Personal Finance

nerdwife · January 2016

I've been wanting to ask this for a while, but I'm hesitant because I know it's personal and people don't like to talk about money. But I'm wondering if people have books, people, places, etc., they go for advice about how much to save, what accounts to save in, how much to put towards certain things and in what ways (like, use a certain type of savings account for saving for the wedding, a different type for a house or something longer term).

I never learned anything about money and when I graduated law school and moved in with FI, I realized I was at a total loss as to how to adult in this way. I was unemployed with a lot of debt and FI had another year of medical school to go. My parents were never good about money - my mom always wanted to own the nicest things and my dad never wanted her to spend money, plus he couldn't hold down a job (they divorced after thirty years of marriage) - and they never sat down and explained how credit cards, loans, savings accounts, the stock market, literally anything works.

So I asked around and the book Young, Broke, and Fabulous by Suze Orman and The Millionaire Next Door were both recommended to me. I read them and they were truly helpful. I learned about 401(k)s and Roths and such, and once I got a job, I was able to make intelligent decisions about those things.

Once FI started working and we got down to wedding planning, we set up our accounts so that a certain amount goes into savings every week (we lucked out and have opposite pay weeks). Our wedding is just under 9 months away and we're weeks away from having all money for it saved up, and we're really happy about this. But moving forward, we still don't get what to do with our money to make the most of it. We want to save money so when we start a family I could potentially stay home, but we don't know if we keep using our personal savings account (which has basically no interest), use some other thing (like an index fund), or something in between. Of course, we'd like to buy a house as well, but we don't see that happening until FI's residency is over and his salary significantly improves.

I'm not necessarily looking for the actual answers to these questions - just like, how did you learn what to do with your money?

labro · January 2016

Following because we're doing all those things too and I still don't know what the fuck to do with my money in order to make the most out of it.

I'm planning to read The Millionaire Next Door soon I'm glad you got something out of it!

I spend a lot of time talking to my dad about investing and personal finance. And then I repeat to myself that we're in the market for at least the next 35 years and a lot of things are going to happen between now and then so just ride the wave.

julieanne912 · January 2016

After the recession of 2008, I went from making 6 figures to making under 50k. So yeah, I had to figure out how to be better with my money, stat. I don't really remember how I did it... I just did. I'm sure I probably read articles online and I know I watched Suze Orman on TV sometimes.

These days, I really like reading the Money Matters board over on The Nest. It's not a super fast paced board, but it's better than most boards over there, and there's some really knowledgeable ladies that can answer even basic questions.

kvruns · January 2016

I learned from parents, reading things, that sort of thing. I can't say I'm an expert or anything, especially since I am much more cash heavy vs investing. I like to hoard cash in my non-interest earning savings accounts pretending they are like the indexed money markets of old days that actually earned $$.

Do you have any investment accounts outside of a 401(k)? If not, open them. Here's what I have:

Roth IRA: Contribute up to $5,500 each year. Contributions can be withdrawn tax-free, but earnings have to wait until age 59.5. While you should not plan to withdraw it, knowing it is available with limited penalty is nice. You still have time to contribute to the 2015 tax year if you haven't already.

Traditional IRA: Depends on income if you can contribute to one. This can help reduce taxes so if you qualify it might be nice. $$ isn't as liquid as the roth but the trade off is tax-free.

Individual investment account: easiest way is contributing through index funds (or similar) which may have less reward but should be less risk and can be a hands off way of investing. Can also have more taxable investment accounts, like I have, that are potentially higher reward but the taxes from so much trading can sting.

401(k): currently contribute 11%; have continued upping this over time and need to continue

HSA: if you are HSA-eligible through your health insurance you should consider maxing this out, the money is yours forever so it can help later on if you can bank the $$ now to use for medical expenses later on when you have only 1 family income. Also has tax advantages

For my investments liquidity is important if you're thinking of buying a house. Work with a financial advisor who can make sure your $$ goes into accounts where you can withdraw without penalty. That way you're earning $$ but can take it out if you have to. If either of you have school debt I'd focus on paying that down as much as possible too.

lyndausvi · January 2016

For budgeting, I read things like Money Matters on The Nest (just a lurker) or other forums like Personal Finance on Reddit. Both sites give good advice on how you should be budgeting from REAL people. I have read the same books as you, but I found the forums to be more helpful for me. IDK, real people vs an author who's book is a few year old? Not sure, but they seems to work for me better. Sometimes their advice is a little too conservative for our situation, but it's a good starting point.

