Where to keep money for monthly expenses?

[Maxoman]

So I am really on track with my budget. While I am still playing catch-up with some bills, I am making this work. What I did was take my monthly bills that fluctuate (electric, gas, etc) and divide by 12 so I know how much I need to put away for when the bills become due. But what to do with that money? If I just leave it in my checking account I might as well kiss it goodbye and not have enough when the bills become due. For example, right now my electric bills are relatively low. I know once summer hits they will be through the roof. So I am trying to put enough away each month to cover the summer months. But where to put it? Do I open a bunch of savings accounts for each bill and put it there? I liken that to the envelope method. Is that what people do? At the end of each month do I take the money that is earmarked for a bill and put it in its own account so I can access it when I need it? If I open an online account (ING) how long does it take to get my money out so I can pay a bill? Thanks!

[photo]

All you need is one savings account. Just use self-control and think of it as "non-touchable" money and only transfer it into checking when it is planned.

[snshijuptr]

It sounds like you may need to physically separate your "bills money" and your "blow money". Have you thought about going all cash with your discretionary money?

[kork13]

Just set up a separate account that is labeled and reserved for 'Expenses'. It does require some degree of discipline to only draw on it for expenses, but the easiest way to do that is to take all of your monthly expenses, total them up, and only make a single withdrawal of that exact amount each month.

If your accounts run close to the line, separating the pots of money (spending vs. expenses) is a very good technique. But if you always keep enough on-hand in your account to easily cover both your expenses and normal spending, I'd just say don't worry about it.

Both methods are totally doable, just based on what works for you and your family.

[disneysteve]

Originally Posted by Maxoman

So I am really on track with my budget.

But what to do with that money? If I just leave it in my checking account I might as well kiss it goodbye and not have enough when the bills become due.

If leaving money in your checking account would be like kissing it goodbye, then your first statement isn't true - you are NOT on track with your budget. Following a budget means knowing how your money is going to be spent. If you spend money just because it is there, then you need to sit down and create a written budget each month and stick to it.

[MonkeyMama]

I do the same - I just transfer it to a savings account every month. I think having a seperate account simplifies and improves discipline, but I don't see the point of tracking the savings "per bill." If I put 1/12 away every month (1/12 of all the bills I need to cover), the money is always there when I need it. Thus, no need to micro-manage it beyond that.

[pdweaver]

Originally Posted by disneysteve

If leaving money in your checking account would be like kissing it goodbye, then your first statement isn't true - you are NOT on track with your budget. Following a budget means knowing how your money is going to be spent. If you spend money just because it is there, then you need to sit down and create a written budget each month and stick to it.

This is exactly what I was thinking. Sticking to a budget means limiting your "spending money." If you truly cannot do this, seperate the money in a different checking account.

Where do you currently bank? Do you have direct deposit? If so, some banks offer $$ for opening a new account with direct deposit. It doesnt hurt to check.

[cypher1]

It all comes back to discipline. If money is slipping by from Checking, do automatic transfers to separate savings from each paycheck. My rule of thumb is to keep 500 per paycheck (weekly) in my checking to cover mortgage/escrow/utilities, cell, internet, insurance. That's more than enough to cover monthly, but nice to have a little extra for higher electricity/gas months.

[fe2o3ez]

This may be a lengthy response, and I will try to be brief, but I designed a system with my wife a couple years ago that has worked great for us. We have 4 main accounts, and they work like this:

1. House checking - joint, all house expenses come from there.
2. Savings - Liquid savings go here; vacation savings, Xmas savings, etc.
3. My personal checking (no fee, no interest) - my fun and gifts
4. My wife's personal checking (no fee, no interest) - her fun and gifts

I do a calculation every so often and determine what it would take to cover the next full cycle of bills, if either of us lost our job or a small unexpected expense required re-distribution of a paycheck. I will typically do this in December or January, based on 12 months of bill trends. This amount is treated as a maintenance level for the House (bills) account.

When either of us gets paid, we review the balance of the house account and deposit the amount necessary to bring it up to the maintenance level. Then a portion of the remainder goes in the fun account, and the rest goes to Savings. Naturally, depending on which bills come in, the amount going to savings will vary.

Here's an example:
Maintenance level is set at $4000.
After recent bills, the current balance in House account is $2600.
When I get paid, $1400 will be deposited into the house account, maybe $100 will go to my fun account, and the rest goes to savings.

Once you build up the maintenance balance to the desired level, this system actually works quite well for taking care of bills, no matter fluctuation in their amount, and allows you to have fun money on the side, at a PRESET amount without affecting the bills. Give yourself a little padding in the maintenance balance, but no more than 10%, since you aren't making any money on the balance.

Hope that helps, or gives you some ideas.

[herdjohnson]

Originally Posted by snshijuptr

It sounds like you may need to physically separate your "bills money" and your "blow money". Have you thought about going all cash with your discretionary money?

Agree completely. That's what I did. Budget all your bills and figure out how much you want/need to save, then figure out how much you can pull out weekly for discretionary spending. I signed up with PNC and their virtual wallet so my "spend" account is just for bills. Whatever is left over after everything - 50% goes to my "reserve" account which I use for larger purchases when I have the funds, 25% goes to savings, and 25% goes to my car payment. Put it all in excel and keep track of it - you can find some neat templates online and edit them to suit you. Here's mine:

[snafu]

1st, what are you paying in bank charges? Some banks are more greedy/expensive to use than others, you need to know what they charge for different types of transactions. 2nd, do you have an emergency fund? Hopefully, you have direct deposit and pay your bills on-line or via automatic withdrawal. You can use your bank, you don't particularly need ING or an electronic only bank Both are more secure than paying by check for example. Each payday pay bills on-line choosing the date you want the sums to go out for the 'Due Date' shown on the bill.

Once pay is in the account, I suggest an on-line transfer of sums for 1/12th system needed later to a linked savings. Funds will be there when needed to transfer back to checking with a couple of clicks. Add in a sum to build an emergency fund if you don't yet have one. I found it helpful to transfer any sums left in checking a/c from the previous month to savings after each payday. It was a painless way to build savings.

You're doing well and we're making suggestions to help you do even better! If you have trouble limiting discretionary spending, give yourself a cash 'allowance' as suggested by snsh and Kork. Once that money is gone...so is non budgeted, fun spending. Cash is good because it feels real.

[Silver Bug]

I opened up a way2save account (for example) with wellsfargo and I put all my expense money in there. When I need to make a payment I transfer it back into checking and make the payment!