Multiple Checking Accounts Budgeting Made Simple

It’s hard enough to follow your finances if you have one checking account. When you have multiple checking accounts the process becomes geometrically more difficult – until today.

I’m about to share a system that will help you track your spending for free in about 15 minutes a month regardless of how many checking accounts you have. All you need is an excel spreadsheet and your bank statements.

The Set Up

I recently got an email from a very nice lady who just couldn’t track her spending and she wanted to get a handle on this muy pronto. She understood that in order to achieve her financial and life goals she had to know what it cost her to live on average each month. The problem was she had 3 checking accounts and that made it confusing. We discussed the 4 step method below and it solved her problem.

The Steps

Let’s assume you have three checking accounts all being used for personal expenses.

1. Add up the total value of three accounts at the start of the month.
2. Subtract the value of any investments you made from any of these 3 but do not include inter-account transfers.
3. Add all deposits made to any of these three accounts during the month but ignore any inter-account transfers.
4. Subtract the value of the three accounts at the end of the month.

Let’s take a look at an illustration for Sally Saver.

 

Tip: I recommend you consider Everbank for online banking.  They pay great rates for checking, make it easy to do business, have an easy to use web site and provide world-class service.

Line 3 represents the starting value Sally had at the start of the month in each of three accounts. Her total starting value is $5650 – capische?

During the month she withdrew $300 from Ally Bank and $400 from Everbank and invested that money in different mutual fund accounts. So she saved a total of $700 from these three checking accounts. Good job Sally!

Sally sold some collectibles on Ebay and deposited the $500 she earned in Ally Bank. She was paid $6300 from work and deposited that money in Everbank. Her total deposits for the month were $6800. Sweet.

Sally looked at her bank statements and determined that the ending balance for all three accounts totaled $5450.

Using the formula above, she took the starting value, subtracted the investments, added the deposits and subtracted out the ending balance. Once she ran this calculation Sally realized she spent a total of $6300 for the month. Of course Sally had to go through her monthly statements to make sure she did not include any inter-account transactions.

This method is fairly easy to use but it assumes that the banks all use the same starting and ending dates. If they don’t, you can still use this method. Some months will over report spending and other months will under report. In the end it will work out and you’ll be able to see what it costs you to live on average each month.

If you use a particular account for personal and business, you will have to go through those accounts and isolate only the personal expenses. You’ll also have to reconcile each account every month.

You can see that it is far easier to consolidating your banking. Have one checking account for your personal needs and one for your business needs. For me, this is banking Nirvana.

But I know that sometimes having more than one checking account is unavoidable. And I know that it takes time to implement the consolidation process too. In the interim you can use this method to easily figure out where you stand each month and use your bank records to quickly calculate how much you spend on average each month.

If you have multiple checking accounts, how do you track your spending….or do you bother?  And while I’m at it, why do you keep multiple checking accounts anyway?