YNAB BLOG

Trust your Budget and Close Some Accounts!

I am growing more and more convinced that the reason a lot of people struggle with budgeting is because we live in a world that is too focused on accounts.  Most people have more than one account, typically checking and savings at the very least.  Some folks have two checking accounts – one for bills and one for everything else.  On average most people have between three and six Savings Accounts based on what I see through webinars and coaching.  They have one savings account for property taxes, one for emergencies and so on.

Then there are credit cards.  Most folks have a few of those as well.  Many people have a credit card they use for purchases and pay in full each month and some folks have cards they have stopped using entirely and are just trying to pay off.

It’s not unusual for me to look at a YNAB file and see ten accounts.  In an effort to understand the people I am working with, I always ask the purpose of each account.  When it gets right down to it, many times people are using accounts to budget.  “The money in this account is for XYZ.”

Why are we so hyper focused on accounts?  Because if you do not have a budget – you do need some structure to manage your money, and accounts are the structure that society provides.  (See?  You are secretly craving a budget!!) Everyone has a few accounts, and we are in constant contact with them. Money goes in and out all the time.  If you are using an account for a specific purpose – more than likely – you are trying to budget through accounts.

It can be really hard to let go of that structure, but the budget can simplify things for you if you let it.

Let’s say you have two checking accounts as mentioned above – one for bills and one for everything else.  If you create categories for the bills – and everything else – you could easily have one checking account.  Track WHAT the money is for in the budget.

In fact to take this a step further, when you finally go to spend money, checking the account balance is no longer even necessary.  Check your budget instead!  Let’s say you have budgeted $300 for groceries and your total account balances are $1000.   It doesn’t really matter what account you use for the purchase. You can hand over cash, a credit card, a check, a debit card – the budget doesn’t care HOW you pay for this.  The budget needs to know that it was for groceries.  The point is that $300 is what you have set aside for groceries.  Your other dollars ($700 of them) are busy doing other jobs!  So you cannot spend all $1000; your allowed amount for groceries is $300 and it’s the budget, not the bank balance, that tells you so. 

Do you have multiple savings accounts? Condense that down to one!  Set up savings categories on the budget to track your savings goals.  Instead of having a savings account for emergencies, and a seperate one for vacation, and yet another one for property taxes, set up a master category for savings, and  sub-categories for each of those things.  This is what the budget is for!

Honestly, if I could find a checking account that paid a great interest rate, I’d have one account and let my budget take care of everything else.  Because ultimately, accounts are just storage containers for our money.  (Dollars by location)  The budget is where we keep track of WHAT our money is doing.  (Dollars by job)  When it comes right down to it, the budget doesn’t care WHERE your money is.   You can keep it all in pennies in a sock drawer if you want – as long as you tell the budget what you spent those pennies on.

Can you imagine how simple things would be with one account?  Think about it.  No transfers, no wondering how to move things around.  Look over your existing accounts and ask yourself “Am I using this account to budget my money?  Could I take care of this by creating a category instead?”

Simplify your life.   Trust your budget.  Close some accounts! 

50 Responses to “Trust your Budget and Close Some Accounts!”

  1. Kenny D.

    I have 4 accounts with my bank: primary checking, online checking, business checking and savings.

    Everything hits primary checking first. That’s the account my paycheck goes to, I pay my bills out of, and use it for almost everything.

    Online checking: I only use this one to buy things online, and only keep enough money in to cover upcoming planned purchases. This way, if someone swipes my debit card # (I don’t use credit cards) the most I can lose is whatever is in there.

    Business checking: I’ve got a side business I am trying to get going. Anything coming out of this account is expenses and anything coming in that isn’t transfers is income.

    Savings: emergency fund and saving for large purchases (like next year’s vacation) go in there.

    The only account I can see getting rid of is the Business checking account. Or would it be better to do a separate budget for the business?

    I do have some other accounts in YNAB: 401k, Roth IRA, and mortgage. These are all off-budget accounts though and I just update them at the end of every month so I can track my progress on paying down the mortgage and saving for retirement.

    Is there any better way to track this in YNAB?

    Reply
  2. Julia

    While I do think that many people could benefit from simplifying their checking and savings account structure, there is caveat that I’d like to mention.

    Do NOT use your primary checking account (or a debit/check card linked to it) for online purchases. If you don’t want to use a credit card, then keep a separate account for online purchases and use the Visa-branded debit card linked to that account when you pay for things online.

