Budgeting and Your Bank Account

Organizing Bank Accounts

When you read the title of this article, you are probably wondering what I mean. Why would someone need to organize her bank accounts? Well, let me explain a method of using multiple checking and/ or savings accounts to help you stay on track so that you can meet your financial goals.
After the children arrived and I quit work to stay home with them, my husband and I soon figured out that we needed a method of setting aside money for those expenses that came at various times throughout the year—biannual car insurance, yearly taxes, variable medical payments such as co-pays and medications, etc.

We sat down and went through the previous year’s checkbook and receipts and found all of those expenses that were NOT monthly. We totaled these items up, divided by twelve, and came up with a minimum amount that we knew we needed to set aside each month to be sure that we always had the money on hand for these expenses. To be sure that we always had this money available, we decided to set up a second checking account and automatically deposited the desired amount into it each month on payday. We never “missed” this money because it was money we were spending each year anyway.
A few years later, we were finally ready to tackle the task of setting aside an amount equal to three months’ salary for emergencies and other unplanned expenses. We opened up a savings account to hold these funds and again had the money deposited directly each month on payday. We looked around for banks that were offering better savings rates or gifts for opening up a new account and ended up choosing a bank that was offering a free iPod, which my daughter promptly snagged for herself! It took a couple of years, but we finally have our emergency fund fully funded.
Our next goal is to double the amount in our emergency fund so that we can pay cash for our next used car that our teenage son will be driving in a couple of years. Once we have our car loan paid off (in about six more months), we are going to take the money we’ve been using to accomplish this and will deposit it into the savings account until we reach our six months’ goal.
In the past, we have also had a third checking account for what we call “flexible spending/savings.” We used this account to save money for specific purchases and expenses. One year, we used it to save for a vacation. Another year, we used this money to buy new windows for our home. We bought the windows and used the amount that is deposited into this account monthly to pay off the amount owed in one year (instead of the three years the window company had set up for us). We have since closed this account and just add that money to the variable checking I mentioned above, because we have become a lot more disciplined in our ability to save.
There are some negatives to having several accounts opened. Sometimes I have to juggle money between accounts to pay bills. I also have multiple check registers in my billfold to keep up with. I solved this by assigning each account a different color checkbook cover so that I can instantly see which one to grab as needed. This might be easier to manage with online banking options. Currently, we have accounts at three different banks—this is because of the various offers we wanted to take advantage of when opening new accounts. One of my goals is to get all of the accounts at one bank. Luckily, all three of the banks are within minutes of my home, so this isn’t a huge issue for me at this time. I do believe that the positives outweigh the negatives.

• We are never caught off guard when payments are due.
• We are able to easily save for special purchases and vacations. The money is deposited to each account directly on payday, so we really never miss it!
• We can take care of emergency expenses as they arise.
• We live debt-free (except for mortgage and a car loan). Any credit card balance can easily be paid off each month.

You can even switch banks once your goal is met and take advantage of another great gift offer. This is something I plan to look into; I often see signs offering cash to open a new account, sometimes as high as $100.
I encourage you to look into this method of organizing your budget. Why not get out a piece of paper or pull up a new Word document and write down your financial goals for the next year or more?
Start small, if needed. Look for a local bank with a great offer for opening a new account and have money set aside automatically each month so that you can reach the goals you have set for yourself and your family. Maybe opening up another bank account is just what you need to stay organized in this area of your life!