Some online banks like Captial360, Ally and a few others have good interest rates to keep your money in savings, but liquid. I.e Emergency funds, vacation, car replacement, etc.

Investing? DH takes care of that. It's the one area I can't seem to want to do the research on.

princessleia22 · January 2016

kvruns said:

HSA: if you are HSA-eligible through your health insurance you should consider maxing this out, the money is yours forever so it can help later on if you can bank the $$ now to use for medical expenses later on when you have only 1 family income. Also has tax advantages

Make sure to verify this with the HSA account. Most keep the money in the account until you use it, but not all of them. My mom had one provided through work that the funds expired at the end of the year. So, she had to estimate how much to contribute to her HSA each year and if she didn't use all the funds by Dec. 31, she lost the money. So, she usually would underestimate on expenses. Or the whole family would get paraded to the doctor and dentist in Dec. to use up any remaining funds.

lc07 · January 2016

I am following this plan https://www.daveramsey.com/baby-steps/ and love Dave Ramsey in general.

princessleia22 · January 2016

DH and I are both lucky to have parents that have been pretty good at managing their money. We have been not so good at following in their footsteps. We aren't hugely in debt, but certainly don't save or invest like we should. But, we are currently trying to remedy that situation. DH has taken a liking to Dave Ramsey and his teachings.

I've been trying to take advice from my parents, but their main advice has always been max. out contributions to 401K and retirement. Contribute to mutual funds as much as possible. DH and I are trying to invest, but we also like to keep liquid funds on hand. Ideally, we want to get to a point where we have enough cash in a regular savings account to pay 6-12 months of bills, plus investing in mutual funds, retirement, and maybe some individual stocks. I do also have a financial advisor to manage my IRA, but haven't actually talked to him in several years.

kvruns · January 2016

princessleia22 said:

kvruns said:

HSA: if you are HSA-eligible through your health insurance you should consider maxing this out, the money is yours forever so it can help later on if you can bank the $$ now to use for medical expenses later on when you have only 1 family income. Also has tax advantages

Make sure to verify this with the HSA account. Most keep the money in the account until you use it, but not all of them. My mom had one provided through work that the funds expired at the end of the year. So, she had to estimate how much to contribute to her HSA each year and if she didn't use all the funds by Dec. 31, she lost the money. So, she usually would underestimate on expenses. Or the whole family would get paraded to the doctor and dentist in Dec. to use up any remaining funds.

@princessleia22
That is an FSA - flexible spending account. FSAs are "use it or lose it" for funds, where if you don't use it at the end of the year it is gone (unless your company has a carryover provision which is new as of 2013).

A health savings account is truly yours forever, even if you're not in an HSA-eligible insurance plan down the road.

People often confuse them.

nerdwife · January 2016

lc07 said:

I am following this plan https://www.daveramsey.com/baby-steps/ and love Dave Ramsey in general.

Is Dave Ramsey religious or include religion? I feel like he sounds familiar and I looked into him but I'm not religious (and was raised Jewish) so is it like a thing?

spockforprez · January 2016

nerdwife said:

lc07 said:

I am following this plan https://www.daveramsey.com/baby-steps/ and love Dave Ramsey in general.

Is Dave Ramsey religious or include religion? I feel like he sounds familiar and I looked into him but I'm not religious (and was raised Jewish) so is it like a thing?

Somewhat. I like his book Total Money Makeover. It's not super theology-focused so much as folksy kinda soundbites and occasional Bible verses. You can get a lot out of it if you just ignore the religious parts. His Financial Peace University on the other hand is super religious.

thisismynickname2 · January 2016

Roths and 401ks are easy enough and very long term. Ride the waves, don't worry about pullbacks and recessions. Practice "dollar cost averaging"- look at the pullbacks (like we're in right now) as an opportunity to buy more shares at lower cost, which then all increase exponentially as the market corrects and improves.
I would love to figure out how to invest and choose actual stocks, but those are risky. You can't buy what you can't afford to lose. I don't have the risk profile for it nor the interest in researching. I also don't have the risk profile to find a broker that would do that work for me, because brokers have fees and commissions and I just don't know who are the honest ones and who are just out to get rich off people.