    I work in banking and see far too many cases of people who use debit cards linked to their primary accounts when shopping online (even at reputable sites) and end up with some kind of fraud and all/most of their account is temporarily unavailable to them while the investigation is done. It can be a real problem.

    Likewise, though I never would recommend allowing creditors to automatically debit your checking account, there are times when it’s advantageous (rate discounts for autopay come to mind). If you’re going to do that, use an alternate account (could be your “online” account). You’ll be thankful when Bank X has a data problem and tries to withdraw $10,000 instead of $1,000. It could cause a disaster with your primary account, but will not be nearly as troublesome when it happens on a lower balance, limited purpose auxiliary account.

    So, though there may be no budgetary reasons to keep a secondary account, it’s something I’d strongly encourage for security reasons.

    Reply
  3. Mary

    The only thing I don’t quite understand is how do you keep track of how much money you have put aside for savings? Where can you see how the $50 you put aside every month add up?

    Reply
    • Kate

      You see a running total of all money you have budgeted to a certain category. If you don’t spend that money, the total accumulates each month. So right now I see that we have $785 in our vacation savings fund. It is sitting in the checking account with our other money, but it looks like it is already spent on vacations so I don’t spend it. It shows as a total in my budget waiting to be spent on a vacation.

      Reply
  4. Yann

    I think this is a great article/post. In general I follow Erin’s advice, and I focus only on the budget and not too much on my two accounts: checking and savings. I save for annual expenses (for example car insurance) on a monthly basis. For budget categories like these, I’d like the money to be stored in my savings account, to gain a bit of interest throughout the year. But that money needs to be transferred back to my checking account when it comes time to pay.

    Does anyone have advice about efficiently keeping track of how much should go in an out of the savings account each month?

    My plan for now is to tag the budget category with notes in YNAB and manually add up the total once a month.

    Reply
  5. Andrea

    Kenny, you don’t have an excess of accounts – your account handling is not like someone who has, say, 8 accounts going for numerous planned expenditures. That is someone who would benefit from a shift in thinking towards letting the budget be the planner and the money can stay pooled together because the budget knows what the jobs are for the dollars, not the account itself.

    Having an account that you keep separate for certain truly separate functions is a good idea if there is a strong benefit to doing so – for instance, your account you use for online purchases has the rationale of keeping the bulk of your money safer from identity theft.

    And keeping your business account separate may save you time on the far side when you have to identify your business activity to Uncle Sam. (And yes, even now, a separate business YNAB budget is a good idea and you can do that just by opening a new budget from within the YNAB you already own.)

    As far as your 401(k), Roth IRA and mortgage, these are accounts that have specialized function and are okay keep off-budget and to let go along for the ride with monthly updates as you are already doing.

    The gist is that you are already doing what it takes to understand the map of your money, and that is using your budget, not your accounts, to tell you where you stand. Anyone who is sitting on 10 checking accounts may do very well to emulate you!

    Reply
  6. Julia

    The subject of this post is, I think, why I have come to love YNAB so much in the few short months I have been using it. Having a budget that I can actually use for present needs and future planning (as opposed to the type of budget you find in a product like Quicken, which seemed mostly intended to show me what I’d done in the past) is an incredibly freeing feeling.

    I bank at a credit union that offers a “rewards checking” account with a 4% interest rate; the savings account has a 0.25% rate. Keeping all my money in checking, pre-YNAB, made me itchy because I would see that largeish balance and feel like I wanted to spend it all! (I keep a token amount in the savings account, just enough to avoid monthly charges, just in case interest rates ever go back up.)

    Now, though, the only time I even glance at the account balances for my checking and savings are when I am reconciling my YNAB budget, to be sure I haven’t missed any transactions. I concentrate on my YNAB budget category totals, which tell me clearly how much money I have to spend this month regardless of what my bank balance says. The itch is gone!

    Reply
  7. Erin

    Hi Kenny,

    Andrea is correct. You sound like you are using accounts wisely and for good reason. The goal of this post is to just get people to stop and consider how they are using accounts. Are they using accounts to budget? Would it be easier to let the budget take care of things? For example, a year ago I realized that I did not need 6 savings accounts, and I condensed everything into one savings account. I track WHAT I am saving for in the budget. It seems to me you have already thought this through. Thanks for your comment!

