The last time Melissa tried to fix her finances, she opened another 10 bank accounts.

She was following the digital version of what used to be called the ‘envelope’ system: when people got paid in cash, every week they would physically split the money into different envelopes, each labelled with the bill the money was to pay. When the relevant bill came in, that envelope would be emptied, and the bill would be paid without pain.

This is a blissful idea. No more stress or cashflow bumps when all the large bills turn up together, as they inevitably do.

Melissa had two savings accounts for specific events, and transaction accounts for rent. food, utility bills, insurance, health costs, car costs, sports costs, clothing, and fun with friends.

And it started out great. Melissa set up automatic transfers from her main account to all the other accounts so that when her pay came in, she wouldn’t have to think about what to do. She also automated the bill payments from the specific accounts.

Perfect. From now, her money would run on rails, no more juggling or stress. When there was no more money in one of the ‘fun’ spending accounts, she would simply stop spending.

And then one of her close family members who lived in another city was involved in a car crash, and spent a few days in hospital. As soon as she heard, Melissa immediately jumped in the car to visit and provide support.

She had the money for the extra costs involved in the trip, but she had to transfer almost all the money in the specific expense transaction accounts to the account she used for car expenses. Then a utility bill came in, and she had to empty her savings accounts to cover that.

Things got more tangled after that – she cancelled some of the automation, and moved some bill payments back to the main account, but she was still juggling between accounts to cover some direct debits that she couldn’t summon up the emotional energy to change. She also found it hard to make every single expense fit neatly into a specific account. Where should she put the costs involved in moving-house? Was physio for a sports injury a health expense, or a sports-related one?

And every time she logged in to her online banking, the large number of empty or almost-empty bank accounts staring back at her reminded her that yet again, she’d failed to fix her finances.

The first small step we took when I started working with Melissa was to make sure she had enough bank accounts, and to close the unnecessary ones.

How many transaction accounts are enough? One transaction account that her pay came into, and that she pays all her bills from. Melissa liked the idea of having a different account that she did her day-to-day spending from, so we left that open too. All the others, we closed.

We opened another savings account so that she had one for periodic expenses, one as a safety net, and one for a holiday to Fiji. We opened one restricted-withdrawal savings account at a different bank to use as place to start saving for a house deposit.

We kept her one credit card – one is plenty, and often vital for travel.

Melissa was concerned that this structure would lead her to overspending. And right-sizing her number of bank accounts was the only step in fixing her finances, she might end up doing just that.

But no number of bank accounts can fix the problem of overspending. If the ‘when there’s no money left, stop spending’ mantra worked, we wouldn’t be in debt or constantly juggling already. Our lives are too complex to have bank accounts for every expense, and when family emergency happens, we prioritise what is now needed over what was previously planned.

What is needed, alongside enough bank accounts, is an adjustable plan and savings to cover large expenses and loss of income. I’ll be writing about those next time.

How many bank accounts is too many? It depends. If you are constantly transferring money between accounts to cover costs, then that’s too many. Take a small step, and simplify them.