Thanks to Talaat and Tai McNeely of His and Her Money for this guest post! We started using multiple bank accounts about a year ago when Tai first told me about it, and I would never go back!
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Have you ever wondered if there was an easier way to handle your money, that will allow you to get out of debt and build wealth? Look no more! We adopted a system over 7 years ago that has revolutionized the way we handle our income and expenses.
On our own personal journey to debt freedom, as well as the stories of the over 100 individuals that we’ve interviewed who have also become debt free; we have found that the key to debt freedom is consistently creating and sticking to a budget.
Some people cringe at the very thought of putting themselves and their family on a budget. However, the truth is, without mastering the art of budgeting, you will never achieve the financial independence that you so desperately desire. Now, before you come to the conclusion that this article is all about implementing a budget…it’s not. Please keep reading.
One of the most effective strategies that we employ in our budgeting process, is the use of multiple bank accounts. We have what you might call an “online envelope system”, to help us keep track of our day to day expenditures.
After getting married and combining our income and expenses, budgeting became a very overwhelming process. Whenever we would log into our online banking system, we would see a cluster of transactions moving in and out of one checking account.
In an effort to gain clarity and a firmer grip on our finances, we decided to break our finances down into subcategories. We then went to our local community bank and opened an account earmarked for each sub-category of our household budget.
We have been using this technique for years now, and we LOVE it! It’s a system that is extremely easy to maintain, and it’s not very complicated at all. Not only has this strategy helped us to see where leaks in our budget had been happening, we were also able to build wealth as a result. We gave ourselves an immediate pay raise!
Although we only started out with about 3-4 bank accounts, as of this writing we are now up to a total of 14 accounts. Now to some, when they hear that number they immediately respond…”14 ACCOUNTS!”
Before you fall out of your chair, take a look at this break down of our accounts, and it will help to bring clarity to our process and why it’s so effective.
- Main Household Checking
This account is used for our main living expenses. Such as mortgage, groceries, cell phone and utilities. Our income is directly deposited into this account, and we operate a good bulk of our monthly budget from here.
- Dining Out
Every month we set aside money that is dedicated strictly to eating out. It’s much easier for us to have a debit card attached to this account, to use only in the case of eating out. Whether it is ordering takeout or sitting down inside of a restaurant.
This has allowed us to stay on top of our monthly dining budget, without it affecting our main household checking account. Once the money that we budgeted for takeout food is gone for the month, then that’s it for eating out!
- Non-Monthly Bills Account
We absolutely LOVE this account! We use this account to set money aside monthly, for any bills that are due quarterly, semi-annually, or annually. Certain bills such as car insurance, homeowner’s insurance, water bill, life insurance, and garbage disposal.
Each time, our car insurance payment was due every six months; it became difficult to come up with hundreds of dollars to pay the bill. So, we decided to take each bill and break it up into monthly amounts that we put away into this account. When the final bill comes due, the money is already put away to pay it.
Most insurance companies charge you a fee to set up monthly/quarterly billing. For this reason, we decided to pay the money to ourselves monthly and keep it in a separate account.
- Real Estate Taxes
This account is used to escrow our property taxes. Instead, of having our taxes escrowed in our monthly mortgage payment, we made the choice to pay ourselves. Each month we put money into this account, for future payment of our property taxes. Instead of the mortgage company making interest off of our money, we now make interest off of it instead!
**We do not recommend you take this approach if you know that there may be a chance you will be unable to pay your property taxes on your own.
- Tai’s Fun Money
Every month we budget individual “fun money” for each of us. We get to do whatever we want with this budgeted amount, without having to check in with each other. I love having a debit card for this account so that I don’t have to carry cash all of the time. My husband is on the account with me, but it’s strictly used for my pleasure.
- Vacation
This account is used to put money away for vacations and trips! This account does not get funded each month. We don’t feel it’s necessary to make this a part of our monthly budget. However, we do put money aside from time to time, especially if we know there is a trip we would like to take in the future.
- Wealth Building Account
We use this account to help build our retirement funds, pay down our mortgage, or store extra cash that we made. For example, we may buy a piece of used furniture from a thrift store, and then turn around and sell it on Craigslist to make extra money. The extra money that we make is then used to either build our retirement funds or pay down our mortgage.
- Child #1 Savings Account
We have savings accounts for each of our children. Any money that they may receive for birthdays or Christmas, is put into their own separate account with their names on it.
- Child #2 Savings Account
Same as above
- Child #3 Savings Account
Same as above
- Car Fund
We don’t believe in taking out loans for vehicles. We believe in self-financing our cars. We pay ourselves a car note and place it into a savings account. That way, in the event that we need to purchase another vehicle, we have the cash to do so.
- Household Savings Account
This account is separate from our “Emergency Fund Account”. If an appliance breaks down, or if one of our non-monthly bills is much higher than expected, then this is where we pull the money from. We always keep this account at a certain balance to cover small emergency situations.
- Emergency Fund
This account is held at a separate bank, away from our other accounts. We don’t want easy access to this money because it is used for EMERGENCY situations only. This money is used to cover any unforeseen layoffs or any other major financial emergency situations.
