Not counting my investment, retirement, or other accounts, including IRAs and 401Ks at other institutions, why do I have 60 traditional bank accounts at my primary bank? Well, actually, I’m gaming on you a little bit. In truth, if we organize the accounts by purpose, I only have 9 accounts (which still might be a lot to some folks). The hard segregation between the accounts keeps money management simple and enables system-based discipline. But, let me explain what each account is used for.
I have accounts at multiple banks, but here I will focus on the accounts at my primary bank which is Ally Bank. I execute nearly all of my core operations through Ally Bank to ensure consistency, normalize tracking, and reduce errors. If I kept these core operations spread out amongst several banks, keeping a tight process flow would be more difficult (however, I do have accounts at other banks, but those accounts are fed from Ally which is acting as a switchboard). Numerically, I have 3 checking accounts, 5 savings accounts, and 52 CD (Certificate of Deposit) accounts at Ally Bank.
The 3 Checking Accounts are:
Tactical
Bill Payer
Vault
The 5 Savings Accounts are:
Throw Away
Utility
Emergency
War Chest
Endeavors
Again, the 52 CD accounts, from a category-based-on-purpose perspective, can be consolidated into a single unit, as each account is meant to serve the same function, albeit with a different maturation date. I have also written another article on why I have 52 CD accounts that can be found in The Distiller archives. Below is a screen capture (sanitized with the balances removed) that shows how much visibility and control you have within the Ally Bank Dashboard.
Ally Bank Dashboard (Sanitized)
So, the purpose for each of these account types is as follows:
3 Checking Accounts
Tactical – This is money used for cash withdrawals. It’s the only account with an attached credit card and the only one that allows withdrawals from a teller machine. For Security, it rarely has a balance larger than $200. If I need to make a larger withdrawal I will fund it with the amount for whatever the withdrawal purpose is for.
Bill Payer – This is the account that acts as the switching station or gateway for money coming in and money going out. Paychecks and deposits hit this account and are then immediately distributed to pay bills or be allocated to a utility account or purposeful, remote destination. None of my money sits unused and every penny is allocated with intent. I don’t know if I’ve ever had money sitting in this account unaccounted for longer than 24 hours.
Vault – This account is used as a holding area for things pending execution where execution is imminent. This would be for money allocated for but not executed on for internal money movement, CD allocations, stock purchases, large purchases, etc. I wouldn’t have created this checking account, but because there can be a lot of activity with this category, I couldn’t leave it as a savings account, due to the 6 withdrawal monthly limit.
5 Savings Accounts
Throw Away – This is money I can literally light on fire if I want. I want to have an unrestricted, mental diversion tank for indulgence, to counteract any latent suffocation I may have created by having such a strict framework. I can spend this money on whatever I want, whenever I want, and not suffer psychic damage. Although this money usually gets repurposed to buy stock or pay something down, sometimes I’ll blow it on something, splurge, treat somebody else to something, or give it away.
Utility – This is money that is saved for maintenance and operations (house projects, yard projects, fixing up something on the car, etc.). It’s made to take care of expected expenses, for the things that we already own.
Emergency – This is the fund used for exigent circumstances that come out of the blue and I-need-money-now situations. Once I got it to $1000, I just keep adding a little here and there as I can. I’d like to get it to $5000 one day and cap it off.
War Chest – This is for longer hardships or tough times, but I don’t consider this an Emergency scenario. If something is going on for 3-6 months, that’s not an emergency anymore, that’s day-to-day life for you now and can be planned for. I’d like to have a years worth of money for this someday. I plan to start with my Razor and then set the limit to my Normal and then set it once again to my Luxury.
Endeavors - This is for Projects – buying a car, buying a house, taking a trip, getting new furniture, moving expenses, etc.
This is how I'm setup, but your needs may be completely different. Ally Bank now allows customers to create buckets within a single account, so that may work, as well, but I personally like the hard account segregation afforded by having separate accounts. For your personal banking and budgeting, it may worth considering to figure out how many account you need for your circumstances. And, what works perfectly for you one day may be overly complex or conversely too simple 6 months later. If you start with a clean slate and take some time organizing based on what you feel is optimal, it may give you a greater sense of control over your finances. And, if something isn't working, guess what, you can change it, as often as you like. Good luck on your next steps. Thanks.
--Charles