Next topic- housing. Is the rule for your house 30% of income? Something like that? So if you bring home $1000 a month after taxes, your rent/mortgage shouldn't be more than $300. I could be totally wrong but there is a rule of thumb out there. But anyway, if you do buy a house, don't trust the bank to give you a mortgage you can afford. They tell you how much money they're willing to loan you. They don't take into account your restaurant habits, your love of traveling, whatever. Shop significantly under what a bank says they'll loan you. And, save for 20%. Anything less than 20% down results in PMI (private mortgage insurance) which means you are totally throwing money down the train. It's basically a fee they make off you for being a riskier borrower.

My two cents!

lc07 · January 2016

nerdwife said:

lc07 said:

I am following this plan https://www.daveramsey.com/baby-steps/ and love Dave Ramsey in general.

Is Dave Ramsey religious or include religion? I feel like he sounds familiar and I looked into him but I'm not religious (and was raised Jewish) so is it like a thing?

I have no idea. I'm not religious. I don't listen to his radio show, I just use his online tools. Guess I shouldn't have said I love him in general!

julieanne912 · January 2016

thisismynickname said:

Roths and 401ks are easy enough and very long term. Ride the waves, don't worry about pullbacks and recessions. Practice "dollar cost averaging"- look at the pullbacks (like we're in right now) as an opportunity to buy more shares at lower cost, which then all increase exponentially as the market corrects and improves.
I would love to figure out how to invest and choose actual stocks, but those are risky. You can't buy what you can't afford to lose. I don't have the risk profile for it nor the interest in researching. I also don't have the risk profile to find a broker that would do that work for me, because brokers have fees and commissions and I just don't know who are the honest ones and who are just out to get rich off people.

Next topic- housing. Is the rule for your house 30% of income? Something like that? So if you bring home $1000 a month after taxes, your rent/mortgage shouldn't be more than $300. I could be totally wrong but there is a rule of thumb out there. But anyway, if you do buy a house, don't trust the bank to give you a mortgage you can afford. They tell you how much money they're willing to loan you. They don't take into account your restaurant habits, your love of traveling, whatever. Shop significantly under what a bank says they'll loan you. And, save for 20%. Anything less than 20% down results in PMI (private mortgage insurance) which means you are totally throwing money down the train. It's basically a fee they make off you for being a riskier borrower.

My two cents!

That bit about the mortgage is soooo true. In 2007 (before the crash), I got preapproved for a loan for $535,000 after I sold my $190,000 condo. I was like whaaaaaaa? And then looked for homes in the 250-300k range (didn't end up buying again thankfully). Then they wondered why there so many people in foreclosure...

Also just a side note about 20% down... there's ways around paying PMI. The most popular one is getting an 80% first, and then a 10% second mortgage. The second mortgage is at a higher rate though. In our case we only put 10% down so we could use the cash to do some other stuff to the house after closing, so we just paid a PMI fee up front. It was like 4 grand, but cheaper than paying the monthly premium.

lovesclimbing · January 2016

My H and I were both raised by pretty thrifty parents who owned their own businesses with no employees (in other words, no retirement/pension/401k).

Growing up, I was required to tithe 10 %, save 50% and could do what I want with the remaining 40%.

I am still an extremely thrifty person. H a little less so but he's not bad. He is not as good at saving. I'm better.

We're getting ready to start a Financial Peace class (the Dave Ramsey one) in a couple weeks. I'm looking forward to it, mainly for the budgeting part of it and saving. I'm already good with money but I think it will be good for both of us. I'd like a budget so I don't feel so bad about spending money on myself and so H will spend less on work tools (which I know he needs, but I do wish we could set a monthly budget) and so we get consistent at saving with every paycheck.

ShesSoCold · January 2016

julieanne912 said:

thisismynickname said:

Roths and 401ks are easy enough and very long term. Ride the waves, don't worry about pullbacks and recessions. Practice "dollar cost averaging"- look at the pullbacks (like we're in right now) as an opportunity to buy more shares at lower cost, which then all increase exponentially as the market corrects and improves.
I would love to figure out how to invest and choose actual stocks, but those are risky. You can't buy what you can't afford to lose. I don't have the risk profile for it nor the interest in researching. I also don't have the risk profile to find a broker that would do that work for me, because brokers have fees and commissions and I just don't know who are the honest ones and who are just out to get rich off people.

