Tools and Resources

Why I Divide My Savings Up into 6 Different Accounts and How it Saves Me Money

I’ve always struggled with saving money. It never came naturally to me, and likewise if I feel like I have money, then I feel like I need to spend it. If I see it, then it’s gone. So when I was getting my finances in order, I realized that I needed to come up with a better system for saving money.

Separating Savings

It occurred to me, that having all of my savings not only going into a different account, but a different bank altogether would be helpful. That way I didn’t need to see it, and it wouldn’t feel like I was looking at this money that I just couldn’t spend.

So I researched online banks that had multiple different savings accounts (fewer than you might imagine) and finally settled on a bank that is all online and offered me 6 different accounts, with no fees. I then broke my money up into the following categories: Vacation/Travel, Rainy Day, Emergency, Side Hustles, Christmas, Kids.

I’ll make sure that I say ahead of time, Mr. BFI cannot fathom why I do this, and wholeheartedly disagrees with my methods. But for me, if I don’t split my money up into specific categories, than if I want to go on a vacation, I would be taking money away from my emergency fund, if they were all in the same group. I am a big enough person, to recognize that I don’t have very good self control when it comes to money. So finding way to regulate myself, and make it hard for me to get to that money is imperative to my savings rate!

The Breakdown

Vacation and Travel: this one is pretty self explanatory. Whenever I want to travel, or go on a vacation, I use funds from this line item.

Rainy Day: This is for things that I really don’t need, and might even be hard to justify getting. For example, getting a new Fitbit, which I talk about here. Did I need it? No. Did I want it, and don’t want to feel guilty about the purchase? Yes.

Emergency: Fortunately, and unfortunately, this has mostly been used for car emergencies in the past. It’s the account I funnel the most money into, and it has just so happened to workout that about every year, what I funnel in is enough to pay for any unexpected charges from my car inspection.

Side Hustles: I love to try new ideas, and start new businesses. This can be anywhere from starting an Amazon FBA business (this didn’t go as well as planned) to starting a personal blog (also did not go as well as planned). I learned a while back, that I am business and idea prone, and if I was going to have the urge to try new ideas, I might as well be financially prepared to do so.

Christmas: I sock a small amount away every month so when Christmas time rolls around, we are more prepared to buy gifts. This also really helps because our families have had previous conversations about how to keep costs down during the holidays.

Kids: This might seem a little crazy, given that Mr. BFI and are I not looking to start a family anytime soon, but still, each month I put $5 aside into a savings account. I know it’s not a lot, but I figure that this will be money that will have plenty of time to grow and accrued and will be a great gift to our kiddos for something fun someday.

Why This Helps

Each month I am able to send over a lump sum from my checking account to my bank that holds my savings, and different amounts are funneled into each savings account. I contribute much more to my emergency fund, then I do to my travel fund, for example.

The nice thing about my process, is that your money is guilt free. If I go on a vacation, the expenses are normally covered by the money I put aside every month into travel. This way, I don’t need to feel like I am hurting myself in the long run, after all, that’s what the money was tagged for anyway.

I know that this may seem extreme to some people, but for me the process has worked wonders. Because I’m paying myself first, I never see this money that automatically goes to savings. And then when I do want to travel, start a new hustle, or need all new tires, I know the funds are already there, and won’t dip into my cash flow or savings rate goals.

Just remember, your process doesn’t need to work for anyone but you. As long as you are handling your money safely and securely, and you’re knowledgeable about the in’s and outs, if you have a process that will make your path to FI easier, then I say take it.

I'm a young professional in a large metropolitan area. I became interested in early retirement and financial independence after entering the workforce and realizing that a traditional 9-5 setting was not going to work for me. Since then I've been combining my love for entrepreneurship and money!

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