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My Bank Accounts System to Keep My Personal and Business Finances Separate

Written by Magoz
6 min read 1.9k views 10 comments

When I started being self-employed, I didn’t have a dedicated bank account for my business. All my income and business related expenses were mixed up with my personal account.

That made everything complex and very difficult to track. It was a disaster from an accounting point of view.

I did some research to solve the issue, but I couldn’t find a lot of information about it. After thinking about my particular situation I came up with a system that works pretty well and I still use it currently.

My Bank Accounts System

The system I use now involves having separate bank accounts for different purposes. Then, I set up automatic bank transfers between accounts. This workflow allows me to operate my business, pay my personal bills, and plan for the future without having to worry about it.

These are the bank accounts I use and how I use them:

1. Checking Account

This is my personal bank account—the one I use every day.

Even I’m self-employed I have assigned myself a salary—a fixed amount of money that I transfer from my Business Account to my Checking Account every month.
It helps me to control my expenses and forces me to live a frugal life.

When my situation changes (I move to another country, I move to another flat or there is a major change in my Fixed Personal Expenses), I adjust my salary to reflect the new situation.

That salary is calculated after summing up all my Fixed Personal Expenses (rent, budget for groceries, recurring bills, etc.) and the Variable Personal Expenses (Budget for dinning out, leisure, clothes, trips, apps, and non essential expenses).

Every month, I get my salary transferred to my Checking Account from my Business Account.
If there is any surplus, it stays in the Checking Account for future usage.

Money That Comes In

My salary (from my Business Account).

Money That Goes Out

Pay Fixed Personal Expenses.
Pay Variable Personal Expenses.

2. Business Account

This is the basic bank account I use for my business.

Here is where I receive payments from my clients, and how I pay my business expenses and taxes.

I always keep a financial cushion (of 5x my monthly salary) in my Business Account. As I’m self-employed, I never earn the same amount each month. The cushion allows the system to work regardless of the fluctuation of my earnings.

I review the account every 3 months (after paying taxes), and if there is any surplus (after restoring the financial cushion), I transfer the money to my Savings Account.

Money That Comes In

Income (earnings from assignments, talks & workshops, online shop, etc.).

Money That Goes Out

My salary (to my Checking Account).
Pay other professional services.
Pay Fixed Work Expenses (self-employed fee, apps and online services).
Pay Variable Work Expenses (trips, courses, new tools, etc.).
The surplus after 3 months (to my Savings Account).

3. Savings Account

I use this account to save money. Anytime I have a surplus in my Business Account (as mentioned above), I transfer the money here.

It also works as an emergency fund. I shouldn’t transfer money out from this account unless it’s an emergency.

Money That Comes In

Surplus (from my Business Account).

Money That Goes Out

Only emergencies (to my Checking Account).

4. Special accounts

If needed, I can always have additional accounts for specific purposes.
These accounts can be integrated into the workflow and add more depth and control to the prior accounts. This allows me to target a specific area of my business or save for a specific purpose.  

Examples:

A specific area of my business that deserves its own account.
For instance, at some point, I can consider having a separate bank account for the Online Shop or for the Online Course. In this way, it would be very easy to keep the income and expenses of each parts of my business separate.
Saving for a long term specific reason (for a long trip, buying a house, etc.).
Investing.

Conclusions

After I tracked the different aspects of my business using my spreadsheets, it was time to find a better way to manage my bank accounts.

It took me a long time until I realized how important it was to have effective and automated system to have control of all the income, expenses and finances of my business and life.

I’m not an accountant or a financial expert, and I’m aware that there might be a better way of doing this, but I’m very happy with the system I use.

It helps me to track and have a clear vision of my personal and business expenses. It’s flexible because I can easily adapt it as my life changes. It’s pretty much automated, so I don’t need to worry about it. And most importantly, it works well and I can trust it.


As always, I would love to hear your thoughts.
How do you organize your personal and business finances? Do you keep them separate? Do you have a system?

Please, let me know in the comments!

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Magoz

Nomadic illustrator. Thinker. Seeker.

