Monday, February 11, 2013

Bank Account Business

For those of you who have been following this money series from the beginning, you may notice that I went back and added another post to the original line-up.  This post about bank accounts wasn't in the mix at first but I decided it would be a good one to throw in.  Bonus post!  For those of you just tuning in, click here for the introductory post for this series and click here for the first real post of the series about giving every dollar a name.

Moving right along.

How many bank accounts do you have?  Do you have a system for how you use them?  Trent and I have four bank accounts and have landed on what we think is a pretty good system. It works well for us at least, so I thought I'd share it with you as well.   Here is an overview of our accounts, what we named them and how we use them.

Savings Account
This is pretty self explanatory.   It's a plain jane money market account to which we shuffle a piece of every paycheck.  It is reserved for unplanned car repairs, home repairs, big doctor bills and general life surprises that don't end up fitting well into our regular cash flow.  Let me tell ya, once we got this account built up a bit, we realized what a relief it is to have it in the times when we need it.  Staring down the cost of a busted tire or a $100 pharmacy trip to heal my husband from simultaneous bronchitis and sinus infection is not so bad when you have a place to pull the money from.  

Bills Account
This is a free joint checking account and its sole purpose is for bills to be paid out of it.  At the beginning of each budget period, I transfer the right amount of money into this account to cover all the regular bills due for that period.  I include groceries in that as well. My paycheck is already deposited into this account and Trent's is deposited into our Operating account (see below), so I just look at our needed outflow of money, make sure that amount is present in the Bills account, set up all the bills to pay, then leave it alone. I know there is enough money in there to cover the payments I set up, so there is no need to check up on it and worry about a balance. If there is money in this account, it is already fully designated and on its way out. I have a debit card and a checkbook for this account, Trent does not.  That is not because I don't trust him, it is simply because he doesn't need it.  I pay our bills and get our groceries so it is one less card for him to have to carry.  Since it is a joint account, he could access it any time if he needed to.   Whatever money in the budget period does not go to the Savings account to cover surprises and does not go the Bills account to cover bill payments is left in the Operating account.

Operating Account
This is another free joint checking account that is sort of our leftover, catch all account for items that do not need to be covered in the Bills account: gas, eating out, coffee, random spending, blow money or cushion money in each budget period.  Trent and I each have a debit card for this account and we don't have a checkbook for it.  If a check needs to be written for something that would normally come out of the Operating account, we transfer the amount to the Bills account and write the check from there.  That way we know the money is there and don't have to worry about the check being cashed at a bad time when there wasn't enough balance in the account.   The Operating account does take more checking up on and monitoring.  With two people spending from it with debit cards, it's easy to get carried away and quickly realize we overdid it.  I check up on this account a lot and regularly fill Trent in on the balance, what's left, what it needs to go to, etc, so we are both on the same page.

Holding Account
This is yet another free joint checking account, but it doesn't see a ton of action.  It is exactly what its name implies: a holding account.  This is where we stash money that is extra income and we don't quite know what we want to do with it yet, like a tax refund, Christmas money or my tax season overtime money.  If we let it hang out in our regular accounts, we will spend into it on regular stuff, and that is not how we like extra money to be used.  We try to be intentional about using it for a special house project, maybe a small trip or another fist is debt's face.  So this money sits in our Holding account until we decide where it needs to go.  Pretty simple.  We also use this account as a place to hold any money that needs to be carried over from an income heavy budget period to an expense heavy budget period (more on that later).  Overall, this account is a good place for us to hide money from ourselves until we make a good plan for it.

That's it.  Maybe to some people, four accounts is a lot, but it works really well for us.  Here are some other suggestions I'd offer regarding bank accounts:

1. Have all your accounts at the same bank.  We do lots and lots of transfers among accounts and that is not easy if they are at different banks.  I can understand if you find a super savings account interest rate at another bank.  But at this point our savings account is not there to earn us interest, it is there to save us from cratering financially when life surprises pop up.   Overall, it's just simpler if your accounts are at the same bank.  Everything is in one place.

2.  Use a bank with good online banking.  This is pretty common these days. Most banks are good at it and may even have their own mobile app.   Setting up online bill payments is so much easier than writing checks and they end up processed and off your radar much quicker.

3. Use a local or regional bank.  We used to use a ginormous bank that began with the word Bank and ended with the word America.  While we were never entirely frustrated with them and generally had a good experience, we got a bit fed up with the red tape, the bigness and the lack of human contact.  So we moved our accounts to a smaller regional bank in our area and it has been GREAT.  They remember our names when we come in, are so, so helpful and when we call their main phone number, a live person answers!

So there ya go.  I hope this run down of our banking system is helpful.  Does anyone else have a different system that they use?  Please share in the comments below!


  1. This makes a ton of sense! Not sure if we need a "holding" account right now, but I love the idea of a bills-only account so I can set up bill payments and forget about it--I'm calling my credit union tomorrow!

    1. Awesome! Glad to help. Most banks will offer you a free checking account if you meet certain criteria like number of transactions, have a direct deposit sent to that account etc, so there are no fees for having multiple accounts.