Checking and Savings Account | Tips for Keeping the Ship Afloat
Planning for a Rainy Day with Good Automated Checking and Savings Account Management
I can’t tell you how to run your household, I don’t know how much money you make, I don’t know what your bills are. What I do know is that I have developed a formula for me that has worked well for nearly two decades now – and it may be of use to you. Some of these ideas I gleaned from books I’ve read. Others I’ve kind of had to pick up on my own. What’s important is to have a fundamental model for managing your basic cash needs and coming to mutual agreement with other family members about what’s left over.
Home Finance Software Can Reduce Headaches
My Formula – Checking Account:
My money management formula starts with my checking account, and it is very simple. I maintain an amount in my checking account equal to the largest day of outflow I have (my mortgage) plus a pad of $200. Simple. Not too much idle cash, but never too little. If you have two credit cards and a car payment due more or less on the same day and that equals say… $800 – and that’s your highest day then under my formula then even on that high outflow day my checking account would maintain a balance of $1000 or more. Make sense? If your rent and car insurance bills are due on the same day (or close enough between pay periods) and your payments came to $1500, then my checking account would NEVER have LESS than $1700.00 in it. Period.
It may not seem to make sense to have a setup like this but I automate virtually all of my payments so that I NEVER have to spend time fretting about how I’m going to make the next one. I repeat – I NEVER have to worry about a bill coming due – EVER.
My Formula – Local Savings Account:
You shouldn’t be surprised to find out my savings account transactions are automated as well. WITH-OUT-FAIL $25.00 a week goes into my savings account. It is automatically deducted from my checking account and put into my savings account every Friday. EVERY FRIDAY. I build up an amount equal to $1000.00 – enough to fund a minor appliance failure or car repair. Once the account reaches $1000.00 I let it grow to about $1500.00 before then transferring $500 into my online savings account. The local savings account varies with periodic expenses like car repairs or oil bills. Because the money is pulled out of my checking account weekly I never worry about emergencies. If something happens, I get it fixed, no worries.
Online Savings Account:
I build up a cash balance equal to the sum of an entire month’s expenses between my online savings account and my local savings account. If your entire monthly expenses were $2500.00 per month, then my savings accounts combined would have $2500.00 in them. I would again let this combined balance swell to $500.00 over the minimum (in our example the minimum was $2500.00) before moving funds into my investing accounts.
In Summary:
Managing your finances in a deliberate and automated way completely eliminates the drama and heartache associated with making what can be some awful choices. If you can starve for a little while as you build your own home financial formula you’ll come to find life is much more easy to live and enjoy. I hope this helps you commit to automating your finances between your checking and savings account and spending your time enjoying your life rather than worrying about money. It’s not easy… but it’s soooo worth it.
