Author Topic: Checking / Savings account / bill pay strategy  (Read 8395 times)

Pixelshot

  • Stubble
  • **
  • Posts: 141
Checking / Savings account / bill pay strategy
« on: April 30, 2014, 04:06:13 PM »
I'm curious if there are suggestions as to the most Mustachian way to arrange my checking and savings accounts and handling bills. My situation is like this:

I have a Checking account and an accompanying savings account in a bank that I love (USAA). My wife's salary (what we use for all of our living expenses) is deposited to the Checking account. For nearly all of our day-to-day expenses, we use one card (AMEX Blue Cash Preferred), which, among other advantages, provides a way where I can see all of our fluid expenses in one number at the end of the month. I have it set up to autopay the statement balance every month from our savings account.  There are several expenses (like our rent) that can't go through the AMEX, and has to come directly out of the checking or savings account.

The main issue I'm trying to think through is how I might best arrange the in and out flow of cash using the checking and savings account. Should I put a buffer of cash in the savings and always pay the monthly expenses (rent, AMEX payment, utilities, etc) through the savings account? This would require moving cash from checking to savings, but it would keep things a bit more clear as to how much money is going out. On the other hand, I could just set up everything to go through the checking account - easier, but less accountability. Note that my "savings" account is actually secretly a checking account with "savings" as its nickname.  I use Mint to keep track of monthly expenses, but I often lose track of exactly where the money is coming from and going, which makes it harder to save.

Any good ideas? How do other Mustachians do this?

homeymomma

  • Bristles
  • ***
  • Posts: 335
Re: Checking / Savings account / bill pay strategy
« Reply #1 on: April 30, 2014, 04:31:19 PM »
We do the same thing, except switched checking/savings. Income goes into checking acct on the last of every month. ira retirement contributions, other savings, auto-pay health ins. goes out on the first of every month. I keep a 1000 buffer in checking but otherwise we spend down to zero every month. any extra unspent left over above the 1000 gets moved into a savings goal on the last day of the month. I get a little thrill each month when I get to reset the account to zero again :)

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4732
  • Age: 34
  • Location: Seattle, WA
Re: Checking / Savings account / bill pay strategy
« Reply #2 on: April 30, 2014, 04:44:14 PM »
We're similar to you. Salary gets directly deposited to the checking account. Most expenses are paid by credit card. Utilities are auto-paid (by credit card, when possible) to eliminate the risk of late payments. The credit cards are set to auto-pay the full statement balance out of the checking account. For purchases, we have a few cards that offer different rewards for different purchase categories; we use whichever card gives the best bonus for that transaction. The savings account is for our emergency fund; we almost never touch that account. When the checking account balance gets too high, it's time for a deposit to IRAs (or the brokerage account if IRAs are maxed out for the year).

payitoff

  • Guest
Re: Checking / Savings account / bill pay strategy
« Reply #3 on: April 30, 2014, 04:50:40 PM »
i have to open 2 bank accounts for the purpose of separating my paycheck from DH -- my paycheck for all debt payments/savings, his for all monthly expenses. i pay off credit cards every month for food/gas budget, everything else is auto paid from the checking account where his paycheck is, whatever leftover we save or spend a little for fun (ex. easter egg hunt, birthday weekend this month)

Shor

  • Bristles
  • ***
  • Posts: 480
  • Location: Orange County, CA, USA
Re: Checking / Savings account / bill pay strategy
« Reply #4 on: April 30, 2014, 05:37:18 PM »
We're similar to you. Salary gets directly deposited to the checking account. Most expenses are paid by credit card. Utilities are auto-paid (by credit card, when possible) to eliminate the risk of late payments. The credit cards are set to auto-pay the full statement balance out of the checking account. For purchases, we have a few cards that offer different rewards for different purchase categories; we use whichever card gives the best bonus for that transaction. The savings account is for our emergency fund; we almost never touch that account. When the checking account balance gets too high, it's time for a deposit to IRAs (or the brokerage account if IRAs are maxed out for the year).
Similar to above:
- Everything that can autopay on a CC does.
- All purchases are done on one of several CC, first to fill minimum payment amounts, then whatever fits the promotional ones.
- All CC are set to auto-pay from the checking account.
- All income goes in to the checking.
- If checking is too big, it's time for a deposit to the investment account. Monthly deposit usually keeps it low anyway.

Savings account. Pssh, what's that for anyway?
Just don't spend it in the first place. You know what you spend your money on!