- Business Account
We are entrepreneurs and choose not to commingle our business funds, with our personal funds. We do all of our business transactions in and out of this account for our company.
Keep in mind that these are our accounts. Some of these will fit your situation and some of these accounts won’t. You’ll probably have some subcategories for your family that wouldn’t be a good fit for ours. The point is, take this formula and configure it to the needs of your family.
We have educated countless households on this budgeting strategy and not once has anybody ever said anything to us except, “THANK YOU!” If you take the time to put this technique into action, your personal finance management will be revolutionized forever.
Thanks to Tai and Tallat for giving us a breakdown of their accounts!
We have a similar setup and also love it!
Here’s a much requested breakdown of our accounts:
Personal Accounts:
Qube- We have an account with Qube Money (which is both a bank account and super easy budgeting app). This is our main checking account and this is where most of our spending happens. Qube (it’s a budgeting app and FDIC bank combined that lets you create easy digital cash envelopes), helps me budget easily but also has the added benefit of being able to cancel unwanted recurring expenses at the press of a button. Food, groceries, babysitting, clothing, date nights, etc. all get budgeted and spent from here.
Check Holding- This is where we transfer any money that’s going to be “pending” for a few days. So if we write a check, it’s written from this account and then the money is transferred from here. If we transfer money to another bank (like to our emergency fund or Betterment), we transfer the money here first and then transfer it from here to the other bank. This means that our other account balances are always accurate and there’s no need to remember pending transactions.
Emergency Fund- This is in a separate hard to reach bank with no debit card or checks. It would take me 3 days to be able to transfer this to a usable account. That’s my goal is to make that money hard to access. (We use American Express Savings for this now).
Rosemarie’s Blow Money- This is money for me to spend on anything I want guilt free. Now, we have this money automatically assigned to us every month, but when we were in the middle of paying off our debt, the only way to earn this money was to be under budget in any category. Then I got to keep 20% of the leftover amount budgeted, while the other 80% went to debt (or savings and investments when the debt was paid off). I use Qube Money for this and love it because I can set aside money for things that I want (almost like my own budget within a budget). Like this month I had an envelope for “kitten expenses” when I wanted to get the kids a kitten.
Jon’s Blow Money- Same as mine. He uses Qube Money too since it works seamlessly between us and has partner notifications. But he also gets to keep his own envelopes separate from me. You can see how Qube works here…
Vacation Fund- Saves for upcoming vacations. We mostly do RV trips now (we bought a super cheap 20-year-old RV and renovated it during the 2020 quarantine) which are shockingly inexpensive.
Medical- We use a Health Share, but often need to self pay for treatment before our Health Share pays us back, so we put money into this account monthly to use, then take the Health Share payments and just disperse that with our normal budget.
Car Fund- We pay cash for cars now (we use this method to make our car payments $0) but keep some money in a separate account earning interest in case we need to make car repairs. We cap this at 2k though since we have older cars and my husband can do a lot of repairs.
House Fund- We have money that goes into this account monthly that can be used for home repairs, upgrades, and maintenance. So when our roof needs replacing in 15 years or the AC breaks, it comes out of here instead of the emergency fund.
Outgoing Fund Debit Card Usage- For the accounts that are in higher interest savings accounts (We use Capital One 360 but, Ally and American Express Savings have similar rates), if we need to use money from them (like if we need to take $500 from the house fund for AC repairs), we transfer the $500 to this account and can use the associated debit card to make the payment.
Retirement Accounts- We use Betterment and have transfers set up automatically.
Business Accounts- We use Profit First and have for 5 years, which means we have 6 separate accounts for business. (Hint: If you own a business, I can’t recommend Profit First enough!
P.S. Looking for an easy way to implement this?
If you love the idea but get overwhelmed quickly (or are worried that you’re living paycheck to paycheck and you don’t have enough money to keep one account from overdrawing much less 14), I get that. A really easy way to have all of the same benefits of doing this, without having to actually go open 14 bank accounts and keep them all from overdrafting is to just use Qube Money.
Bonus Points because Qube makes it easier to actually stick to your budget and it lets you cancel any unwanted subscriptions with the press of a button.
Qube is the best budgeting app for beginners by far, and it’s the only budgeting app that’s also an FDIC insured bank.
- You sign up for a free account here. Then they send you a debit card immediately.
- Transfer money in from your current bank account. (This can be done immediately with a debit card or in 2-3 days with a free bank transfer).
- Then set up digital cash envelopes for you to use. Like “food”, “mortgage”, “date nights”, etc.
When you go to the grocery store to buy food, just open the “food” Qube, buy your groceries and the money is instantly removed from the correct Qube.
It makes it so you don’t have to track individual purchases. Your budget and your spending are completely integrated and there’s no need to spend time making sure they match. It’s automatic.
You can see how I recommend using Qube here if you’re overwhelmed and want an easy way to budget.
Banking services for Qube Money are provided through Choice Financial Group, Member FDIC. Qube Money is a financial technology company, not a bank. The Qube Money Card is issued by Choice Financial Group, Member FDIC, pursuant to a license from Visa.
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