The Cost of Too Many Financial Accounts

Peter Donisanu
11 min readMay 12, 2023

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Did you know that having too many financial accounts can actually be more counterproductive than being useful? To be sure, while some individuals view having multiple financial accounts as making them better stewards of their finances, the truth is that being overbanked can lead to serious financial problems.

And that’s what happened to Brian. Now, Brian is an ambitious entrepreneur with a passion for personal finance. And Brian believed that the more accounts he had, the better he could manage his finances and grow his wealth.

Even so, little did Brian know that his obsession with opening and managing various financial accounts would take a toll on his mental health and cost him dearly.

And, that’s not because Brian didn’t know how to manage his money. In fact, Brian had always been a high achiever. He graduated at the top of his class from a prestigious business school and quickly climbed the corporate ladder, earning a six-figure salary enabling him to make the leap and start his own business.

As his wealth grew, so did his appetite for diversification. So much so that Brian believed that opening multiple bank accounts, credit cards, and investment accounts would provide him with better financial security and opportunities for growth.

And, over the years, Brian accumulated several dozen bank accounts, credit cards, and investment accounts. Even so, Brian meticulously tracked the balance, interest rates, and fees for each account, ensuring that he maximized his returns. In fact, he spent countless hours poring over spreadsheets and statements, monitoring his cash flows, and making complex transactions between accounts.

Now, at first, Brian’s strategy seemed to work. His wealth grew, and he felt a sense of accomplishment from his financial prowess. But as Brian brought on new clients and his business grew, so did the complexity of his financial situation.

And as his finances became more complex, Brian’s stress level started to rise. Indeed, whenever a statement arrived in the mail, or an email notification popped up on his phone from a financial institution, Brian felt a wave of anxiety wash over him. The truth is that the sheer volume of information related to his finances was so overwhelming that he struggled to keep track of all the financial details.

The turning point came when Brian missed a credit card payment deadline. He had always prided himself on his financial responsibility, but the oversight led to a hefty late fee and a hit to his credit score. And it was that incident that shook Brian to his core, forcing him to question whether his financial strategy was really working.

Nevertheless, despite the warning signs, Brian stubbornly refused to simplify his finances. He believed that his system, while complex, was still the best way to manage his money, and this decision came at a steep cost. That’s because the stress from managing so many accounts at once led to more oversights and errors, resulting in additional fees and penalties. As this happened, his stress levels skyrocketed, which affected his work performance and personal relationships.

So, what happened?

Well, Brian’s once-pristine credit score plummeted, making it difficult for him to secure cheap funding to keep his business afloat. What’s more, his investment accounts suffered, as he was unable to give each account the attention it required. Eventually, Brian’s professional and personal life began to suffer as a result of his financial struggles.

And, only when Brian hit rock bottom did he finally recognize that something needed to change. At that point, he realized that his finances had become unmanageable, leading him to admit that he needed to simplify his financial life.

Now, as Brian began working to simplify his financial life, he noticed a significant decrease in his stress levels. In fact, he no longer spent countless hours poring over financial statements or worrying about missing important details. And as a result, his professional performance improved, and he gradually repaired his relationships with friends and family.

The Mental and Financial Costs of Too Many Financial Accounts

In the end, Brian learned a valuable lesson: sometimes, less is more. His pursuit of financial complexity had limited his ability to remain financially flexible, ultimately costing him far more than it had earned. By embracing simplicity, however, Brian was able to regain control of his finances and, more importantly, his life.

Can you relate to Brian?

The truth is that many individuals today are overbanked or have too many financial accounts spread across various financial institutions, and it’s costing them their ability to manage everyday stresses and to remain resilient to one-time shock events.

The Mental Costs of Being Overbanked

In turn, these complex processes for managing their finances quickly spiral out of control, leading to unnecessary financial costs and setbacks.

Indeed, there are many costs associated with being overbanked, and it all starts with cognitive overload.

So, what is cognitive overload?

Well, cognitive overload is when you become so stressed that you don’t know what to do next. And this typically happens when your brain cannot process and handle the overwhelming amount of information it’s receiving because there are so many things coming at you at one time.