    Reply
  8. Rob Ward

    When I first bought YNAB this was a hard concept for me to grasp (and I have an accounting degree). I think people continue to use multiple accounts because that is how they have always “budgeted” in the past. But after using YNAB for a few montages it eventually made sense. And more recently I have been condensing my accounts as much as possible. We only have one credit card for all of our purchases, one online checking, one savings, and one checking with a local bank. That is all you really need!

    Reply
  9. Katie

    I finally did it! I consolidated my 3 goal-specific ING accounts (house downpayment, emergency fund, car replacement) into one. They were all on the same account in the budget anyhow, just different categories. It was a pain to deal with 3 separate interest amounts coming in each month. I know I can trust the budget to tell me what I’ve saved for what! I just needed a post like this to push me over the edge. :)

    Reply
  10. Anne

    I must be living under a rock because this is the first I’ve heard of using an “online” account. I pay most of our bills by allowing the creditor to directly withdraw the funds. if a bill is not paid for automatically, I set up the withdrawal online, too. What should I be doing differently?

    Reply
  11. Greg

    I use a credit card for everything I possibly can and almost never use checks or cash. I started doing this long ago because of the extra income I realize from rewards. All incoming monies go into savings. Twice a month, I transfer enough into my checking account to cover the credit card bill and any other regular expenses that come out of checking (mortgage, utility bills, insurance, etc). That limits the amount of possible damage due to fraud or bookkeeping error. In a pinch, I have an investment account that I can write checks against should my regular checking account is blocked for any reason.

    I have exactly two accounts configured in YNAB, one for checking and one for the credit card.

    I don’t track savings in YNAB at all and I don’t want to. What attracted me to YNAB in the first instance was simplicity. YNAB doesn’t try to manage my entire financial life, just my monthly budget. BTW, I don’t like the fact that if you do configure a regular savings account into YNAB (the “natural” thing to do) , the balance automatically shows up as “available to budget”.

    Reply
    • Jesse

      Hi Greg,
      Yeah, it’s Available, but you’d really just budget it to a savings category (Emergency Fund, Vacation, Property Taxes, whatever). I’m with you though. I have savings accounts (one for Christmas, one for the EF) and I simply keep them off budget. What is happening though is that people really are using accounts to do what a simple category on your budget screen can do for you (w/o having all of the reconciliation hassle that comes along with it). That’s what we’re trying to pare down.

      Reply
  12. Steven

    I would like to echo Mary’s comment. Where and/or how do you keep track of the jobs of all the dollars in your savings accounts? For example, if I am using my savings for three categories (property taxes, vacation and home repairs) where do you track the running totals for each?

    Does YNAB do this?

    Thanks!

    Steven

    Reply
    • Amanda

      From what I have seen in my short time using YNAB, if you have a budgeted category for your spending goals, YNAB will keep a tally of what you have budgeted in april, then what is budgeted in may will add on top of that, etc. … others who are more familiar with YNAB may correct me if I’m wrong??

      Reply
  13. Ray

    This is a great article! I consider myself a pretty good manager of money but I never thought to not budget by accounts but rather by YNAB. The lightbub has clicked on and I appreciate this article.

    Reply
  14. Bryan Sheme

    We just did this over the last two months. We had an ING account with 7 different accounts for each thing. It was really confusing so we consolidated everything into our checking and now just budget from there. The reason we were using ING was for the higher interest bearing account and now that interest is just about obsolete…it wasn’t worth our hassle to use multiple accounts.

    Reply
  15. Matt

    As YNAB newbie, I’m pleased that this particular component of the transition from a seat-of-the-pants budget methodology to structured has been easy for me.

    However, I found myself recently creating two “faux” accounts for my children’s allowances. The idea is that I may be able to teach my children something that I have only just recently learned, the concepts of delayed gratification and saving.

    On their “pay day”, I simply transfer (in YNAB only) the funds from my checking account to their individual accounts. The actual funds stay in checking, but I’m able to print a “statement” for my kids periodically so they can watch their balances grow.

    Is this in keeping with your admonition to be less account centric or is this a counter intuitive thing I’ve done?

    Reply
  16. Christian Sean Caspers

    Well, after reading this article I decided to drop my 12 accounts in ING Direct. Before YNAB, I set up the accounts to track funds for various uses. Now that I’m budgeting better, I’m paying attention to categories. I just didn’t make that final decision to close the ING accounts. That’s 12 accounts I don’t have to balance each month. In addition, access to the cash took longer when I needed to transfer to my main checking.