Next topic- housing. Is the rule for your house 30% of income? Something like that? So if you bring home $1000 a month after taxes, your rent/mortgage shouldn't be more than $300. I could be totally wrong but there is a rule of thumb out there. But anyway, if you do buy a house, don't trust the bank to give you a mortgage you can afford. They tell you how much money they're willing to loan you. They don't take into account your restaurant habits, your love of traveling, whatever. Shop significantly under what a bank says they'll loan you. And, save for 20%. Anything less than 20% down results in PMI (private mortgage insurance) which means you are totally throwing money down the train. It's basically a fee they make off you for being a riskier borrower.

My two cents!

That bit about the mortgage is soooo true. In 2007 (before the crash), I got preapproved for a loan for $535,000 after I sold my $190,000 condo. I was like whaaaaaaa? And then looked for homes in the 250-300k range (didn't end up buying again thankfully). Then they wondered why there so many people in foreclosure...

Also just a side note about 20% down... there's ways around paying PMI. The most popular one is getting an 80% first, and then a 10% second mortgage. The second mortgage is at a higher rate though. In our case we only put 10% down so we could use the cash to do some other stuff to the house after closing, so we just paid a PMI fee up front. It was like 4 grand, but cheaper than paying the monthly premium.

I was just talking to some Knottie friends about the mortgage thing! H and I were told we could have a mortgage for WAAAAAAAAAAAAAAAAAAAAAY more than I thought we would and WAAAAAAAAAAAAAAAAAAAAY more than I'm comfortable with! We close on our first house at the end of next month and our mortgage will be about 25% of our monthly income and that scares me!

princessleia22 · January 2016

ShesSoCold said:

I was just talking to some Knottie friends about the mortgage thing! H and I were told we could have a mortgage for WAAAAAAAAAAAAAAAAAAAAAY more than I thought we would and WAAAAAAAAAAAAAAAAAAAAY more than I'm comfortable with! We close on our first house at the end of next month and our mortgage will be about 25% of our monthly income and that scares me!

Yeah, same thing here. DH and I are looking in a price range that would keep our mortgage at about 20% of our income. In theory we could afford more, but we would be comfortable in a house of the price range and then we still have money to spend on entertainment and savings. Our plan is to buy a cheaper home now, that allows us to keep saving more money, then in 5-10 years we can upgrade to a nicer home and have a larger down payment for it and keep our mortgage close to what we pay on the cheaper home. Then work on paying that house off quickly.

julieanne912 · January 2016

ShesSoCold said:

julieanne912 said:

thisismynickname said:

Roths and 401ks are easy enough and very long term. Ride the waves, don't worry about pullbacks and recessions. Practice "dollar cost averaging"- look at the pullbacks (like we're in right now) as an opportunity to buy more shares at lower cost, which then all increase exponentially as the market corrects and improves.
I would love to figure out how to invest and choose actual stocks, but those are risky. You can't buy what you can't afford to lose. I don't have the risk profile for it nor the interest in researching. I also don't have the risk profile to find a broker that would do that work for me, because brokers have fees and commissions and I just don't know who are the honest ones and who are just out to get rich off people.

Next topic- housing. Is the rule for your house 30% of income? Something like that? So if you bring home $1000 a month after taxes, your rent/mortgage shouldn't be more than $300. I could be totally wrong but there is a rule of thumb out there. But anyway, if you do buy a house, don't trust the bank to give you a mortgage you can afford. They tell you how much money they're willing to loan you. They don't take into account your restaurant habits, your love of traveling, whatever. Shop significantly under what a bank says they'll loan you. And, save for 20%. Anything less than 20% down results in PMI (private mortgage insurance) which means you are totally throwing money down the train. It's basically a fee they make off you for being a riskier borrower.

My two cents!

That bit about the mortgage is soooo true. In 2007 (before the crash), I got preapproved for a loan for $535,000 after I sold my $190,000 condo. I was like whaaaaaaa? And then looked for homes in the 250-300k range (didn't end up buying again thankfully). Then they wondered why there so many people in foreclosure...

Also just a side note about 20% down... there's ways around paying PMI. The most popular one is getting an 80% first, and then a 10% second mortgage. The second mortgage is at a higher rate though. In our case we only put 10% down so we could use the cash to do some other stuff to the house after closing, so we just paid a PMI fee up front. It was like 4 grand, but cheaper than paying the monthly premium.

I was just talking to some Knottie friends about the mortgage thing! H and I were told we could have a mortgage for WAAAAAAAAAAAAAAAAAAAAAY more than I thought we would and WAAAAAAAAAAAAAAAAAAAAY more than I'm comfortable with! We close on our first house at the end of next month and our mortgage will be about 25% of our monthly income and that scares me!

