Tuesday, May 26, 2009

My Insane Accounting

I previously wrote about my 7 saving accounts and 3 checking accounts. I'm embarrassed to even write about my personal accounting system since it's inefficient, cumbersome and insane. But it's been working for me and until there's a drastic change in my life (i.e., I get laid off), I don't really have any impetus to change the way I do things.

Some of you commented how easily I can close down my inactive accounts. But that would mean I would need to re-jigger my current system and re-draw my crazy spreadsheet. I really don't want to have to go through that unless I really have to.

I also discovered that I'm irrational about money. I have this strange need to compartmentalize my money into different "buckets" for different purposes. For example, let's suppose I have $1,000 in my savings specifically earmarked for irregular expenses. And let's suppose I incur $100 in vet bills and $500 in car repairs this month. Most sane people would just pay $600 out of the $1,000 savings account and make plans to replenish the account.

Not me. Paying $600 out of $1,000 would drive me nuts. I would feel more comfortable if my $1,000 earmarked was categorized into a "pet fund", "car fund", etc. etc. I realize it's coming out of the same bucket of money, but categorizing and compartmentalizing has a calming effect on me. Go figure.

Anyhoo, here's my mental illness spelled out:

1. My Semi-Inactive Accounts (4 Accounts = Savings #1, 2, 3 and Checking #2)
My bricks-and-mortar savings at Wells Fargo (savings #1) and my credit union (savings #2) have approximately only $100 in each account. My BofA (savings #3) account has approximately $77 in it. Since they accrue piddly interest rates, I have no intention of increasing the amount in any of them. They are mostly kept open for convenience (i.e., in case I'm in a situation where I need to access some quick cash at an ATM).

I'm not exactly sure how much I have in my Credit Union checking #2 account. I only opened this account because it's the only true free checking account that doesn't require a monthly direct deposit from payroll in order to avoid monthly fees. If and when I get laid off from my current employer and if I have a significant lag time before I start my next job, I will probably designate checking #2 as my primary checking account.

2. Active Checking Accounts (2 Accounts = Checking #1 and 2)
I get direct deposit of $100 each pay period into my Wells Fargo checking #1 and the remainder of my paycheck goes into Bank of America checking #2.

As I previously wrote, checking #2 pays the bills. Checking #1 is supposed to be my "fun money", but I've regularly shifted 20% into my EF, 25% into my "mom and dad fund" and 20% into my car maintenance fund. But since checking #1 isn't linked to any of my online saving accounts, I have to write a check to myself to deposit into checking #2.

So let's summarize the inefficiency of this system: Payroll $100 -> checking #1 -> $65 into checking #2 -> $65 to savings #4. Insane, I know.

3. SmartyPig Account (1 Account: Savings #7)
Every month, my BofA checking #2 automatically transfers $25 into my BofA savings #3 to avoid monthly fees. (This means every month, I need to make sure that I set aside $25 to cover the transfer.) I've recently set up an automatic transfer of $25 from my BofA savings #3 into my SmartyPig savings #7, which is currently getting 3.05% APY. My SmartyPig Account is designated as a pure EF account.

So let me summarize the inefficiency of this current system: Payroll -> Checking #2 (set aside $25) -> $25 to Savings #3 -> $25 to Savings #7. Pretty silly, eh?

4. ING (1 Account: Savings #4)
My ING savings #4 account holds the majority of my "irregular expense" money that I don't need to tap right away. It takes approximately 2 to 3 business days to get money transferred in and out of this account so it's not the most convenient place to stash my emergency funds.

Currently, my ING savings #4 account is separated into the following categories:

a. I-Bond Fund

b. Mom and Dad Fund: To those of you new to my blog, my parents are not in the greatest financial shape. Knock on wood, they have not asked my sister or me to help them out financially in any significant way... yet. In the interim, I give each of them $100 in cash for mother/father's day, birthday and Christmas. This fund covers that expense.

c. Car Repair/Maintenance Fund

d. Pet Care Fund

e. Christmas Fund

f. Computer Fund

g. CD Ladder Fund

h. EF #1
Any money I have left over from my first paycheck of the month gets allocated into the above funds.

5. Dollar Savings Direct (1 Account: Savings #6)
Savings #6 holds some EF money, an earmark for 2009 taxes and my "arbitrage" fund. (My arbitrage fund holds money I intend to use to pay off my 0% credit card balance in October.) This fund has the highest APY (before I opened SmartyPig), so the majority of my EF is held in this account.

I transfer $931 of "arbitrage" money every month into this account.

6. Citibank Ultimate Savings Account (1 Account: Savings #5)
I allocate whatever money I have left over from paycheck#2 of the month into this account. Savings #5 holds the following funds:

a. Roth Fund: I try to deposit $50/month into my Roth account every month. But some months I'm short. I pay the shortfall out of this account;

b. COLA/Insurance: I've started paying my insurance premiums in one lump sum with a credit card rather than paying $3.50/installment fee to my insurance company. I pay $120/month into this account to cover my annual premiums. I also put extra money into this account to cover any unexpected cost of living increases. I tap this account until I can re-adjust my budget to cover the increased cost of living expense on a regular basis.

c. Vacation Fund

d. Extra Paycheck Fund: I get paid every other week and 2 months of the year, I get 3 paychecks. I wish I'm banking my 3rd paychecks, but I can't. I currently put the 3rd paycheck into this account and distribute it equally over the next 6 months to cover my living expenses. One of these days, I hope my livings expenses will go down enough so that I can just bank my 3rd paychecks.

e. EF

I keep this account open for liquidity purposes. Unlike ING, SmartyPig or DollarSavingsDirect, I can access money from this account immediately at a branch.

My once simple system has grown into a monster. But as they say, if it ain't broke, don't fix it. Oh, and here's another cliche: there's a method to my madness. Too bad only I can comprehend it!


MoneyFunk said...

Okay, I thought I was neurotic, but I think you beat me to it! LOL. You lost me way up towards the middle of the post. ;)

I know what you mean about the parents. My mom always comments how she is going to work until she dies. And secretly I think she is hoping we will take care of her. She has basically a null retirement (she puts $50 a month into a bond account that she just started a year ago). So, I know its coming and I know what I am not ready for it cuz I have my own freakin' financial state to take care!

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Ms. MoneyChat said...

oh lawd!!! girl you are .... shoot, i can't even think of a word. LOL. geez, what a system! you're absolutely right, if it ain't broke, don't fix it. hey, at least you actively manage your money.

DogAteMyFinances said...

This is a freaking mess. The post, plus the picture, actually has me laughing.

I simplified because I wanted to make sure Senor Dog would be able to figure it all out if something were to happen to me.

Michelle said...

Personal finance is personal, you know! There's something A Dangerous Mind about all of this, but I've got 3 checkings and 5 savings, so I'm only 2 accounts away from being crazy, too! My only difference is that my company will direct deposit into a total of 5 accounts (2 diff savings, 3 diff checkings), so I don't have to push as much money around. Oh, and each of my savings is earmarked to a single goal (like EF or new car fund) or group of common goals (household - repair, AC replacement, flooring replacement), which makes things easier to track. To Dog's point, you both should put together a financial emergency book that details your financial life JUST IN CASE - and make sure whomever might help you / need the data knows where it is...