Confession: I use to be a scrapbooker. However, I never actually finished any of the scrapbooks that I started. I spent 90% of my scrapbook time organizing all my supplies and 10% (possibly less) actually creating scrapbook pages.
Fortunately, I accomplish a lot more with my finances, but it’s another thing that I love to organize. I hear all the time that “no one loves to budget, but it’s really necessary if you want to get ahead financially.” Well, you know what?
Confession #2: I love to budget. Making a plan each month and being able to see how that plan is helping me to achieve the things I really want (like travel) is really rewarding to me. I’d rather budget than any other household task (especially washing dishes, yuck).
When I saw how Apathy Ends created his account map, I knew this was something that I absolutely needed in my life as well. I discovered in this process that I have 24 separate accounts that I use every single month. Thank goodness for automation!
Here’s how my financial map looks overall:
THE CORE ACCOUNTS
At the most basic level, I use cash, checking, savings and credit card accounts for my day-to-day living expenses. I check each and every one of these core accounts on at least a weekly basis to make sure that there are no fraudulent charges as well as to track my expenses.
My checking and savings accounts are at the same bank. I try to keep my checking account to the minimum I need to pay my regular bills, just in case my account was ever compromised. My savings account usually holds a small amount of extra money for expected, but non-monthly expenses like semi-annual insurance premiums, minor home repairs and simply as a buffer if I have a month of higher than usual spending.
I have more than four credit cards, but these are the ones that I use on a consistent basis. In reality, it’s generally a little more complicated than this because I also open other credit cards from time to time to do a little travel hacking. I do, for the most part, try to limit my online purchases to one specific credit card.
Allocating separate allowances to my husband and I may possibly have been the smartest money move I’ve ever made. Our monthly allotment is directly transferred once monthly from our regular checking account to our individual bank accounts.
We choose to have separate bank accounts for our allowances for several reasons. One reason is that one of our insurance companies gives a sizeable discount if we hold an account at a specific local credit union. We don’t prefer to do our regular banking there, so this is a good option for us.
I’ve explained before how we track our kids’ allowances using Famzoo. These accounts are essentially a series of linked prepaid cards. I automatically transfer a lump sum each month from my checking account to the main prepaid card (labeled Mom’s Card) and then can instantaneously transfer funds to the cards for my 3 kids. I do have automatic transfers set up in FamZoo for weekly allowances, but can also manually transfer funds for extra chores and to deposit birthday money.
I keep a separate business account related to my LLC income and expenses. I prepared a couple tax returns for a fee this year, so this money all went into my business account. It is ESSENTIAL that you keep business funds separate from personal funds, especially if you have an LLC.
In addition, we currently have one rental property and have set up a separate account both for tracking reasons and to allow the tenants to directly deposit rent into the bank account.
If we don’t currently need to keep the money in either of these accounts for expected expenses, I transfer it to our main checking account.
OTHER SAVING & INVESTING
In addition to our regular savings account that is linked to our checking account, we have several other saving accounts that we use as well.
I’ve talked about what an amazing tool a Health Savings Account (HSA) is and it was our first savings priority after an emergency fund. We are able to pay for all of our medical bills with pre-tax funds (including pre-FICA taxes!) and save for future medical expenses and we can even use the funds for general retirement at age 65. We are currently funding the maximum amount allowed to this account directly through payroll deposits.
Our online savings account earns about a 1% interest rate (as opposed to our regular savings account at around .1%), so that’s where we keep the bulk of our emergency account (approximately 3-6 months worth of expenses). We also keep funds in our online savings account that have more of an intermediate-term purpose such as when we were saving for our major home renovation. It takes approximately 3 days to transfer funds from our online savings to our checking account via ACH transfer, so it is well-separated from our day-to-day spending accounts.
Because we have our emergency account funded and are on track with contributing sufficiently to meet our retirement goals, we also contribute to college savings plans for each of our 3 children. Our automatically transferred contributions should be sufficient to fund half of their tuition at an in-state public school.
A small amount of money is also transferred automatically to our taxable brokerage account. I’ll be sharing more on this in the future! We aren’t contributing a lot because we would rather contribute to our Roth IRA while we can, but even small amounts matter.
Retirement certainly isn’t our last priority for our money, but it’s the last one discussed here. We have two accounts that we regularly contribute to: a 401(k) through my husband’s employer and a Roth IRA. The traditional IRA is from my previous employment (I rolled my 401k into this account and haven’t contributed since).
The 401(k) contributions are made directly via payroll deposit. We receive generous employer matching as well as some additional employer funds that aren’t dependent on us contributing.
In addition, we contribute each month to a Roth IRA via automatic transfers from our checking account. I consider our Roth IRA as part of our emergency fund and part of our retirement plan, as we would be able to withdraw all of our personal contributions tax and penalty-free at any time.
It appears that I’m far from being a minimalist when it comes to my financial accounts. I definitely feel that each and every account serves its own purpose and of course, many of the accounts have to be separate due to varying taxability (such as the retirement and college savings plans).
A couple of quick thoughts come to mind when discussing my account setup:
- Automation is KEY to being successful in saving and investing. It would take a significant amount of time to contribute and move money around without setting up automatic transfers. With them, I only spend about 15 minutes per week on budgeting and transferring funds.
- The more accounts you have, the more benefit you get from using personal finance software (I personally love YNAB).