Yay on the new house though, congrats!!!

And, after you're in there a year, you might be able to adjust your tax witholdings a bit, since you'll now get the write off of your interest and property taxes.

SP29 · January 2016

I learned a lot watching "Til Debt Do Us Part" with Gail Vaz-Oxlade, and I've also read some stuff on her webpage.

Fortunately DH is really good with money, and knows about the difference between the various savings accounts vs. stocks and bonds, etc. While I manage my own money, I defer to him regarding what type of account I should open, or where the best place to put my money is.

DH also created savings targets for us- broken down into: short term and long emergency (short is if an unexpected expense comes us- like a vet bill, or the heater breaks, long term is if one of us loses our job), vacation, car maintenance, car replacement, retirement, house down-payment.

I have also recently spent time talk to friends- one of my friends is really savvy and she said she learnt a lot from reading finance boards.

Jells2dot0 · January 2016

I really had no idea that the Nest was a good resource for money matters! I'll have to go check it out.

My parents were always really good with financial matters, but in different ways. My mom had to raise two kids with almost no child support on very little. My dad, on the other hand, owns several businesses and does a lot of investing. I just soaked it all in!

My H is also very financially savvy, though we don't share finances. But, we do toss out ideas to each other.

As far as savings, I have multiple accounts. One has an auto transfer every month from my checking. Another is from my second side job. Then I have a real estate account. Retirement-wise, I make too much to qualify for an IRA and my 401k is maxed out. I also use my company's HSA option, which if you know my story, I use up all of the allotment. My main goal is to save for retirement at 55, so that is my focus and i'm well on my way.

lyndausvi · January 2016

DH have joint accounts and separate. Our house DP is one of the those accounts.

I get paid weekly and have various accounts that I auto-transfer funds to each week. Being 1099 I have a tax account for my quarterlies.

In addition to that, I have vacation, emergency, car replacement and a Rain Day fund accounts. The RDF also doubles as my yearly or non-monthly payments account. I.E car registration, Amazon Prime renewal, car insurance, vet, stuff like that. I figure out how much I need to put in a week so when the bill comes in I'm able to just send the money in.

Rain day things are things that just pop up unexpectedly, but isn't really an emergency per-se. Let's face it shit pops up all the time. Plus I do not get PTO, so it's kind-of a like a self-paid time off money (if I need). Basically it's just a catchall account that is separate from my main checking account.

I also use Mint to help keep my budget in line. I know some people use You Need A Budget (YNAB). There are other Apps out there that help budgeting.

nerdwife · January 2016

Thanks everyone! The whole mortgage/home buying thing seems incredibly overwhelming. And I've seen so many get stuck in their "starter" homes that I'm nervous about going that route, but it will also be a lot of time before we can afford a down payment on a non-starter house. Well, it will be quite some time before we can afford sort of down payment, but we will have to decide the best way to handle this at some point.

I will definitely look into Dave Ramsey and the nest and even reddit - really good to know. We do use mint, which is helpful for pointing out how much we spend and on what (though we need to really sit down and say hey, we're spending too much money on food, let's not do that). I have a roth through work and contribute the max amount my company matches. FI doesn't have a company match and has been contributing to a 403(b) (he works in a non-profit hospital), but we've been talking about just doing something else altogether. I also recently learned what an FSA is and started using it this year. I am not familiar with HSA and will look into it, though since FI works for a hospital, he has amazing health insurance with basically no deductible that I am looking forward to joining. And I do have a vanguard index fund account with a good amount of money in it that was set up (very generously) by my grandma.

And we do automatically save some of our income every week (it's actually 1/3 of our income), so it's not like we're no where, it's just like I don't know what sort of savings account to use for different goals. Like, should we be contributing to the vanguard account that I have? Should we be opening up a different type of vanguard account? Should I just lie awake and wonder if we're doing anything right?

@lyndausvi (and anyone else who does this) - when you say you have multiple savings accounts, do you mean like just a bunch of savings accounts linked with whatever bank you're using, or is that more like you have one savings account with different amounts for each in your head? I know there are some benefits to having more money in one account (like chase bank will increase your interest rate from completely negligible to slightly less negligible), so does that factor in at all?

