Reader Question: My fiance and I are in the process of attempting to combine finances to limit hassle while still maintaining independence. We are trying to figure out if you have separate for all your "funds" or if you keep them in the same savings account but keep track some other way? Any other details you have would be great. We have been wrestling with this stuff for a couple weeks now.
In the system above (which is explained in more detail here), we literally have seven different accounts. The savings accounts are in blue, while the checking accounts are in orange. Our accounts are at three different banks: the dark purple = Bank of America, the green = Well's Fargo, and the light purple = ING Direct.
Matt and I have found that the savings accounts are the easiest ones to set up. Our online bank, ING Direct, lets us start as many as we want for free. The checking accounts are limited to one per person, so my name is on Account #1 up above, and Matt's name is on Account #2.
We also have one more category for savings--Retirement. This money, however, goes into our Roth IRA at Vanguard and Matt's 401k through work.
One of the things that works best for us about this system is the separate savings accounts. ING Direct lets us set up monthly transfers. Matt and I have a budget breakdown for the month. Here are our categories:
|Savings: Home Improvement|
|Gas (Home) |
|Water and Trash|
|Sara's Allowance |
|Dog Costs |
|Matt's Car Gas|
|Sara's Car Gas|
|Savings: Travel |
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So, Matt's paychecks go in on November 5 (my paychecks are on a less-regular schedule because I'm an educational consultant). On November 6, we have a set amount go into vacation, car savings, and home savings (based on our pre-planned budget). We don't even have to think about savings.
Because we have very tight personal allowances ($70/month), we are able to put a significant amount of money into our vacation fund every month ($320). We started this system in August and have already saved more than $1000 to go toward our upcoming vacations (Thanksgiving in Indiana, Christmas in Florida and Indiana, our two-week May honeymoon in Kaua'i).
This kind of system looks complicated (and it is a little tricky to set up all the pieces), but once it's in place, it basically runs itself because everything is automatically transferred to the right place.
Right now we have separate check cards for Accounts #2, #3, and #4. That way, if I'm paying for something out of my personal account, I use card #3. If Matt is paying for something personal out of his allowance, he uses card #4. If we're buying something for both of us (movie tickets, groceries, etc.), then we use card #2.
That piece of it might get a little revised because I think it's better to use a Discover card for the bulk of our purchases rather than debit cards (as long as the card has no annual fee and we are super-diligent about paying off the card each month and never spending more than we have in our budget). With Discover cards, we are earning back some of our money (plus we are earning interest on the money that is withdrawn from our account only once a month to pay our credit card bill as opposed to it being taken out in increments throughout the month).
One piece that's missing from our model that you'll find in financial books is an emergency fund. For us, all of our other savings accounts (car, home, and vacation) count as our emergency fund. Our car fund, for example, is a savings account for the next car we need to buy. Since we have recently paid off my car after four long years, we now have no car payments. Instead, we pay ourselves each month. Our goal is to be able to buy our next car in cash if at all possible, so we can avoid wasting so much money on interest payments.
However, if we had an emergency and we weren't able to work for some reason, then we would tap into that fund (as well as our home savings fund and our vacation fund, since those categories are important but not-urgent).
I hope I've answered your question! If I've raised any new ones, please let me know...