From Podcast #171, Close An Account, Then Another, the one in which Jesse talks about the benefit of closing extraneous accounts.
The question of the day, as we take a run down Simplicity Lane—it’s a straight lane, not a lot of curves, not a lot to look at, just simple—how many accounts do you have? And does it matter?
Are you comfortable with how many there are? Have you ever questioned why you have the accounts you do?
History Isn’t Everything
Do you have what we call account scar tissue? So, you set up this account that one time to solve that one problem, long before you heard of YNAB, and that account still exists and does a few things for you. Maybe you had another account set up because they used to do those signing bonuses back in the day. Remember that, when you’d sign up for an account and they’d give you 50 bucks or something? It’s enticing.
Banks want you to have as many accounts as possible. Have you ever walked into a bank and said, “I need a checking account,” and they say, “Oh great, a checking account. It’s no fee, blah, blah, blah,” and then they say, “All you have to do is…” (and this always happens, at least at my bank), “All you have to do is,… we’re going to set up this super simple thing where we set up this separate savings account for you. It will be used as your overdraft protection in some way, and all we do is just set up a simple transfer once a month, $100, just to go from your checking to your savings, and now it’s fee-less, no minimum balance, yada, yada, yada…”
Every time they do this. I set it up for rental properties, and every time I have to tell this poor banker, who’s like 16 years old, “Hey, don’t do that savings account thing! I hate it.” “Oh no, it doesn’t matter at all, it doesn’t matter.” I say, “No, it does matter. That’s one more account I have to think about, so please don’t do that.”
More is More
Why do banks push you to have so many accounts? It’s because they don’t want you to leave and they know that the unwinding process that is required to switch banks is so high when a person is staring at something-teen bank accounts that they’ll just stick around and they can just keep treating you like garbage and you’ll stick around because you’ve had 19 accounts for 19 years and you have no idea how it all works. So, there’s that.
There’s also the idea of transferring money to and from things. You’re trying to use accounts for jobs that, really, the budget should handle. There’s the idea of reconciling all of those different accounts, if you reconcile—and you should.
Reconciliation is simply a way of saying, “Does YNAB reflect what the bank tells me? Has the bank made a mistake? Have I made a mistake?” You reconcile those accounts to make sure they’re all up to date and that’s just one more step. And sure, you could say, “Oh, that reconciliation takes me 30 seconds.” Well, you times that by eight unnecessary accounts and you’re up to four minutes. There’s mental overhead, there’s some just kind of hoop-jumping in your brain as far as, “Why is this there? What’s that for? This moves here.”
Keep It Simple
I submit to you that fewer accounts is just more simple. I don’t submit to you that one account is the best ever. There are compelling reasons to have separate accounts, but the scar tissue idea, where you have them for no good reason or you haven’t questioned them for quite a while, that’s what I want you to think about today.
Just ask yourself, “Do I have all of these accounts for a really good reason? Are some of them doing the job that the budget is doing for me anyway? Am I financially more fit than I used to be where I don’t need to necessarily hide money from myself through these artificial account walls?”
Trust yourself to make decisions on how you spend based on your category balances in the budget, not based on your account balances spread across all of those different institutions.
Something to think about: is it on purpose and is the purpose legitimate? If that’s the case you have my blessing. If not, maybe close a few and then close a few more.
The more simple the better. We want you to actively engage and we believe that fewer accounts is simpler and that you, all things being equal, will be more likely to engage when things remain simple.
Until next time, follow YNAB’s four rules and you will win financially. You’ve never budgeted like this.