days. It is to be kept separate from your emergency funds, your retirement funds, and your investment portfolio. This is not the money that you spend on groceries, clothing, or vacations. This money is for funding those bills that come around, month-in-and-month-out, until such time as you cancel them.

Since you’re the only one in charge of your money, it’s on you to ensure that your recurring utility bills are funded, before you start spending on your wants. Creating and funding a money pot for your recurring bills is an effective way to complete this monthly chore.

Trust me on this! Automatically funding a money pot for all of your recurring monthly bills guarantees that the money doesn’t “accidentally” get spent on something else.