    Now, I’m left with a main checking for bill paying, a business checking, a savings account for emergencies.

    My goals are to make balancing accounts easier by reducing the number that I have. Thanks for the post.

    Reply
  17. Michelle

    We used to have fewer accounts until I read one of Jesse’s posts advising how easy it was to open several ING accounts. We thought it sounded great and added additional accounts to separate our various rainy day funds. Maybe I misinterpreted Jesse’s weekly e-mail.

    Reply
  18. Kit

    I actually disagree. I started out having everything listed under my budget and not separate accounts, and I found I was spending way too much time allocating what was supposed to go where. And trying to reconcile with my bank account was a royal pain.

    As I got busier, it was far easier to create separate accounts with nicknames for each one in ING that tell exactly what they are for. It is also very nice to watch the balances slowly creep up each and every month, knowing I am getting that much closer to my goal.

    While I understand your point of focusing on the budget more than accounts, I don’t think it’s a one-size-fits-all solution.

    Reply
  19. Susan

    This is a timely post. I currently have a checking and a savings account at my local bank that I use for everything – income is direct deposited and then allocated with YNAB, some into savings for RE taxes, emergencies, car stuff etc, and the rest sits in the checking account. I use my debit card for online purchases and don’t use the credit card at all. Is my checking account balance in a hazardous position?

    I’ve been thinking that there’s more money in the local bank than I need sitting around and it ought to be somewhere gathering a little more than the paltry amount it’s earning. On the other hand, I do like the simplicity of having just those two accounts…

    I paid off the credit card about a year ago when they jerked up the rates and never activated the new card they sent. I was considering opening an account at the local credit union and using them as my CC provider. Would moving money to the credit union be a wise move, or should is it worth considering an ING or other online banking account? I’m not talking a lot of money here… just more than I need sitting around.

    Reply
  20. Susan

    I should have said “… just more than I need sitting around, *thanks to YNAB*!”

    Reply
  21. Nicki

    Julia-Where in the world did you get a 4% checking account? ING isn’t even paying that much on savings accounts. I have been hunting for an option to earn interest on my checking because the balance is so high with the extra month budget in it. Perkstreet offers cash back when you debit, but I still can’t find any that actually pay interest.

    My husband and I had separate checking accounts until we found this program three years ago. It made a huge difference in converting “his” money and “my” money into “our” money. I love categories. They make all the difference. I have an annual expense savings built into my budget. The main category is Annual Escrow. I have a set amount I put in each month, but I spread it among my subcategories- Christmas, DMV, school clothes, birthday money, etc.. This allows me to use the reports section to see how much I have spent in each category for the year and track that I am following what I predicted at the beginning of the year. I especially love this for Christmas.

    Reply
  22. Ted Jardine

    @Mary:

    “The only thing I don’t quite understand is how do you keep track of how much money you have put aside for savings? Where can you see how the $50 you put aside every month add up”

    That’s what categories are for. It doesn’t matter what account the money is in (as long as your resolving your bank statements so checks don’t bounce etc.) as long as you’re allocating all your money into categories (including saving specific ones). For example, you will have a general savings category into which you put your $50/month into and see it grow.

    Reply
  23. Mark

    Jesse, great post!

    I’ve recently trimmed down the number of specialty accounts (because of your system) and now keep a larger amount in my primary checking account. I use a separate debit card for online transactions and when I’m on vacation. The only time I refer to my account balance anymore is to record the exact amount of each direct deposit paycheck and to reconcile once or twice a month.

    Having the iPhone app is awesome! I always know what I can and can’t do.

    Reply
  24. Kent

    I definitely had an “account” issue prior to YNAB. Now I really only actively use 2 accounts, checking and an interest bearing savings where I hold the bulk of my money. But my big transition has been letting my checking build up to cover my future expenses, which has also eliminated my “overdraft” concern I used to have. That is now gone.

    Great article, these are very useful. I also like them because they “pull” me back into focus on my budget issues. We have competing items requiring our focus and only a limited amounts of time. I personally need the reminder on the financial end!

