Mastering Your Budget with Multiple Bank Accounts

Finding a budget system that you can stick with is essential for managing your money effectively and achieving your financial goals. One innovative way to budget your money is by using multiple bank accounts for different purposes and goals. This method can help you keep your finances organized and ensure that you are on track to meet your objectives. In this blog, we will explore the benefits of using multiple bank accounts for budgeting, how many accounts you should have, and how to manage them efficiently.

Benefits of Using Multiple Bank Accounts for Budgeting

Having a spending plan in place is crucial for maintaining control of your cash flow. However, budgets are not one-size-fits-all, and the key is finding a system that works for you. For some, creating separate checking and savings accounts can make budgeting easier to stick with. Here are some benefits of using multiple bank accounts for budgeting:

It Helps to Keep Funds Separate

By keeping funds for expenses and discretionary spending separate, you can easily determine when you can afford to splurge and when you need to hold back. This separation also helps you avoid mixing up your emergency savings with funds you plan to spend on purchases or travel.

You Can See Your Progress Toward Goals

Using multiple bank accounts for different goals allows you to see your saving efforts pay off before your eyes. For example, if you are regularly funding an emergency savings account, a house down payment savings fund, and a wedding savings fund, you can see your progress toward each goal in your different account balances.

It’s Compatible with Other Budget Plans

Some people prefer using multiple bank accounts to budget because it helps them eyeball their spending and determine if they are within their spending limits without crunching the numbers. However, if you prefer a more structured approach to budgeting, you can use multiple accounts alongside systems like the 50/30/20 budget plan, envelope budgeting, or zero-based budgeting.

You Can Take Advantage of New Bank Account Bonuses

If you create sinking funds for each of your major savings goals, you’ll have the opportunity to shop around for the best interest rates and new savings account bonuses when you create a new account.

How Many Bank Accounts Should I Have?

To effectively budget using multiple accounts, you should find a method that works well for you personally. For example, some people like to pay all their fixed bills, such as rent, internet, and phone, out of one account while paying variable expenses like groceries and electricity from another. Others prefer to keep all their money for essentials in one checking account and “fun money” in another. Here is an example of how to separate money in bank accounts:

Bills Checking Account

It can be useful to have one checking account dedicated to paying your monthly bills and other expenses, such as basic groceries and transportation costs.

Spending Checking Account

You can route a sum of money each month into a dedicated discretionary spending account. Then, when you’re evaluating whether you can afford to splurge on a retail buy, go out for dinner, or go to the movies, you can check how much you have in discretionary funds.

Emergency Fund Savings Account

It’s a smart financial move to keep some money in a dedicated emergency savings account. The best place to stash this money is somewhere liquid so that you can access your money quickly if you need it. A high-yield savings account is one common option.

Other Savings Accounts

Beyond your emergency savings account, you can set up separate savings accounts to fund different goals. For instance, you could create a down payment savings fund, vacation fund, and a furniture and appliance fund.

As with any budgeting method, it helps to look at how you’re already spending money before you try to implement new structures. Look back through your transaction history and group spending into categories that make sense to you, such as discretionary versus non-discretionary, or fixed expenses versus variable expenses. Then organize your income into funds that match your preferences.

How to Manage Multiple Bank Accounts

Keeping track of your spending and balances in multiple bank accounts can be tricky. The best approach is to take things slowly and ensure you’re not overwhelming yourself with too much to keep track of. Here are some tips for managing multiple bank accounts:

Fund Your Accounts

You’ll need one main checking account where you receive direct deposits and divvy up funds for your other accounts. You can also see if your employer allows you to split up your direct deposit so that each payday your paycheck funnels a set amount of funds into each account.

Link Your Accounts to a Budgeting App

To track your net worth and spending across multiple accounts, consider using a budgeting app that allows you to import balances and transactions from multiple accounts, such as You Need a Budget.

Check Your Accounts Regularly

Whether you set up a payday routine to look over your spending and make sure you’re on track or you prefer to check each of your balances daily, make sure you’re scheduling regular time to look over your balances, check for unusual transactions, and ensure you have enough cash for upcoming bills. That can help you avoid overdrafting any of your accounts.

Adjust as Necessary

When you have a change in income or expenses, readjust your account deposits to create a new spending plan. Or, when you meet one of your savings goals, you can designate a new purpose for that account and continue to fund it.

The Bottom Line

Using multiple bank accounts to separate funds into different categories can help you keep your spending and saving organized. In addition to using multiple bank accounts to budget, you could consider adding a credit card to the mix. Some people like to use a rewards credit card for everyday spending to earn cash back or points.

For example, you could use a grocery store rewards credit card or a gas cash back card to get more out of the spending you already do. To make sure this strategy is financially beneficial, rather than costly, it’s important to pay off your full balance before the end of the grace period. That way, you’ll earn rewards without paying interest.

At O1ne Mortgage, we understand the importance of effective budgeting and financial planning. If you need assistance with your mortgage or have any questions about managing your finances, don’t hesitate to call us at 213-732-3074. Our team of experts is here to help you achieve your financial goals and make the most of your money.