You could easily argue that money management is the hardest thing to take care of when trying to get your finances in order. With so many expenses and different saving goals, how exactly do you ensure that you have enough money for everything?
I personally find that having multiple savings accounts is the easiest way for me to manage all my different priorities. The concept is simple enough; I create a separate bank account for any savings goal I may have, and by putting money into different accounts, I can quickly see how I’m doing for each individual fund.
Managing joint expenses
Before I got married, it was pretty easy to manage money on my own since I didn’t have too many goals. Once I got married, however, we needed to come up with a method to keep our savings goals aligned.
My wife and I agreed right away to set up a joint account which would pay for all of our day-to-day expenses, but we also felt it was important to maintain some financial independence, so we kept our individual bank accounts. To keep things straightforward, we decided to stick with one bank so we could keep everything centralized.
The issue with using a traditional bank is that they charge a monthly fee for each account you hold with them. We both had individual personal accounts and one premium joint account which would have cost us $52 a month or $624 a year. The reason I say “would have” is that the monthly fees were waived as long as we maintained a minimum balance.
While some may not like the minimum balance requirement, I just viewed that money as my emergency fund. Considering all the extra services I was getting with those accounts, I had no issues leaving my money “parked” with my bank.
Setting up accounts for saving goals
Once we had our main accounts set up, we quickly decided that we wanted to set up individual accounts for specific goals which included general savings, car maintenance, a home down payment, vacations, and presents.
We used a digital bank that allowed multiple accounts with no monthly fees and no minimum balance requirement. What I love about online banks is the flexibility you get. We could connect our accounts directly to our regular bank account so moving money around was no issue. We also had the ability to set up joint accounts so we could always see our overall progress. Plus, getting a decent interest rate was a huge bonus.
Getting the most out of our accounts
Having all of these accounts is one thing, but we needed to ensure we were getting the most out of them. We decided to set up automatic transfers to each account so they would always be topped up.
How much we put aside depended on our budget. Travelling and buying a home were huge priorities for us so we put a bigger emphasis on those accounts. Our car maintenance and general savings accounts were necessities and we decided to make a fund for presents since our budgets would get thrown off whenever a special event came up.
What made all of these accounts important is that it kept us honest. We basically had money available all the time for our spending. For example, if a major car repair came up, we pulled money from our car maintenance fund. If we were going to take a trip, we paid for it with our vacation fund. All of these accounts ensured that we would never go into debt or spend money that we didn’t have.
Modifying things as needed
As you can imagine, these accounts are meant as a guideline. We’ve changed our strategy over the years with no regrets. When our daughter was born and we were on a single income, we had to cut our savings quite a bit. Our presents, vacation and general savings budget were pretty much cut to zero. We knew this was a temporary thing, so we didn’t feel bad about it.
There are also times where we had to change our accounts and goals. Once we bought our home, there was no need to have a down payment fund anymore. We kept a small amount aside every month for maintenance, but most of the money that went to our down payment was now going to our mortgage. When our car was starting to get old, we decided to increase the amount we were setting aside for maintenance. We expected repairs would go up but the increased savings would also help if we decided to purchase a new vehicle (which we did).
Things change all the time. Our goals, careers, and savings are always in flux but having a money strategy that allows us to manage our budget has always been a constant. I can’t imagine where we would be now had we decided to just “wing it” without a real plan.