Jells2dot0 · January 2016

nerdwife said:

Thanks everyone! The whole mortgage/home buying thing seems incredibly overwhelming. And I've seen so many get stuck in their "starter" homes that I'm nervous about going that route, but it will also be a lot of time before we can afford a down payment on a non-starter house. Well, it will be quite some time before we can afford sort of down payment, but we will have to decide the best way to handle this at some point.

I will definitely look into Dave Ramsey and the nest and even reddit - really good to know. We do use mint, which is helpful for pointing out how much we spend and on what (though we need to really sit down and say hey, we're spending too much money on food, let's not do that). I have a roth through work and contribute the max amount my company matches. FI doesn't have a company match and has been contributing to a 403(b) (he works in a non-profit hospital), but we've been talking about just doing something else altogether. I also recently learned what an FSA is and started using it this year. I am not familiar with HSA and will look into it, though since FI works for a hospital, he has amazing health insurance with basically no deductible that I am looking forward to joining. And I do have a vanguard index fund account with a good amount of money in it that was set up (very generously) by my grandma.

And we do automatically save some of our income every week (it's actually 1/3 of our income), so it's not like we're no where, it's just like I don't know what sort of savings account to use for different goals. Like, should we be contributing to the vanguard account that I have? Should we be opening up a different type of vanguard account? Should I just lie awake and wonder if we're doing anything right?

@lyndausvi (and anyone else who does this) - when you say you have multiple savings accounts, do you mean like just a bunch of savings accounts linked with whatever bank you're using, or is that more like you have one savings account with different amounts for each in your head? I know there are some benefits to having more money in one account (like chase bank will increase your interest rate from completely negligible to slightly less negligible), so does that factor in at all?

I have multiple accounts at one bank. They have a program that gives you benefits based on how much money you have with them. Even if one of my accounts is only $50, if the sum total is more than a certain amount, then the benefits apply across the board (higher interest rate for example).

H has multiple accounts at multiple banks. Not sure why it turned out that way, but it works for him.

MyNameIsNot · January 2016

FWIW, the stock market can be fun. It's intimidating at first, but it's not that bad. Years ago, a friend convinced me to put half my tax refund into an e-trade account. I've since switched it to a capital one investment, but there are tons of options available with low fees for people that don't want to invest a ton of money or pay for advice. I still don't have a lot of money in there, but it's done a lot better than regular savings or my IRA. It's fun to put a little money in some stock or other and see how it does. (Caveat, this gets expensive if you trade a lot. I usually only make trades 2-3 times/year.)

The key to your investment and long term money is to diversify. It's never a good idea to have all your assets tied to one thing. Spreading out into a variety of different investment types gives you an opportunity to grow with less risk.

kvruns · January 2016

Some people will do multiple savings accounts to keep the money separate. Like my bank will help you do a vacation fund where you make automatic transfers to this special account for vacation, or wedding or whatever. If you want to segment your $$ that is better than using 1 savings account and mentally trying to divide it if you're not good at that. Or maybe have a long-term savings account that you don't touch (downpayment type thing) and one for shorter-term things.

I personally just have 1 savings account, although I did take advantage of a deal at a local bank where they give you $250 if you open an account with $5,000 or more. That was a 5% rate of return and you just have to keep it open for 6 months so it was a no brainer, much better than you can get with a CD or any other short-term, risk free, investment product. H got one too and I'm considering having him open one in his name to get the $$ too.

labro · January 2016

@nerdwife We have multiple accounts. We did it that way only because we were taking our HM in Germany so we opened an account with BoA since they have a relationship with a major bank in Germany and it would be easy to get cash if we needed it without excessive fees. We ended up keeping that one random account open and use it exclusively as our vacation fund now. I route some money to it with every paycheck and it kind of stays out of sight, out of mind, until we use it for vacation.

I see the benefit in compiling everything into one massive account for the purposes of marginally better interest rates (and sometimes other benefits), but I guess I also like having a few accounts among different banks as a JIC measure too. H and I both kept our separate checking and savings accounts when we got married and we transitioned to using my account to pay down loans/debt and we use his account for our day to day expenses and to maintain our main savings/emergency fund. After our debt is gone my account will be a separate savings/rainy day fund.

lyndausvi · January 2016

@nerdlife - both.

My tax, emergency and vacation accounts are in separate accounts. My Rainy Day Fund has a bunch of different uses all lumped into that account that I track on an excel spread sheet.

If you use You Need A Budget you really do not need separate accounts.

