How to Budget Using Multiple Accounts

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There are countless ways to budget your money, and it's important to find the method that works best for you. The ideal budgeting method is one that you stick with year after year, or as long as it's helping you meet your goals.

Budgeting using multiple bank accounts is one way to put your money to work without using a big spreadsheet, expense-tracking app or envelopes full of cash. Multiple-account budgeting can take several different forms: You can use separate accounts for fixed and variable expenses, you can split up savings and bill payment into separate accounts with a spouse or partner, or you can save for multiple goals simultaneously.

Here's why budgeting with multiple accounts can be a worthwhile, and relatively convenient, approach to money management.

The Case for Creating a Budget

Some find the idea of budgeting restrictive and time-consuming, and it can certainly be a complex task depending on the method you choose. At its most basic, however, a budget is merely a way of keeping track of your spending so you can make sure there's enough left over to do the things you want. It might help to think about budgeting as a means to an end: If your ultimate goal is to own a home, travel more or to buy all the guitar gear you want, a budget can help you get there.

The first step in budgeting is to identify how much money you're bringing in each month, being sure to factor in your partner's earnings if you're a dual-income household. Then, take a look at your expenses, either by tracking them in real time going forward, or by looking back on one to three months' worth of bank account and credit card statements. This will give you an overall picture of how much you spend by category (groceries, meals out, entertainment, utilities, housing, car maintenance and the like). As you create your budget, knowing your previous spending will help you decide how much to allocate toward each category and whether you need to cut back in one area to cover another.

Then comes the fun part: Think about your financial goals and start crafting a savings strategy. Maybe you want to retire early, buy a beach house or live as a digital nomad for a period of time. When budgeting, make sure to work in a monthly savings goal for each major milestone you want to hit. That can also help you figure out how much to siphon away from your entertainment or personal care spending, for instance.

How Does Budgeting With Multiple Accounts Work?

Merely allocating money from your paycheck to multiple checking and savings accounts can be an effective budgeting strategy—no fancy tech or ongoing expense tracking necessary. Here are three ways to do it:

  • Fixed vs. variable expense accounts: Using this strategy, you'll create two checking accounts and one emergency savings account (you can always make more savings accounts for specific goals if you wish to). One checking account will be for fixed expenses that don't change each month: rent or mortgage payments, insurance, utilities, gym membership fees, minimum debt payments and so on. The second checking account will be for expenses that can change from month to month, like groceries, meals outside the house, concert tickets, clothing, gas and others. Your third account will be your emergency savings account, which should be linked to one of the two checking accounts so you can easily transfer money there if necessary. You'll split your paycheck into these three accounts each month. The goal is to get a better overview of your spending and to easily limit variable-expense spending if needed by transferring less money into that account.
  • Multiple savings accounts for different goals: You can also choose to use your checking account for bills only, and to immediately transfer money out of your checking account each pay period into separate savings accounts. That can help get your income out of easy reach and give it a home before you can spend it. Some banks allow you to create separate sub-accounts for various goals, and in general, online savings accounts come with low enough fees that you can safely create many accounts at one institution. Consider creating separate accounts for emergency savings, vacations, a down payment, holiday gifts and car or home repair and making transfers to each one every month or every few months.
  • Separate and joint accounts with a spouse: You may also consider multiple account budgeting when you're married or in a partnership and you share finances. In this case, each partner may have their own checking and savings accounts, plus a joint checking account for shared bills and a joint savings account for shared savings goals. That's a lot of accounts to keep track of, though, which could become overwhelming if you're not careful. But by setting up automatic transfers from your personal checking account to each shared account—and your own savings account for meeting personal goals—you can stay on track for the future while allowing for financial independence.

No matter which multiple-account budgeting method you choose, make sure you first understand whether the accounts you set up carry account maintenance fees, and if so, how you can avoid them. Additionally, be aware that your bank may limit the number of transfers or withdrawals you can make from a savings account.

Other Budgeting Methods to Consider

If maintaining several bank accounts seems overwhelming, here are other options to try:

  • Envelope budgeting: This is an option for budgeters who like a hands-on approach. You'll decide on a range of budgeting categories and assign each an envelope. You'll then divide up your earnings each pay period, in cash, across all the envelopes according to the amounts you've determined you'll spend in each category. If you spend all the cash available in one envelope, you're discouraged from pulling from another envelope—you'll simply have to wait until the next pay period to continue spending in that category.
  • The 50/30/20 budget: Using this method, your income is split into necessities (which you'll spend no more than 50% of your income on), wants (30%) and savings and debt payoff (20%). This can help you decide how much to spend in each category no matter which supplemental budgeting strategy you choose, such as multiple accounts or envelopes.
  • Zero-based budgeting: The zero-based budgeting method sorts every dollar you earn into a category. But unlike envelope budgeting, it allows you the freedom to move money between categories if necessary. You can use this in tandem with multiple-account budgeting by splitting every dollar you earn into separate accounts, letting you easily account for all of your money each month.