First Person: Having a Boatload of Accounts Encouraged Me to Overspend

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I recently decided to switch to a single savings account after realizing having multiple bank accounts might be the culprit behind my overspending. According to an article I read in an academic journal, "Influence of Motivated Reasoning on Saving and Spending Decisions," people who have several accounts tend to spend more and save less. Considering I have a boatload of accounts, I had to do some serious reevaluation of my strategy for saving for the future. Before I consolidated all of my accounts, I had a Rollover IRA, Roth IRA, 401(k), regular savings account through a discount brokerage account as well as regular savings and checking account.

Justifying my spending

According to the psychological experts, having multiple accounts makes it easy for people to justify their spending decisions. I know in my case, having only one savings account gives me a feeling of insecurity. When I feel insecure, I tend to work harder at saving. Now I realize that having more than one account gave me a false sense of security that made it easier for me to spend.

Organizing my budget

I used to have separate accounts because I wanted to create different "buckets" of money for different purposes. Now I simply keep a financial journal. I write down how much money I am saving for different purposes. I write down how much of the money in my one account is for our next car, future college expenses, vacations, house repair and renovation and medical expenses. By having concrete, written financial plan for my money, I'm less likely to dip into the savings for a clothing shopping spree.

Diversifying for retirement

In addition to having one savings account, I am gradually consolidating all of my retirement money. I would like to eventually have all of my retirement money in a Roth IRA. However, I can't afford to pay all the taxes by rolling over too much money in one year. Each year, I rollover a little bit more of my retirement money into the Roth IRA account. By the time I retire, I hope to have all of my retirement money in one account. By having multiple retirement accounts, I felt less motivated to save. I used to save 20 to 30 percent of my income toward retirement. After building up money in several different retirement accounts, I lowered my contributions to just 6 percent of my income.

After consolidating my savings account, I stopped secretly spending money behind my husband's back on impulse purchases. We are more focused on building up our savings. I used to be worried that my husband would spend our savings if I didn't make it difficult to access. Instead, seeing the savings balance statement on the online banking reinforces the savings habit. We are each motivated to curb our spending so we can watch our balance increase. It's also a lot less stressful to keep it simple with our savings.

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