10 comments

  1. Muy útil Magoz, la verdad es que yo uso el mismo sistema de cuentas aunque no lo hago automático. La verdad es que no tiene sentido que lo haga a mano, por lo que seguiré tu consejo de automatizarlo.

    Por cierto, como lo haces con clientes extranjeros ¿recibes lo pagos aquí o tienes cuentas especificas en otros países? Porque no veas los gastos en transferencias…

    Un abrazo!
    Adri

    • La automatización es genial. Aunque me encantaría poder sacar más jugo ya que la mayoría de bancos lo único que permiten son transferencias periódicas. Espero que algún día la tecnología llegue al sector financiero y podamos integrar los bancos con servicios tipo IFTTT o Zapier.

      Respecto a tu pregunta, yo soy autónomo en España y recibo todas las transferencias en una cuenta de banco española. Depende del banco tienen unas condiciones u otras, es un tema peliagudo. Hay algunos bancos como EVO que no cobran comisiones (pero tienen otros inconvenientes). Así que es cuestión de encontrar de entre las opciones disponibles la que más se ajuste a la situación de cada uno, o en muchos casos, la que menos perjudique jejeje.

      Por cierto, también hay servicios como TransferWise que minimizan el coste de las transferencias en otras monedas. El problema está en convencer a los clientes para que utilicen esos servicios en vez de su forma de pago habitual.

      Gracias por el comentario.
      ¡Un abrazo, Adri!

      • Yo he desistido con TransferWise y Paypal ya que los clientes, sobre todo americanos que es con lo que más trabajo, son más “amigos” del check y los sistemas online alaaaaargan mucho los plazos.

        No sabía lo de EVO, gracias por el consejo, le echaré un vistazo! y Dios te oiga con servicios tipo IFTTT jajaja

        Un abrazo,
        Adri

  2. Yo tb uso el mismo sistema casi punto por punto y no puedo estar más contenta. En mi caso surgió por casualidad cuando mi marido y yo juntamos las cuentas para gastos comunes y la que tenía personal se quedó de “business” y desde entonces yo tb me he puesto un salario mensual y eso me ayuda enormemente a estar más tranquila.

    ING cobra un par de euros por recibir transferencias extranjeras (al menos en cantidades pequeñas). Es una opción que merece la pena mirar.

  3. Thanks for posting about this! When starting my freelance career two years ago, I definitely didn’t realize that it also meant being your own accountant.

    I also use the same system and it seems to work very well, though I don’t have things automated and maybe should. I have a business savings account to sort out money that I have to pay in taxes, which I do annually rather than every three months. By doing taxes annually, I save more than I need for both taxes and as a financial cushion. Perhaps this is digressing a bit away from the subject of your post, but what are your thoughts on paying taxes annually versus every three months?

    • That’s a good point, Sharon! Thanks for your comment.
      I do it every three months because I’m self-employed in Spain and it has to be done in this way.

  4. Thanks for sharing, my accounts are quite similar. One exception In the U.K we pay balancing payments at year end + payments on account to cover the current years tax, so a lot of Self employed have separate savings for tax owed. It is a real pain I would much prefer to pay quarterly!

  5. M
    Marie Coons

    Hi Magoz,
    Thanks for sharing your accounting methods. I too learned the hard way when I started freelancing. Its only been recent that I started paying myself (like you) and I find its really been helpful in how I monitor the ebb and flow of my money. I also have a bank account specifically for quartely taxes so when I get paid I immediately put a portion of that money aside in that account. At first I didn’t do that so my heart sank when I had to fork over money from my savings to pay Uncle Sam – its a real mental thing when you think you have this money but you really don’t.

  6. Muchas gracias por tus consejos Magoz! Yo hace un par de meses que he empezado a trabajar por mi cuenta a tiempo completo y todavía no había organizado mis cuentas de ninguna manera y todo es un poco caótico. Seguiré tus consejos y a ver qué tal me funciona, pero parece un sistema muy eficiente la verdad.
    saludos!

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