At one point, I once had over a dozen checking accounts.
I was doing reviews for my previous personal finance blog and since opening a checking account didn't hurt anything, I kept opening them and reviewing them.
After a few years, I had a dozen checking accounts. I'd have ten bucks here, twenty bucks there, and it was a total mess.
It was awful.
As I started closing them, I realized that I didn't have a good idea of how any of my accounts were connected.
Which bank account was automatically paying my credit cards?
Which bank account was connected to my Vanguard account?
For the checking accounts, I didn't care. I was closing them.
But for the important accounts, I had no idea and that was a problem.
So I did what any engineer would do, I drew a map.
You can draw your map however you like, I think it's best to go with something intuitive, but mine was relatively simple:
- Start with a list of all of your accounts – bank accounts, brokerage accounts, credit cards, Paypal, Dwolla, etc.
- Then add in all of your bills and services – cable TV/internet, utilities, Netflix
- Now draw arrows between them indicating a link – The side with an arrowhead meant I had to log into that account to draw money from the other. I'd use acronym for the link type – A for ACH transfer, BP for bill pay, DD for direct deposit.
- Remember to update this as your accounts change
Now that you have the financial network map, prune it. Chances are there are things in there that don't make any more sense and you can close down those accounts and adjust the map so it's simpler.
And if you haven't done it already, it's time to put together a money field manual to put into prose everything you know in your head.
Here's what our financial network map looks like today (with color coding!):
Complexity can be a source of problems and a cognitive weight you don't need, so make your life simpler. Fortunately you have a map to show you how! 🙂