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

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.

Related: Track Your Business Expenses with This Spreadsheet

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.