Now that I have achieved phase I of my financial goals, I am evaluating my organization method to see if it still makes sense. Here's what I have today:
Operating Account (Checking Account 1)
This account is grand central station. This is where all income gets deposited and all mandatory monthly expenses are paid. Mandatory expenses primarily include giving, savings and housing related costs. Everything happens electronically, income is direct deposited and expenses are paid via online bill pay. I do not use a debit card for this account and I only write checks if absolutely necessary. Although the remaining balance in this account rarely changes from month to month, it's still balanced each month.
Discretionary Account (Checking Account 2)
This account receives a weekly transfer from the Operating Account for categories that are funded with cash. As I continued to define a financial prescription that worked for me, I noticed that I had a tendency to overspend in certain categories. Once they were identified, I set up a second checking account so that I could isolate those funds and therefore "force" myself to spend within my budget. Several years later the struggle still continues if I don't use this account- remember that budget buster last month - hmph! This account is not balanced and there are no checks. I only have a debit card.
Irregular/Non-monthly Expenses (Checking Account 3)
For expenses that are not paid monthly (i.e. car insurance, security alarm, pest control, etc), I calculate what the monthly amount would be and then deposit it into the non-monthly account. This account is not balanced each month. I pay all expenses via online bill pay.
Long Term Savings (Brokerage Account)
****E-Fund: I consider my e-fund to be fully funded and I do not intend on making any additional deposits to it other than the interest it accrues monthly. Unless there is a true emergency (extended loss of income, WW III, etc), the money will just sit there in perpetuity. This account is not balanced each month. I have check writing privileges but again, I have no use for them barring a real emergency.
*****Investments: Roth IRA & other non-retirement investments. Currently the investments are 100% in mutual funds. I do have plans to diversify beyond paper assets.
Short Term Savings (Savings Account)
This account is where I save for whatever is on the docket. Since my car is 11 years old, I am saving for my next car purchase - which I will pay for in cash. I also put my vacation money in this account as well. Sometime in the future, I'd like to have my backyard landscaped so when I begin to plan for this, I'll save it here as well. Whatsoever my little heart desires, I will save for it until I have the cash available.
I only have one credit card and I primarily use it for online shopping and travel. The card is paid in full each month. While I am disappointed with Citi for how they jacked my rate up 66% (7.59% point increase), I'm not sure that I want to apply for a new credit card.
In summary, I only balance the operating account. While I may not balance the other accounts in the traditional manner, I do monitor them online. Now that I am a registered user with Mint, I can manage them all in one place real time.
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8 comments:
Hi there-what a way to go, very organised and a great system you have here!!
Very good system. Was it confusing at first until you got the hang of it? On another note, I called AT&T and with some changes made, from this day forward I will save $13.95/month on my bill. Thanks so much!
It looks like you have a system that works for you. Very well thought out.
SharonRose: thank you.
Anon: Actually it wasn't confusing at all because it evolved to what it is during the process. I started out with one checking, one savings and many more credit cards. LOL. Accounts were added and deleted as I learned more about my financial behavior. For example, checking account 2 was opened when I noticed that I would overspend on discretionary items such as groceries, personal care, and gas. Checking account 3 was opened when I realized that I failed to plan properly for nonmonthly expenses. Those bills would create false "emergencies" in my budget because I did not have the funds set aside. I opened the E-fund account once I had enough money saved in the savings account. So on and so forth.
RTC: Yes, trust me, I didn't set out to have all of these accounts. Like I told Anon, the process was ever evolving until I found the system that worked for me.
smarterdeals: please do not use comments to advertise on my page. i appreciate you visiting and i will visit yours; however, i would also appreciate if you do not spam my comments going forward.
I'm glad to read I'm not the only person with multiple checking accounts. P.S. If WWIII came about, I think your savings might be wiped out by nuculer (oops, I meant nuclear) war. (All joking aside, hopefully that won't happen.)
Wow, sincerely organized with the finances. Great job! I plan on organizing a 'checking account #3', as I have yet to do it for those other expenses like clothing, DMV fees, insurance, etc... I just take it out of my 'checking account #2', which not jiving with me.
So, with that said... thank you for reminding me I need to be a bit more organized in planning for those not so planned expenses! ;)
Wow, that is alot of accounts but, I see you have it all under control. Get it Ms. Money
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