My 5 Bank Account Formula For Staying Rich

There’s a reason why rich people stay rich.

It’s because they know how to use their money to make MORE money.

And this is something I’ve learned how to do after building several million dollar businesses.

I call it my NBA Accounting Formula - Never Broke Again, and I use it to stay rich AND get richer consistently. And it’s the same thing that some of the biggest wealth generators in the world like Dave Ramsey and Robert Kiyosaki use (author of Rich Dad Poor Dad).

So when I first got to a point where I had enough money that I could live on just 30% of what I was making (at least $100k) I immediately started using the formula.

And it became shockingly clear how badly I was mismanaging my money before.

The NBA Accounting Formula

If you’re an entrepreneur, gig worker, or you’re running a business, then it is absolutely crucial you use this 5 bank account formula. It will safeguard the money you have while also growing your wealth at the same time.

Here’s the breakdown:

1. Holding Account: All income initially lands here.

2. Investment Account (50%): Fuels long-term wealth growth through investments.

3. Living Expenses Account (30%): Covers essential needs like rent and groceries.

4. Taxes Account (15%): Ensures you're prepared for tax season.

5. Baller Account (5%): Funds your desires and indulgences ("fun money").

The way it works is pretty simple, but also pretty genius.

Your first account is your holding account. This is where any income generated (subscriptions, product sales, consulting fees, private payments) will land at first until it gets sorted into the other accounts. 

The four other accounts that your money will funnel into are investing, living expenses, taxes, and spending money, distributed in different percentages.

The investment account will take up the biggest percentage (50%), so this formula is really designed for those who can dedicate half their money to growth and still live comfortably.

And “investing” doesn’t mean playing the stock market or buying real estate. It could be anything that makes you more money, like starting a website, building an online coaching business, or renting an office space.

Your living expenses (30%) should be mostly rent/mortgage, groceries, and bills. And like I said before, if that’s not enough, then you’re not making enough money.

Your last two accounts are taxes (15%) and what I like to call a baller account (5%) just for things I want (watches, dinners, etc.).

That all being said, take a hard look at your expenses. If you’re spending more than 5% on luxuries, then you’re not set up for wealth generation.

3 Tips To Keep In Mind

1.) Set up automations to make things easier: Set up automatic transfers to different accounts for savings, investments, and taxes. Automation ensures that you consistently allocate funds without relying on manual transfers, reducing the risk of oversights.

You can also leverage budgeting apps or financial management tools that offer automation features.

These tools can categorize your spending, track your financial goals, and automatically transfer funds based on predefined rules. Many apps can provide insights into your spending habits, helping you make informed decisions with your money.

2. Diversify your investments: When it comes to your investment account, you might be wondering what else you can do with this large chunk of your money (50%).

If you want to get into literal investing (like with stocks and bonds), then I suggest making sure to aim for a diversified investment approach across different asset classes, such as the stock market, real estate, businesses, and other alternative investments.

Diversification helps mitigate risk and enhances the potential for overall portfolio growth. By having a variety of different investment sources, you can feed those that are growing and get rid of any that are losing money.

3.) Utilize High-Yield Savings Accounts and CDs: Definitely look into allocating a portion of your savings to high-yield savings accounts or certificates of deposit (CDs).

While these may not offer the same returns as riskier investments, they provide a safer way to grow your money with minimal risk.

Online banks usually offer higher interest rates compared to traditional brick-and-mortar institutions, meaning more money over time if you choose to save with them.

The BMM Takeaway

The 5 bank account formula is crucial for anyone starting or owning a business of any kind, or if you want to use your money to generate more wealth. But you need to make sure you can live according to the outline of the accounts. If you start spending too much on living expenses, for example, your investing will start to suffer.

That’s not to say that you can’t change the percentages/allocation a bit, but I’d suggest making enough money first (at least $100k) so that you can live comfortably with these allocations and make the most money possible in the shortest amount of time.