Account Setup

I want to talk a little today about how I have my accounts set up.  I have 5 checking accounts and 4 savings accounts.  Yeah, the tellers at my credit union probably think I'm nuts.  They are all connected online, so I can move my money around easily.  The separate accounts are just to keep things classified.  For those of you who are familiar with Dave Ramsey's teachings you can think of it as a digital envelope system.

The savings accounts are pretty straightforward.  There's our contingency fund, which is nothing more than an emergency fund.  It contains enough money to handle something like a broken water heater (BTDT) or blown transmission (crossing our fingers on that one).  Then there is the vacation fund.  I've mentioned before that travel is very important to us.  And while we do try to travel as cheaply as possible, we do regularly deposit money in the vacation fund.  Next is the overdraft account.  In theory, we should never have to use it, but there is enough in that to cover minor mistakes.  Finally is what we call the college fund.  It's money that we are saving for our son's college.  Every paycheck, we put a couple hundred dollars in it and then at the beginning of each year, we deposit that into a Roth IRA.  This account actually doubles as a longer-term savings account (for very, very dire situations only...think long term unemployment) because we didn't open the IRA until he was older and we are limited each year as to how much we can actually deposit.

The checking accounts are a little more interesting.  The first is the main account that paychecks are deposited into and money is disbursed out of.  That is the account that the cashflow planning tool creates.  It is the central account.  Then my husband and I each have our own checking accounts.  That way we are each handling our own day-to-day spending.  Next is the credit card payment account.  I try to treat credit cards like a debit card.  As soon as something is put on the card, the money is moved into the payment account.  Auto-pay for the full amount is set up on every card.  Are there occasions where I float a bill from one paycheck to another?  Of course.  And the planning tool lets me feel confident doing that.  If I know that "yeah, I don't have the money today, but I'll have it in  seven days" then I will do it.  I try not to float expenses that aren't already in the plan, but sometimes life happens.  The final account is the long-term bill account.  I'll talk a little more about long term bills later this week, but essentially this account is used for putting aside money to pay bills that only occur annually or quarterly or every six months.  There are two ways of doing this.  You can have one account for each bill (in which case, I'd probably use a savings account rather than a checking account).  Or you can use the long-term bill tab of the tool that will help track up to 12 different things.