Monday, September 21, 2009

I need more bank accounts.

Six bank accounts spread among five banks, one brokerage account, and some paper savings bonds just aren't doing the trick when it comes to keeping my financial life on track. Ok, to be perfectly candid, cashing out and closing out the HSBC and ING accounts or making my Roth contributions for the year would actually have been a better first step, but I needed something that fit into a weekend full of ProSat and a Confluence of Special Events pasta potluck celebrating both Rosh Hashana and Eid al-Fitr, plus a couple of random Catholic and Wiccan events thrown in for good measure so I focused on a smaller goal. Having over $20,000 in one account does nothing for my motivation to save.

Fortunately, FNBO has been touting the option to create multiple accounts lately so I decided that breaking that undifferentiated chunk of money into more specific goals was worth a shot. Because FNBO only lets you have one account opening request processing at a time, I only got one of the two new accounts done and scheduled for funding, but the other should be up and running soon. My new savings accounts will look like this:

Car fund (for replacement or major repairs): $8,000
Long term savings (for funding retirement accounts, etc.):$5,000
House fund: $7,683.41

That's all well and good, but now I have to figure out which account new savings should go into. They won't start taking out union dues until next month so I don't know exactly what I'll be bringing home every month, but it will be very close to $2,000 a month. I'm once again setting a goal of saving half of my take home pay. The challenge is to allocate $12,000 in a sensible way that keeps me motivated enough that I actually manage to save $12,000.

If I wanted to be really responsible, I would funnel everything into long term savings and make sure I'm able to either keep funding my Roth at a reasonable level throughout graduate school or start doing some taxable investing. I'm not sure I could remain motivated to do that, though. Saving for retirement is about saving for not having to eat catfood or live on the streets, about not winding up a burden to others or on government aid if I can avoid it, about saving enough now that if twenty or thirty years from now I have to scale back my savings to help my parents, I won't be hurting in my own dotage because of it. It isn't something to daydream about.

I want to drive my car until it dies, but I also want to be prepared to replace it tomorrow if that becomes necessary. If I had to, I could. However, I know from my brief, abortive attempt at car shopping that $10,000 opens the doors to far more options than $8,000 so I'm considering boosting the fund a bit, but cars aren't my passion. Sure, I drooled over Ferrari convertibles in my dad's Auto Weeks and Road and Tracks when I was younger, but I can think of plenty of things with a better pleasure to money spent ratio.

A downpayment on a house is something of a goofy goal at the moment, given that I have many years before I'll know where I'll light. I'm probably going to be renting for a long time. Still, that's the goal I dream about, the one that I care enough about to sacrifice some short term fun. I want four walls to call my own.

I also know that I'll be much more motivated by seeing big changes in one account balance than by a slow and steady progression in all three. Looking at what I'd like to have in each account a year from now, subtracting what I already have, dividing the difference by 12, and putting that away each month isn't likely to work. I think this tentative plan might work better:

September and October: full second paycheck goes to car fund. This tops the car fund off so I no longer have to think about it, a quick victory.
November and December: 1/2 of each second paycheck to long term savings & 1/2 to house fund.
January-May: full second paycheck goes to long term savings (or directly into Roth)
June-August: 3/4 second paycheck goes to long term savings and 1/4 to house fund

If I can pull this off, by the start of next September I'll have fully funded my Roth for 2010, saved an additional $3,250 for retirement, increased my car fund to $10,000, and boosted my house fund to over $9,000. Does that sound ambitious enough? Feasible? Nuts?


The Everyday Minimalist said...

Are they actually separate accounts?

I know ING for example, offers sub accounts under a single account, just as a way for you to differentiate your goals like you said, without truly separate accounts.

Over the Cubicle Wall said...

Very ambitious, but not nuts.

Cabin fund?

E.C. said...

Everyday Minimalist,
Although I can access all three accounts through one user ID and password, they have separate account numbers.

Over the Cubicle Wall,
The house fund might turn out to be a cabin fund in an ideal world. Depending on where my career takes me, it might end up being a buying my first house,paying it off as quickly as possible, and then getting started on a cabin fund.