Now, Eldar Shafir has a lot to say about cognitive overload. That’s because Shafir is a cognitive psychologist whose work focuses on how cognitive limitations, such as cognitive overload, can affect decision-making and behavior in various life domains. And Shafir, along with other behavioral economists studied how your mental resources can become scarce when you’re faced with income challenges, time pressures, or other demanding situations.

According to Shafir, when you experience cognitive overload due to resource scarcity, it can lead to a phenomenon called “tunneling.” Tunneling occurs when you focus your attention on the immediate problem at hand, forcing you to neglect other important aspects of your life. And, as a result, you may struggle to make sound decisions or engage in effective problem-solving when it comes to your money.

Indeed, in a study conducted by Shafir and his colleagues, participants were given a challenging financial decision to make, with some participants facing a high-pressure situation that simulated financial scarcity while others faced a low-pressure situation. Those in the high-pressure condition experienced cognitive overload, leading them to make suboptimal financial decisions compared to those in the low-pressure condition.

What this study illustrates is that when you’re overbanked, and your financial management process becomes so complex that it takes up too much of your attention, it leaves little room for other essential professional and personal life obligations, especially when sudden life changes take place.

When this happens, you may feel mentally exhausted, find it difficult to focus on tasks, and struggle to make critical decisions. In turn, “tunneling” can affect your productivity, creativity, and overall well-being because your mental resources are committed to solving one complex problem. And more often than not, that’s worrying about your finances. It can also cause additional stress and anxiety, leading to burnout and decreased life satisfaction.

Moreover, when your brain is preoccupied with one domain of your life, like staying on top of managing your various financial accounts, it may be less able to switch gears and focus on other tasks. This situation can lead to reduced creativity and problem-solving ability, as well as increased risk of errors or oversights in other parts of your life, like staying on top of your workload or managing essential relationships.

Now, maybe you’re in a situation where you have various deposit, credit, and investment accounts spread across various financial institutions and are doing just fine managing all of them.

The Financial Costs of Being Overbanked

The trouble is that while you may have a well-oiled process right now to manage all of the complexity, all it takes is one overwhelming life event to put a kink in your complex financial process, ultimately leading to cognitive overload and potentially costly financial mistakes down the road.

And what are these costs?

Well, having multiple deposit accounts, like checking and savings accounts, can lead to increased fees and expenses if you become distracted by other pressing personal or professional matters in your life.

That’s because when you’re managing several accounts spread across different institutions, it’s easy to overlook minimum balance requirements, which might result in monthly maintenance fees. And if you’re using three, four or five deposit accounts to pay various expenses, chances are that you might encounter the occasional overdraft charge if you forget to make a transfer from one account to the other as expenses come through.

Now, at this point, you may be tempted to believe that, when times get tough, you can just put your expenses on your credit cards to avoid those potential bank charges. But, when it comes to your credit cards, managing multiple cards can make it more challenging to track your spending and pay off your balances on time, leading to interest charges and potential late payment fees when the inevitable road bump or pothole comes along in your journey to financial independence.

What’s more, having too many accounts can not only affect your propensity to spend wisely, it can also negatively impact your credit score. For example, each time you apply for a new card, there is a hard inquiry on your credit report, which can lower your overall score and make it more expensive to borrow money in the future.

And finally, when it comes to your investment accounts, there is such a thing as having too much of a good thing. Indeed, when it comes to investment accounts, managing multiple accounts can lead to inefficiencies, including a suboptimal asset allocation and paying too much in performance fees.

That’s because when you have too many investment accounts, tracking each account’s performance and combined allocations can become time-consuming, making it harder to maintain a well-diversified portfolio. What’s more, with so many accounts to manage, you’ll likely be less inclined to evaluate the fees that you’re paying for various investment products, leading to overall lower returns over the long-term.

So, when it comes down to it, being overbanked or having too many financial accounts can be mentally and emotionally taxing and lead to unnecessary fees and expenses that can delay or even derail your journey to financial independence. That’s why it may not always be beneficial to have many accounts spread across various institutions when it comes to your financial accounts.

The Benefits of Financial Simplicity

So, what can you do if you find yourself in Brian’s position where you’re overbanked, and it’s beginning to tax your time and cost you money?

The short answer is to simplify.

Why simplify? Well, other than the obvious reason that it can reduce the complexities in your life, simplifying your financial account management can have many near- and long-term benefits.