    Reply
  25. maureen

    SO TRUE
    My husband and I sat down and looked at our budget this month and we decided to close out three accounts.
    Now we have one chequing, one savings and LOC

    Reply
  26. rudeboyrg

    I agree that we should use categories for expenses, savings, etc. However, I think alot of people are missing the fact that you can only make 6 withrdrawals a month from any savings account. That is a federal regulation.
    For my regular day to day expenses, bills, and monthly expenses,etc, I use a checking account. I keep a seperate money market account for vacation (the account has zero foreign transaction fees). I have another savings account where I keep my emergency money, unexpected expenses, and house savings. Another savings account is used for car repairs and money saved for a new car. Another savings account is for non monthly bills. Yet another is for non-monthly expenses (eg: clothes,etc)
    I have mutliple budget categories in one savings account, but I still keep mutliple accounts. If I had everything in one savings account, I can foresee a situation such as this: I take a vacation (1), finally saved up enough for that new laptop (2), my Geico 6 months insurance premium is due (3), my car broke down and needed some transmission work (4), an emergency occured (5), a non monthly expense occured (6)…..
    Thats six transactions in one month. And I can no longer withrdraw if I need to. While not VERY likely to happen, it can. And because of the withdrawal limitations set by the Feds, it’s too risky to keep everything in one savings. Besides, I think it keeps things more organized. I still budget off the YNAB categories and not my balances.

    Reply
  27. bookman413

    @ Mary, the way you see how much you have in savings is on your budget page. Say you have $2000 altogether but the budget page tallies up that you have $200 is for savings, $200 is for car repair, $156.21 is for groceries, etc. The budget categories maintain and build their total balances from month to month.

    Under this system, you refer more to your budget than to your account balance when making spending decisions.

    Reply
  28. Trevor

    I have 3 checking and 3 savings accounts at 3 different banks and I’m keeping them all. I don’t use them for for specific purposes, all tracking is handled by my budget. I don’t find them to be very much extra work. One of my checking/savings pair does most of the work and the other two just get monthly interest and occasional deposits when I have far more money than I need to pay my bills.

    Two of my three banks had outages this year where people were very angry and frustrated because they couldn’t get online to pay a bill or they couldn’t withdraw any money because of computer issues. I just shrugged it off because my diversification means that I have access to money even if a particular bank has an issue.

    Reply
  29. Dave H.

    I have “primarary checking” and “primary savings” accounts that point to my credit union acconts. These are my most liquid accounts. But, they don’t pay the interest I need them to pay. I need my money to be working — interest matters. Investments and CDs are fine, but if I can get 1.5% vs. 0.75%, why would I not?

    So, I have several ING accounts for accumulating money for specific purposes. Sure, they are budgeting accounts. So what? It helps me know what I’ve set aside for what. But, these accounts are off-budget In YNAB. They show up as a single outflow to ING.

    Before I set it up this way, I had been burned by multiple accounts, interest payments, bank charges, etc. not being properly recorded by YNAB. (Not really YNAB’s fault, only my lack of understanding.)

    Just letting a category balance accrue with no no check on earning didn’t appeal to me. Maybe if I did everything out of my ING accounts . . . but, that is unresponsive. Sorry, I require multiple accounts for the way I manage money. Budget is primary, but it is there to support money mangement, not the other way around.

    Dave

    Reply
  30. vince

    Erin,
    Am I to understand that you are suggesting I move all my money into one account? At one institution? Are you aware of how many banks and financial institutions have closed in the past 2 years? Are you suggesting I keep all my eggs in one basket? Yeah, I know about the FDIC but, still…

    And what about earning interest? Checking accounts that pay interest usually require a minimum balance. If your balance drops below that minimum you are charged a fee and that fee usually exceeds the amount of interest earned for several months. Just doesn’t seem like a good gamble.

    I understand the idea of using several accounts to budget rather than a budget. I mean I like the idea of no more transfers! But I don’t understand how that applies to my previously mentioned thoughts and questions.

    Anyone?

    Reply
  31. Megan

    I love the idea of just having two accounts (Savings and Checking), but I haven’t managed to make it work. I’ve been using YNAB for 2 years and most of the time I do really well and follow the rules, but every so often my husband and I will do something silly (like blow our entire food budget on eating out instead of buying groceries; or like not checking it as often as I should and overspending) and I’ll have to start all over again at square one.

    I’ve found that if I have separate accounts I am less likely to be tempted to spend money that I shouldn’t because it isn’t physically available.

    But you’re very right about the silliness of using accounts to budget. I would much rather let it all sit in my interest bearing checking account (Charles Schwab) and go from there. I’ll just have to keep trying to get it right, and maybe someday I’ll be able to close my other accounts. :D

    Reply
  32. Stacey

    We have our primary accounts at ING, and a checking account at a local bank we keep only a small amount of money in. There are still enough places we do business with that only take cash or checks, and ING doesn’t offer paper checks of any kind (and we hate carrying cash).

