First Person: Budgeting With Multiple Bank Accounts

Yahoo Contributor Network

Most people know they need to budget, and they understand the general premise of budgeting. In order to create a livable budget, they need to subtract all their expenses from their income and ensure that the number is positive, but did you know it's easier and more efficient to budget with multiple bank accounts?

I budget using multiple bank accounts. I use my checking account to pay my bills. I use my savings account for any leftover money. I use another savings account as an emergency fund, and I have a money market account dedicated to retirement. By parceling out my money among these accounts, I'm not tempted to spend every dime I have on frivolous or spur of the moment purchases, and I am ensuring a well-planned financial future.

Checking

I use my checking account to pay all my living expenses, including my rent, electricity, gas, cell phone, internet, gym, car insurance, petrol, natural gas, food and miscellaneous purchases. Every time I get paid, I calculate by bills for the week.

For Example:

At the end of the month, I owe my car insurance payment, cell phone and water bills. These bills amount to $173. I typically earn $280 a week. That leaves me with $107. Forty of that $107, I'll use for gas, food and other expenses.

Emergency Savings

After I calculate my bills, I look at my emergency fund. I like to have three months' worth of bills in my emergency fund to take care of medical bills or other unexpected expenses that qualify as emergencies. If my account is short, I transfer $50 from my checking account to my emergency account. Using my current example, this would leave me with $17.

Retirement

I currently have a money market retirement account. I don't care how much I put into this account. I only care that I put money into this account. Since I only have $17 left, I'll split that with my savings account and put $8.50 into this account.

Savings

I use my savings account for large purchases. I only own one store credit card, which means that I cannot charge most large purchases. Instead, I like to use cash and pay for everything up-front. This saves me money in the form of interest fees and cuts down on my bills. Using the example above, I'd put $8.50 into this account.

By using multiple bank accounts to aide me in my budgeting, I am assuring that I can always pay my bills, save for retirement and not increase my debt by using credit cards. I find this method incredibly efficient and helpful.

*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.

View Comments