For me, physiologically I like seeing the separate accounts with balances. For example, 2015 was my first full year of being a 1099. In 2014 I was only half year and we ended with a refund. In 2015 I paid similar as 2014, but we are ending owing $1500. It's NO BIG DEAL, because the money is in the account AND THAT IS WHAT IT'S FOR.

If I had it all lumped in with say the vacation account I'm sure I would feel emotionally different. I totally can see myself thinking of the joint tax and vacation account as "vacation", because let's face it, saving for a vacation is way more fun than taxes. So withdrawing the money for taxes would be emotionally different. Even though logical speaking it's not.

Money is often about emotions. Everyone is different. So what works for you will not work for everyone else.

Note - I'm pretty sure Captial360 allows you to setup sub-accounts within an account. My bank in the islands did that also. It was pretty helpful on things like my RDF. So even though I had $1K in the account, I could make sub-accounts to say how much is going to a certain category. It's nice way to keep one savings account, but can see how everything is earmarked.

princessleia22 · January 2016

nerdwife said:

@lyndausvi (and anyone else who does this) - when you say you have multiple savings accounts, do you mean like just a bunch of savings accounts linked with whatever bank you're using, or is that more like you have one savings account with different amounts for each in your head? I know there are some benefits to having more money in one account (like chase bank will increase your interest rate from completely negligible to slightly less negligible), so does that factor in at all?

We have multiple accounts. I have 3 business accounts (1 savings & 2 checking) and 4 personal accounts (2 savings & 2 checking). These are split between 2 different banks. We started with just checking & savings for personal and business at one bank. But, with the accounts all being linked, we found that it was easier for us to move money around to spend and harder to actually save. So, we opened personal account at a different bank that would be less accessible to us. We have DH's income direct deposited there and try to live primarily off my income and use his as savings (or rainy day fund). That account also paid for our wedding. My pay comes very irregularly (I made 1/2 of my total 2015 income in one month last year, then slow for the other 11 months), so it's nice having his income set aside to access if our primary funds get low. I set up business account at the second bank to use for putting aside my quarterly tax payments, mainly because we started to like that bank and they were offering $200 to open an account. So, having multiple accounts just helps us to keep our money separated for different purposes. Plus, I figure that if things really got tight, even when our balance is low in accounts, if combined it's still usually enough money to pay rent or cover a month or two of expenses. My brain may see that there's only $200 in our main account and start really tightening up on expenses, but when you multiply that by 7 accounts, it's still enough to cover essential bills for the month. So, psychologically I think it helps curb my spending to see lower numbers in each account... or at least in our main account.

SP29 · January 2016

@nerdwife
I have a few savings accounts open under my regular bank account. The interest rate sucks, so I uses these accounts to help budget small things- gifts, personal, horse stuff. Essentially I consider it "free" money that I can spend on whatever I wish.

I then also have various accounts with another institution (Tangerine- I don't know if you have that in the US? It's like a bank, but it's only online). I like it because with Tangerine I can open any account I want under my single user, and the interest rates are better than traditional banks- this is where I have various TFSAs (tax-free savings account; you can move money in or out as you please) that are labelled for specific reasons- house, vacation, car, general emergency, etc. I then also have mutual funds and RRSPs (Registered Retired Savings Plan). These accounts are more long term savings projections; I don't have direct access to the Tangerine accounts with a debit card, but it's linked to my bank account so I can easily move the money between in 2 business days.

Except for the mutual funds, I can give all the accounts a name, so yes, I do have separate accounts for the different things I am saving for. DH had recommended that we shouldn't do this and group everything into one chequing, one regular savings, one TFSA, one mutual fund, but we ended up going back to separating things out because I found I like separate accounts for budgeting. For example, with vacation, that's a want, not a need, so it's not like we NEED to have a certain amount of money there. But there is a difference between a $500 and $5000 vacation. Same with buying a car- is the next car we buy going to be a Ford or an Audi?

Where as we need to know if we have reached our $X amount for a 20% house down payment.

What we do for these accounts, is DH created savings targets for us (I'm not sure how exactly, he did some sort of calculation based on our individual incomes)- minimum amounts that we put away each month into each account, up to a maximum (for some).

DH also created a spreadsheet for us where we track every penny we earn and spend.

YNAB- I have some friends who use this and rave about it.

tigerlily6 · January 2016

Can I just say thank you, @nerdwife, for starting this thread? FI and I have also been trying to educate ourselves better on financial planning recently, and reviewing all the comments from PPs here has been very helpful!

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