    For those who don’t understand how to use the categories, here’s a quick explanation/example: you make one category for “general savings” and another for “house escrow.” Every month you put however much into each category – like $1000 into savings and $500 into the escrow. The balance in that category will go up every month since you’re only doing inflows and no outflows. Now, say it’s tax time and you need to pay your property taxes. After 12 months of putting $500 into the “house escrow” account the balance should be $6,000. Say you pay your taxes via credit card. The category you use is “house escrow” and it will subtract the amount from your balance (be an outflow on that category). It doesn’t matter what physical account you keep the money in, you’re just taking it out of the “house escrow” category. I hope this makes sense!

    Reply
  33. david c

    Mmm, thanks interesting blog and I’ll re-read it and read some of the comments. But imho found YNAB categories rather too clumsy in tracking my “accounts”. I’ve been 1 year with YNAB now and still not got it as sussed as it should be. It’s not easy, it’s not straightforward.I’ve read the tips and I’ve asked on the forum. Basically I think the design of YNAB is flawed and has been since it’s early version. I’m sure it works well for some – but for me it just is a bit too clumsy.

    Reply
    • Jesse

      @davidc, I’d love for you to elaborate David. The idea of being able to allocate your dollars to different virtual “jobs” but have them all exist in one physical place…that’s the heart of YNAB (besides some timing things with Rule Four and paying yourself back with Rule Three)…I think that’s what it does best. But maybe I’m missing how you implemented it (or thought it should be implemented?).

      Reply
  34. Karen

    Thank you, thank you, thank you!
    This was just what i needed to hear! Not only do we bank with THREE institutions (yes, 6 accounts), but i also have my own paypal account, as does my husband. Not to mention the store credit cards! I’ve been needing this nudge in the right direction and all i can say is THANK YOU! I will be eliminating all this extra stress TODAY!

    Reply
  35. davidc

    Hi Jesse, my frustration with YNAB is hard to describe really, probably best by example. Here goes…So I have a master category (“Classic car savings”) (we’re saving for a classic car) with three categories “Savings-647″, “ISA-695″, “ISA-298″. Note the ISA’s are UK tax efficent (tax free actually) saving accounts but we’re limited to how much we can save into them each year. One category equates to my wife’s ISA, one category equates to my ISA, the other category equates to general purpose taxable savings. So the three categories add up to one master category – “Classic Car savings”. This works fine, I can see how we’re doing with our saving for a classic car at a glance. I can also use the accounts above for other savings purposes too. I guess you would say this number of accounts would be overkill perhaps. The awkwardness for me comes with categories. The fact these accounts are tracked in YNAB means that transfers in and out of these “on budget” accounts do not get categorised. So, there’s a manual cludge where you have tally up all the account movements in the categories above just to get the master category balances to be correct. I’d kind of prefer a system whereby *everything* is categorised and so when you’re importing your transactions and assigning transactions to categories, this sort of thing just sorts itself out with no manual action to check “when did I transfer that money?”. I guess this goes against the ethos of YNAB. Thanks!

    Reply
  36. Saurin

    The above post by @davidc made me think of a couple of scenarios where I’m unsure how to use YNAB also. I’ve been using it for 6-months now, but am still concerned about how I’m using it… To me it seems like either you’re “all in” with the philosophy – or you’re in a cludgy type of situation where you have to use things in a non-standard way that feels awkward.

    For example, for whatever reason (I just can’t let go) – I track how much of my paycheck goes to all of the different type of taxes. Not very hard at all to do, but I know YNAB philosophy is just to start with your after-tax paycheck. I do pre-tax, and budget everything (taxes, 401k contribution, etc).

    I also use YNAB for my loan accounts – e.g. 2 car loans. I budget an amount of “Car Loan Interest”, which changes every months (gets less and less), and then I don’t use the “Car Payment” category at all – since that is really a transfer from one account (checking) to another (car loan). This also feels strange to me. I’m thinking I should use a category for the car loan payment transaction since that “transfer” is not really a transfer, it’s an “outflow”… right? I know that YNAB philosophy is generally to not categorize “transfers”, but it’s still something you can do in the tool. Thoughts?

    In any case, my overall point is that I feel that if you don’t truly let go of any analytical / data loving tendencies, then it can feel awkward to use YNAB as you won’t feel like you’re using it properly.