For example, in the book, “Your Money or Your Life,” authors Vicki Robin and Joe Dominguez emphasize the importance of simplicity and intentionality when it comes to managing your finances. In fact, the authors drive home the point that being overbanked can often lead to confusion and unnecessary complexity in your financial life.

What’s more, Robin and Dominguez emphasize the importance of understanding the true value of money in terms of life energy. By simplifying your finances, you are more likely to gain a clearer perspective on your spending habits and the amount of time and energy you invest in acquiring material possessions. This awareness can lead to more intentional and meaningful use of your financial resources, ultimately improving your overall quality of life.

Indeed, embracing simplicity can allow you to cultivate a more fulfilling and purpose-driven life. That’s because by reducing physical and financial clutter, you can focus on the activities, relationships, and experiences that truly bring you joy and satisfaction.

Sure, managing a complex financial framework can, at times, make you feel empowered and like you’re a good steward of your money. At the same time, however, simplifying your life can help you identify and prioritize your values and help you align your spending habits with your life goals, ultimately leading to a more content and purposeful existence.

Another take on the idea of simplicity comes from the world of home organization. Marie Kondo, known for her KonMari method of tidying and organizing, offers valuable insights on how you may want to consider decluttering the number of financial accounts you have, which can help simplify your financial life.

Now, Kondo believes that decluttering and simplifying your surroundings can profoundly impact your mental and emotional well-being. That’s because by only keeping items that “spark joy” in your life, you cultivate an environment filled with positivity and happiness. When you do, you’ll likely experience less stress and anxiety, and as a result, your mind will be clearer and more focused.

How does this work? Well, the KonMari method encourages you to be more mindful of your possessions and their value. By focusing on simplicity, you develop a deeper understanding of what truly matters to you. As you carefully consider each of your financial accounts and determine whether or not its management sparks joy, you become more conscious of your consumption habits and learn to appreciate how you spend your life energy.

How to Simplify by Aligning Account Management with Your Money’s Purpose

So, now that we’ve discussed the emotional and financial costs of being overbanked, and how simplifying your life and finances can help you cut stress and achieve peace of mind, how do you actually go about the process of reducing the number of accounts you manage?

One approach to simplifying your financial management is to align your financial accounts with your money’s purpose.

And what exactly does this mean?

Well, you’ll likely recall that in recent articles, we discussed how essential it is to identify your values, crystallize your life purpose and align your money with these priorities. So then, from this perspective, if your values and life purpose guide how you use your money, then how you manage your financial accounts is an extension of making your life goals a reality.

Indeed, when you take the time to examine your financial accounts, you may discover that some of them no longer serve a clear purpose or align with your current financial goals. Remember, this clutter can lead to cognitive overload and stress, making maintaining a healthy relationship with money challenging.

Alright, so where do you begin once you’re ready to simplify and declutter your financial house?

Well, you can start by reflecting on your near- and long-term financial goals and the values that drive them. Ask yourself: “What do I truly want to achieve over the next one, three, five, and ten years and how will my money help me get there?”

Then, review each of your financial accounts, including bank accounts, credit cards, and investment accounts. Consider whether each account serves a specific purpose that supports your defined financial goals. If you find an account that no longer aligns with your objectives or creates unnecessary complexity, consider closing or consolidating it.

Ultimately, the goal is to simplify your financial life and make it easier to manage your money. By reducing the number of bank accounts you have, you can streamline your finances and make it easier to keep track of your spending, savings, and investments. This, in turn, can help you achieve greater clarity and control over your financial future.

What’s more, as you simplify your financial household, you may notice a positive shift in your mental state. The process of aligning your accounts with your money’s purpose can bring clarity and focus to your financial decision-making, reducing anxiety and stress. That’s because when you clearly understand the life goals you are working towards, and how your money supports your goals, it becomes easier to make intentional choices that promote financial well-being.

Moreover, this newfound sense of financial order can free up mental space and energy for other aspects of your life. To be sure, when you are no longer weighed down by financial clutter, you can devote more time and attention to nurturing your personal and professional relationships, pursuing your passions, and moving you one step closer to becoming the master of your financial independence journey.

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Peter Donisanu

I help first-gen tech professionals get their financial house in order so they can live their legacy.