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  • Writer's pictureAtiqah Nadiah Zailani

Create Your Own Personal Finance System

Not all of us are accountants, but all of us, whether we like it or not, need to manage our money - here's how.

savings jar

Previously, we discussed how to allocate your paycheque into certain percentages to suit your priorities and lifestyle. If you haven't done this already, this article won't make much sense, so go do that first.

My own allocation consists of 6 different categories (and even subcategories within those categories, just to make life more exciting), but for the purpose of illustration, we will use my recommended allocation of 4 categories instead, which are:

Spending Categories

At the theoretical level, the above is simply a matter of basic math: pick your numbers and make sure they all add up to 100%. Super easy.

What’s not so easy is actually putting those numbers into practice in real life - how do you actually split your paycheque into several categories? How do you keep track of how much money you put where, and how much money you’ve used from where?

Option 1: The Envelope System

The Envelope System, as the name suggests, makes use of actual envelopes.

Envelope System

In this scenario, we will assume, for convenience, that I receive my salary in cash – that every month, my employer hands me $1000 worth of bills in a briefcase like a true mafia boss.

I take that money, sprint back home hoping I won’t get robbed, and grab 4 envelopes. I label each envelope according to the categories, and put in the appropriate amount of money as calculated above.

Then, for the rest of the month, I make sure I take out money from the right envelope – if I’m about to pay the internet bill, I open the Living Cost envelope; if I’m purchasing stocks via a mutual fund, I open the Investment envelope; and so on and so forth.

If one of my envelope runs out of money, I have two options:

  1. I stop spending on that category, or

  2. I steal from the other envelopes, knowing full well that it means I have less to spend in the category I’ve stolen from. This is perfectly okay, especially for emergencies, as long as you don’t spend more than all the envelopes combined.

Transferring between envelopes

In a cashless world…

Now, the above is fine and well if we lived in the stone age and actually bartered things with cash. In the age of electronic banking and credit cards, we never actually have to touch money. It’s all numbers on a computer screen. Piggy banks are obsolete, and so are envelopes.

That being said, the principle remains the same as the Envelope system: have separate containers, be they physical or virtual, for each of your categories and make sure the right amount of money flows into the right container. Which leads us to...

Option 2: Separate bank accounts

In lieu of envelopes, you create a separate bank account for each category.

Bank account system

In this scenario, once the paycheque is transferred in by my employer, I then transfer the appropriate amounts to the other bank accounts. (You can even automate this by scheduling the transfers as recurring, and let your bank do the hard work each month.)

Then, for the rest of the month, I make sure I withdraw money from the correct account – if I’m about to pay the internet bill, I withdraw from the Living Cost account; if I’m purchasing stocks via a mutual fund, I withdraw from the Investment account; and so on and so forth.

If one of my accounts runs out of money, I have two options:

  1. I stop spending on that category, or

  2. I transfer money in from another account, knowing full well that it means I will have less to spend in the category I’ve transferred from.

Transferring between bank accounts

Option 3: The Spreadsheet System

If the idea of opening up 4 different bank accounts does not appeal to you (because that is a ton of paperwork and administrative crap to go through) then you can keep all that money in one bank account and simply keep track of the ‘envelopes’ via your preferred spreadsheet.

I personally use Excel to keep track of my ‘envelopes’. Every time I get a paycheque, I input that into the table in Excel that automatically divides the amount up into the different categories.

Spreadsheet System

My paycheque may not be the same each month - some months I may get more (bonus, extra hours worked, etc) and some months I may get less (if I'm an entrepreneur with unstable income, for example). All of the ups and downs are captured in the spreadsheet.

After automatically calculating the distribution, then the work actually starts:

Adjusting in the spreadsheets

  1. The automated paycheque distributor at the top tells me how much I should allocate for each category.

  2. The input of money into each category is captured each time I distribute my paycheque.

  3. The output of money from each category is also recorded each time I spend.

  4. If money is running low in one category, I ‘conceptually’ transfer money in from another category, knowing full well that it means I will have less to spend in the category I’ve transferred from. This ‘transfer’ happens only within my Excel sheet - the money in my account doesn’t actually move anywhere.

  5. At the end, I check my ending balance in each category to be aware of how much remains, and to note which categories are about to run low so I can adjust my spending.

This system takes a bit more discipline and work, but if you are tracking your money like I recommended you to in a previous article, then this should be easy for you.

If you’re not tracking how you spend your money, then I suggest that you go back to my beginner series, and start from there. Otherwise, this Excel system won’t work for you. Alternatively, go open up those 5 separate bank accounts in Option 2 and let your banks track for you instead.

Follow through

From here on, it’s just a matter of following through with the system you’ve set up. It will take some getting used to, but eventually, you will spend less than 20 minutes each month to allocate your paycheque and put your finances in order.

Here’s how I do a check on my spreadsheet system:

  1. When a paycheque comes into my account, I distribute the money according to my allocation on my spreadsheet and record the transactions in the corresponding table. (3 minutes)

  2. I check on the balance remaining in each category just to be aware of which one is running low, so that I know to cut my spending that category or to be prepared to take money from another category. (1 minute)

  3. At the end of the month, I export all of my transactions from the app on my phone to my spreadsheet, and record them in the respective corresponding table. (5-10 minutes)

  4. I make sure the numbers and remaining balances tally with what I have in my bank account. (1 minute)

Yours may differ slightly, and may take longer or less time, depending on how complex your categories and systems are. But what you and I will have in common is the fact that we will never find ourselves clueless on where our money is and where it's going.

You can rest easy knowing that every single cent you earn is going to all the right places (determined by you) and that all of your priorities are being financially taken care of.

Too much money in my bank accou

The only financial problem I want to have.


  1. Decide on which system you prefer to use: cash-based envelope system, multiple bank accounts or spreadsheet tracker.

  2. For your next paycheque, distribute the money according to your allocation into separate envelopes / bank accounts / spreadsheet tables.

  3. Spend by withdrawing or subtracting from the relevant envelope / bank account / spreadsheet table.

  4. Rinse and repeat.

  5. Once a month (either when you receive your paycheque, or at the end of the month, or an arbitrary date of your choice), do a quick check of you envelopes / bank accounts / spreadsheet to make sure things are okay.

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