    Reply
  37. » The Case For Multiple Bank Account (and Emergency Funds) Two [Common] Cents

    [...] a month ago, I came across an article entitled Trust Your Budget And Close Some Accounts! in The Wallet (YNAB’s blog).  In keeping with their ‘You Need A Budget’ philosophy, the gist [...]

    Reply
  38. Matt

    You are speaking to me Erin–guilty as charged. I have 7
    savings accounts and 5 checking accounts at three different banks.
    I truly need to consolidate, and it will definitely make my
    budgeting and YNAB experience that much more streamlined! Thanks
    for the write-up.

    Reply
  39. Giles Lewis

    The reason I started writing is that it is 6am on Sunday morning and I have woken up worrying that I have not budgeted for Feb and been through January’s banks statements – and then thought – oh no how many accounts do I have to go down load! so what a great article :-)

    I think this is a great advice and after having multiple left over bank/savings & credit cards – went through a ‘phase’ of simplifying life, closing and reducing old left over accounts. So this is sort of reducing the number of accounts.

    BUT is not the main point of the article I guess which is that people think/learn the jam jar budget approach and actually what I am after is the virtual jam jar as in YNAB all the money is categorized (tagged). And I love the idea of a checking account that pays a good % rate rather than savings & checking, so I will have a look for one. But then this may result in me having yet another account!

    HOWEVER: how do you teach kids about money – spending and saving?
    My problem is that I am frugal (sometimes call a ‘tight ass’ here in the UK) and have had to learn to spend money to enjoy life rather than worry and save it all the time. Now I have kids I have an 8 year old that is worried about not being able to afford a house and is very reluctant to spend money And a 6 year old that is very generous and will spend it (on sweets), play with it (and usually lose it) or give it away (to buskers) depending on what will make him happiest at that moment.

    I like the idea I read recently (can’t find it now) about teaching kids by having 3 jam jars with the labels (I think they had better names but these will do):-
    JAM JARS:
    1. Giving (to charities)
    2. Saving (to buy things you want big or small sweets or a bike)
    3. Banking (for the future, raining days or education fees)

    BUT the things is this teaches the jam jar budgeting approach and really I want them to think if it a virtual jam jars, but writing this I realize that a ‘virtual jam jar’ is a bit of a complex idea for a 6/8 year old to understand. But even adults think like this, so is there a better way?

    Kind regards
    Giles

    PS: when leaving a comment what am I supposed to put in the website field? My personal website? My favorite website?

    Reply
  40. Sylvie Fradette

    Hi, my husband and I are new at YNAB. Actually, we are on trial version. I like this idea of trimming accounts and categories. I have one question on accounts. My husband as a checking account, a saving account and a credit card. I have a checking and credit card account. This all goes in the same budget. Both of us want to have separate account is it ok?

    Secondly, we have put school and personal loans into accounts. His this ok.

    Reply
  41. Jeff

    Hello, I am on the trial version of YNAB and enjoying it so far. My question – I have 3 credit cards. One has a large balance that I am trying to pay down. The second is completely paid off and has a zero balance. The third is another card with a zero balance. The cards are rarely used for purchases.
    So you mention closing accounts, but what about my two empty credit cards? Can I close those? Should I? I’ve heard that could hurt your credit score by closing them, and why wouldn’t I want a high credit limit as long as the balances are kept low? I’m surprised to see the article didn’t really touch on this.
    My only other accounts are a primary checking where everything happens from, a savings account I place money into, as well as a retirement (401K) account.

    Reply
  42. LilySavage

    i’ve just started YNAB and i just love it. currently, i have several active chequing accounts and one active savings accounts, which means a lot of convoluted transfers come payday. i’m looking to collapse some of them into one account, but part of me really likes having separate accounts for very different purposes. my savings account (aka my emergency fund) is in an online bank for which i don’t have an ATM card and i LOVE it that way! as i get better at managing my money, i’ll change the structure more drastically, but for now, i need the externally imposed discipline of money i can’t touch. i have certain accounts associated with certain debts (ie. a student loan). once those debts are paid, then those chequing accounts are no longer necessary and i’ll close them. but for now and in the early YNAB stages, spreading my money out is working for me. i know my system will get cumbersome and i’ll want to change it. incremental change is key for success, as you adjust to a very different way of thinking. make too many big changes at once and you’ll mess up! which nobody wants! so make the changes as they feel right for you.

    Reply

Leave a Reply