I may have too many bank accounts. Are you familiar with the envelope method? You know, that budgeting method where you put all your cash in separate envelopes for each need? Well I might do that with bank accounts. I have a bit of a collection.
How many bank accounts do I have?
I have two separate banks and with 6 accounts between them. This isn’t even counting my investment accounts!
I know most people only have one main bank, but having two has served me very well. The biggest advantage to having two banks is to protect yourself in case of identity theft. I’ve had my identity stolen twice, and the first time they got into my main bank account. That was a pretty awful experience, and the only thing that kept me afloat was the fact that my other bank was spared from the attack.
Why So many?
Ok, It may seem like overload, but each bank account has a very special and specific purpose. And I need all of them! Well, I probably could consolidate, but I don’t want to!
Ok, lets start with checking accounts. I have two of them. The first one is for all my regularly monthly transactions. This includes my direct deposit for my pay check and all of my bills. It also includes my ATM withdrawals for my weekly cash allowance. I use it the same way most normal folks use their bank accounts.
Big Purchases (and Paypal)
My other checking account is a staging area for big purchases. I know that I’m going to need to buy something big every few months or so (Currently I’m saving for a new water heater) and I need a place to store that money so I don’t spend it on other things. This is a great strategy to budget for those big expected costs.
I also use this account for Paypal for some reason. It seems like my paypal should be tied to my main transactions accounts, and while that makes the most logical sense, it’s not. The reason for this is that I initially set up my paypal for my Ebay Sellers account, and I was saving all the money I made. Therefore, it had to go to this bank in order to go into the correct savings account.
Short Term Emergencies
The big known expenses have older meaner cousins. These are the big unexpected costs. It’s hard to budget for them because you don’t know exactly what, when, or how much it will be. It may be as simple as a flat tire, or as complicated as broken refrigerator (or worse!). I have a special bank account ready to go with a few thousand dollars in it for just such short-term emergencies.
Long Term Emergencies
Unfortunately, a few thousand dollars isn’t going to fix everything. That’s not really going to help much if I lose my job, or if I can’t work for some reason. Enter my long-term emergency fund. I currently have enough money in it to pay 6 whole months of living expenses or one full year of my mortgage. My goal is to get it up to 1 full year of living expenses.
We all know I love to travel. So, of course I have a separate account dedicated to that! I put a little bit of money aside each paycheck to fund my next adventure. I usually have my trips planned out (at least in my head!) months in advance, so I know how much I’ll need. Egypt is going to run me about five thousand dollars, so I have to put up a little more each month for that. But it’s super fun to see my travel fund grow and know I’m getting closer and closer to that awesome trip!
This is the bank account that I’ll probably get some question marks on from my personal finance friends, but hey, I have to do me. I have one savings account that’s dedicated to all the things I want to do once I quit my job. This includes going back to school, studying Tai Chi in China, buying an RV, and all the other crazy stuff I want to do once I’m job independent. I need to save up a whole lot of money for these things, and I know a lot of my finance friends will tell me that keeping this much cash in a bank account is a terrible idea. I know, it’s not going to grow in the bank. But this money isn’t for growing. I have investments for that. This money is earmarked for specific goals, and I don’t want to risk losing it.
Keeping Track of it all
I’m old fashioned. I keep track of all my bank accounts with pencil and paper. That doesn’t work for most people, because they are with the times (unlike me). Personal Capitalis a great tool normal people to track all of their accounts in one place without resorting to my stone age methods!
What do you have?
So now you all know my dirty little secret. I hoard bank accounts. Is this normal? Does anyone else have more than 2 or 3 bank accounts? Let me know how many you have in the comments!