Is anyone else obsessed with Money Diaries?
Sometimes it’s a really good hate read, and other times it’s just genuinely interesting and fun to peruse. I love reading about how other people budget, spend and organize their money, since I’ve been trying to get a better handle on mine. After all, I’m almost (GAH) 30.
When I offhandedly mentioned to a friend that I have four different bank accounts, she got really intrigued and wanted to know more. So, I figured it’d be a good blog post topic!
My friends and I joke around a lot about how we’re not sure when we our conversation topics switched from Jersey Shore to 401(k)s, but we’re now officially old.
Seriously… when did our credit scores replace our GPAs as the most important three-digit number in our lives?
Anyway. I want to preface this by saying that I am in no way, shape or form a financial expert. I’m honestly not the most financially literate person, and if you’re looking for investment advice or a breakdown of stocks/ bonds/ mutual funds/ etc. — this post is not for you.
What this post is, however, is a breakdown of how I manage my finances and what works for me in terms of budgeting, organizing my money and paying bills.
So! Here’s a breakdown of my financial organization and budget process. So fun! So adulty!
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I have four separate bank accounts. It sounds excessive, I know, but it’s what works for me — especially considering I have multiple sources of income. (#millennialprobs.) I also have a debit card, three credit cards, a retirement account and a small pile of cash savings. Here’s how all those work together.
Bank account No. 1: Traditional checking account with linked debit card (Fifth Third / MasterCard)
I have both a traditional checking account and its linked debit card from Fifth Third, an old school bank. The majority of my money — the two paychecks I get from my full-time day job every month — is deposited straight into my checking account. This is the money I use for my everyday spending: rent, bills, student loans, shopping, dining, entertainment aka too many concerts, hobbies, groceries, ride sharing, my CorePower Yoga membership, Netflix — pretty much every single normal living-related expense I spend my money on in an ordinary month. I budget my spending using the Notes app on my iPhone to make sure I’m not spending too much money on things like brunch and Madewell every month.
Note: Short of rent and bill payments, I don’t ever pay directly via my debit card/ checking account. More on that later.
Bank account No. 2: Traditional savings account (Fifth Third)
Of my three savings accounts, one is at Fifth Third, so it’s linked to my one and only checking account. I don’t keep much in this savings account at all: Usually just a few hundred dollars. This is the money I use for small emergencies: broken iPhones, unexpected medical bills, etc. I also dip into this money when I go over my monthly spending budget, which happens a little more often than I’d like to admit, even though it’s usually never by much. I stock this account with the “extra” money I get during three-paycheck months. My monthly budget is based on the income I get during two-paycheck months, so the “extra” money I get during three-paycheck months — there are usually two a year — is treated kind of like a bonus. The interest rate on this account is really low so I try to avoid keeping a lot of money in here since it doesn’t make a lot of financial sense.
I could feasibly get rid of this account and just keep all this money in my checking account as a sort of cushion, I know, but I need the visual separation of the two accounts to help keep my spending in check.
Credit card No. 1: Everyday credit card (Discover it)
OK, so going back to that checking account money! When I want to spend it — on shopping, dining, entertainment, hobbies, groceries, transit, CorePower, whatever — I use this credit card. This is the card that I use for pretty much everything I buy.
Note: Throughout the year, I allow the cashback rewards I get through Discover to accumulate. Come December, I use this money to do my Christmas shopping, just so I don’t have to budget ahead of time.
Bank account No. 3: High-yield savings account (Discover)
Like I mentioned a few paragraphs up, I don’t keep a lot of money in my traditional savings account. This is the account where I keep the bulk of my savings. I freelance doing web work and social media, so the money I make from those contracts is direct deposited into this account, which has a 2 percent interest rate. I absolutely refuse to touch this money. My goal is to have six months’ worth of income in it in case of job loss (hello, I’m a journalist) and then to keep saving the rest for something big, like a downpayment on a condo or something.
Credit card No. 2: Travel credit card (Capital One Venture One Visa)
So, if I’m putting pretty much everything on my Discover card, what’s my other active credit card for? I use my Capital One Venture One card (this is the fee-free one) almost exclusively for traveling. I book flights, hostels, hotels and Airbnbs on it, and use it as my everyday card when I’m on vacation. I originally opened this card about a year ago, just prior to a trip to Europe so I wouldn’t have to worry about foreign transaction fees, and now — since I try to travel recreationally every two or three months — I just use it to help me with my budgeting.
Note: I say “almost exclusively” because I also use this card in the few instances my Discover card isn’t accepted by a merchant.
Bank account No. 4: High-yield savings account (Capital One)
I opened up a high-yield savings account with a 1 percent interest rate through Capital One a few months after I received my Venture One credit card. This account is where the rest of my side hustle money (my part-time gig as a yoga instructor, money I get from selling things, gifts, etc.) is direct deposited. This is money to be used exclusively for traveling. Essentially, my Capital One accounts are a closed loop system. After trying to figure out how to budget for travel, I realized that the easiest thing to do was create a “work-for-reward” type of system.
As a part-time yoga instructor, I can pick up or sub classes at my own convenience. So, if I want to book a flight or make some extra spending money for a trip, I can just squeeze a few more classes into my schedule to make it happen. Bam.
Credit card No. 3: An unused generic Visa credit card
The Type A nitpick in me wants so badly to close this credit card down, but — thanks to the weird way we calculate credit scores here in America — I’m stuck leaving it open and unused so my credit score doesn’t take a hit. This was my very first credit card I opened as a college student. It has a laughable limit of $500 and a terrible rewards system. I actually misplaced the physical card like, a year ago, and haven’t bothered to figure out which drawer I put it in. There’s no point in ever using it, so it just remains open and unused. As it will forever.
Misc. accounts and money sources:
The remainder of my “financial portfolio” is pretty simple. I have a Roth 401(k) through my company that’s matched, so I contribute to that with an automatic paycheck withdrawal. It’s kind of the same as my Discover savings account — out of sight, out of mind.
I also have a really small amount of cash I keep on hand, but certainly nothing big and worth noting. Honestly just a few bills I keep folded inside my passport to romanticize the notion of spontaneously booking a one-way ticket to some far-off and exotic destination. ?
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And, that’s pretty much it. I like using separate bank accounts to keep my budget organized since it’s easier to lose track of my money — and therefore, forget to spend it — doing so. Like, putting $20 in a hidden purse pocket when you’re drunk and then finding it again when you’re sober and it’s an exciting surprise? That’s how I feel about automatically putting one source of income into a savings account and then just not touching it.
I also really love the closed loop system I’ve created for my travel budget. Since my travel whims are spontaneous (I’m known to impulsively buy cheap flights and then work out the details later), it makes sense to match my fluctuating travel budget with a fluctuating source of income. This also kind of helps to make sure my travel addiction doesn’t spill over into my everyday budget and affect my daily quality of life too much.
I have a lot of friends that use the Dave Ramsay envelop method, and I think that this is a good compromise between that and my love of credit cards. I have never carried a credit card balance over month-to-month since I pay my bill in full every month, so I love that I can actually make money with my card rewards programs. I also find myself more likely to impulsively spend money if I’m using cash instead of a card. If I use cash, the money is gone and it’s like I never had it, versus using a card where I’m stuck seeing that purchase in my apps and on my statements for pretty much ever.
So, that’s it! That’s how I organize and manage my finances. Kinda boring, so if you made it all the way to the end of this post, you deserve a reward or something.
What system do you use to manage your personal finances? Like I said, I’m obsessed with Money Diaries, so I’m genuinely curious!
