Having trouble making a budget you don’t hate, building up your emergency fund, or reaching one of your financial goals (hi, down payment fund)? The right money management system could help. Enter: Sahirenys Ortega Pierce, a personal finance influencer and educator, and her High-5 Banking Method. She created the method to organize her own finances and reach her money goals, and below she explains how it can help you money better, too.
What is the High-5 Banking Method?
The High-5 Banking Method is a simple way to organize your finances purposefully through the use of multiple, individual bank accounts. Each account has a specific purpose to help you budget and hold yourself accountable. The method is composed of five bank accounts: two checking accounts (one for your bills and the other for your lifestyle expenses) and three savings accounts (for your emergency fund, long-term goals, and short-term goals).
How can this method help me manage my money?
When we think about money management, the first few thoughts that come to mind are budgeting, saving, and the overall flow of how we delegate our money. For years, we’ve been told to simply focus on budgeting better. But an ignored a major piece of the puzzle is where we place the money. If we want to make sure our money is flowing the way we want it to flow, then we need to bank strategically to make it happen. As a financial educator with a background in finance and financial planning, I’d say that people need a clear structure to keep those dollars going where they need it to and this is a great way to start.
What’s the order I should open my bank accounts in?
Always start with the first three accounts, as these are the fundamentals. First, start by prioritizing your bills’ checking account because, at the end of the day, we all have bills. Second, shift your focus to getting an emergency fund savings account, just in case life doesn’t go to plan. Last but not least, set up your lifestyle checking account. Which includes your eating out and play money, if your budget allows it. So regardless of your income or situation, the High-5 Banking Method lets you be real with yourself, take care of yourself, and remember to be kind to yourself. These three foundational accounts can help you do just that.
What mindset shifts will help me view budgeting as a tool for achieving financial wellness rather than as a chore?
For me personally, the core of financial wellness is getting clarity on what you need and what you want. Getting those thoughts on paper and then organizing your finances accordingly is a key component of that. What I love about the High-5 Banking Method is that it holds so many financial planning principles while accounting for your well-being at the same time. Let’s be honest, there is no better feeling than coming home from a chaotic day to a clean and organized home. This is exactly what I want my finances to feel like: clean, organized, and clutter-free. The High-5 Banking Method is like The Home Edit but for your finances.
This interview has been edited and condensed for clarity.
FAQs
The High-5 Banking Method is a simple way to organize your finances purposefully through the use of multiple, individual bank accounts. Each account has a specific purpose to help you budget and hold yourself accountable.
What is the high-5 banking method? ›
Shoutout to Poised Finance Lifestyle for making us aware of what is called the High-5 Banking Method. With the High-5 Banking Method, you'll have 5 accounts total: two for checking- bills and lifestyle; and three for savings – emergencies, long term goals, and short term goals.
What is the high five method of budgeting? ›
The high-5 banking method can be utilized best as a work in progress. You can work your way up to five accounts, starting first with the two checking accounts — one for your bills and one for your lifestyle — and a savings account to act as your emergency fund.
How do you upgrade finances? ›
39 Ways to Improve Your Personal Finances
- Get your overspending under control. ...
- Create a new budget. ...
- Find a budgeting app you like. ...
- Make a will. ...
- Protect your savings from inflation. ...
- Prepare for rising interest rates. ...
- Prepare now for your next major life event. ...
- Boost your retirement savings.
Many banks offer to send you reminders for each of your bills. For the nonrecurring bills, this will remind you to sign in and pay.
What is the $3000 bank rule? ›
The regulation requires that multiple purchases during one business day be aggregated and treated as one purchase. Purchases of different types of instruments at the same time are treated as one purchase and the amounts should be aggregated to determine if the total is $3,000 or more.
What are the 7 C's of banking? ›
The 7 “C's” of Credit
- Capacity. Do I have experience running a business? ...
- Cash Flow. Is my business profitable? ...
- Capital. Do I have sufficient reserves, or other people who could invest in the business, should unexpected problems or hard times arise?
- Collateral. ...
- Character. ...
- Conditions. ...
- Commitment.
The Four Main Types of Budgets and Budgeting Methods. There are four common types of budgets that companies use: (1) incremental, (2) activity-based, (3) value proposition, and (4) zero-based.
What is a successful budgeting strategy? ›
In the 50/20/30 budget, 50% of your net income should go to your needs, 20% should go to savings, and 30% should go to your wants. If you've read the Essentials of Budgeting, you're already familiar with the idea of wants and needs. This budget recommends a specific balance for your spending on wants and needs.
What is the 50/30/20 rule? ›
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals. Let's take a closer look at each category.
9 simple ways to improve your personal finances
- Track your spending. Do you know how much you spent on eating out last month? ...
- Pay yourself first. ...
- Have some SOS savings. ...
- Automate regular bills. ...
- Avoid the laziness tax. ...
- Demolish that house of cards. ...
- Digitise your receipts. ...
- Sort your super.
7 financial habits to help make you smarter with your money
- Automate whatever you can. Automate your savings, automate your loan repayments, automate your bills. ...
- Have specific, meaningful goals. ...
- Invest. ...
- Don't spend that unexpected cash. ...
- Prioritise high interest debt. ...
- Track your spending. ...
- Learn however you can.
Smart money is capital placed in the market by institutional investors, market mavens, central banks, funds, and other financial professionals. Smart money also refers to the force that influences and moves financial markets, often led by the actions of central banks.
How to structure your savings? ›
One approach is to commit to investing a set amount toward a specific savings goal on a regular schedule—for instance, every month or every quarter. Creating a budget will help you figure out how much to contribute to each goal. However, stick to your priorities.
How to be financially literate? ›
Six financial literacy principles
- Budget your money. “Pay yourself first” ...
- Taxation—it's not all yours. “Understand your true earnings and how they are taxed” ...
- Borrowing. “Not all money is created equal” ...
- Plan before investing. “Think about and map your goals” ...
- Invest to achieve your goals. ...
- Preparing your estate.
The 5 Ws of Financial Literacy. Learn the who, what, where, when, and why of personal finance from two leading experts.
What are the 5 banking ratios? ›
5 Essential Financial Ratios for Every Business. The common financial ratios every business should track are 1) liquidity ratios 2) leverage ratios 3)efficiency ratio 4) profitability ratios and 5) market value ratios.
What is the 5 25 rule in banking? ›
As per the 5:25 flexible structuring scheme, the lenders are allowed to fix longer amortization period for loans to projects in the infrastructure and core industries sector, for say 25 years, based on the economic life or concession period of the project, with periodic refinancing, say every 5 years.
What are the 5 Ps of banking? ›
Since the birth of formal banking, banks have relied on the “five p's” – people, physical cash, premises, processes and paper.