Badass by 41

  • Stubble
  • **
  • Posts: 157
  • Location: San Francisco Bay Area
    • Journal
Re: Checking / Savings account / bill pay strategy
« Reply #5 on: April 30, 2014, 06:12:27 PM »
We're a little more complicated because when we married, we decided to keep our own personal accounts as well as open joint accounts, and we wanted to isolate our bills and emergency money from debit access for cash spending. (We've both had our wallet/purse stolen before)

- All income and deposits are made to our Personal-Checking accounts
    - We each have a Personal-Savings account as well
- We retain a fixed monthly allowance from our income and deposits then transfer the remainder into our Joint-Emergency account
- On the first of every month we transfer a budgeted amount from Joint-Emergency to both our Joint-Checking and Joint-Bills accounts
    - Joint-Checking is a slush fund for cash/debit card purchases
    - Joint-Bills is ACH only and the budget consists of Rent and Utilities that don't accept CC
- We use a CapitalOne Venture card for all purchases possible
- At the end of the month, we transfer the exact CC payment amount from Joint-Emergency to Joint-Bills for that payment
- Any excess funds in Joint-Emergency are transferred to Vanguard for investment.

So there are 4 things we do every month: 1) Transfer income from our Personal-Checking to Joint-Emergency; 2) Transfer our CC payment from Joint-Emergency to Joint-Bills; 3) Pay the CC bill; 4) Transfer excess funds from Joint-Emergency to Vanguard.

Now that it's all typed out, that feels like a lot of accounts and work, but it works for us, so take this info for what you will.  8)

DollarBill

  • Pencil Stache
  • ****
  • Posts: 902
  • Age: 44
  • Location: Austin TX
Re: Checking / Savings account / bill pay strategy
« Reply #6 on: April 30, 2014, 06:29:23 PM »
(I also use USAA) I don't know if this is a better system but it works for me, it's kind of like the envelope method. I just started tracking all my spending 4 months ago. During this tracking time I set up extra savings accounts (No cost and took about 10 mins) and titled them with a name and dollar figure (I also added the percentage but not necessary) . Such as Taxes/$220, Travel/$50, Bills/$250...so when I get my bi-weekly check I transfer the amount to those accounts (This can be done automatically but I don't do that yet). My goal is to have a little cushion left over at the end of each month in case I have an unexpected purchase or if prices go up.

Like others I pay all my bills by USAA Master Card for the award points (I use to do cash back but you get more money from award points plus it will help come travel time). I use USAA American Express Card for Food & Gas...It gives you double the award points for these two items. Plus it helps me track my purchases since they are separate. I pay these off each month and you can use any of your accounts to pay. Both cards are tied to the same awards points.

Bill Fund: This covers all my utilities, food, Dog food (two Med size dogs), personal hygiene, toiletries, kitchen supplies but does not include eating out (That's comes from fun money).

Fun money: I made this a separate account because last year when I was paying off my house I became a bit of a loner. I decided it was too painful to keep that going. So I decided to try to convince myself to spend the fun money anyway I see fit. I also use this account for some items that are unexpected. For example over the last 4 months of tracking I use the car wash 4 times at $7 a pop; Vet bill $28; target $128; Autozone $42; trash bill $48; and surprise tax bill for $87. I take out about $200 for cash a month and about $100 for going out to eat or out with friends. Some months I'm sure I'll go over but once I get settle into my budget I'll tweak it a little.

Taxes & Ins: House taxes, House Insurance, Car Insurance. I wondered if I would run into problems paying my house taxes electronically since this is a savings account but I had no problems.

Slush Fund: Emergency fund, newer car fund, car repair, unexpected purchase

Travel Fund: Ahhhh for travel, plus I have my awards points from Credit cards. If I just kept a checking account at a certain balance then I probably would not take a vacation. Now I see it build up and if something comes up then I go.

PS...if I owed any debt I would think twice about the Fun/travel funds but that's just me. I'm an all or nothing kind of person. I hate owing anyone anything.

Pixelshot

  • Stubble
  • **
  • Posts: 141
Re: Checking / Savings account / bill pay strategy
« Reply #7 on: May 07, 2014, 08:13:51 AM »
Thanks to everyone for your replies. Very helpful.

wow, @DollarBill, you're seriously organized. :) I'm not sure my wife could keep up with that system, but it would save us money for sure.

Seems like everyone is more-or-less on the same system:
- income deposited into checking (or in @Badass and @DollarBill's case, multiple checking accounts) with a small buffer
- one credit card used for all purchases when possible to maximize points and accountability, paid off at the end of the month
- all bills (including credit card) are paid through the checking
- leftover gets moved to savings/investment at the end of the month

I'll try it out!


catccc

  • Handlebar Stache
  • *****
  • Posts: 1677
  • Location: SE PA
Re: Checking / Savings account / bill pay strategy
« Reply #8 on: May 07, 2014, 10:48:56 AM »
I do it kind of like DollarBill, but I'm not so organized, so I use YNAB to help with this.  I have one savings account with Smarty Pig  (but separate goals within the one account) to track intermittent things like preschool tuition (paid Aug & Dec), insurance (life, car, and renters, some paid 2x/yr, some annually), vacation, and other planned larger purchases (new mattress.)  Smaller things, like the occasional swimming lesson or birthday gift, home maintenance expense, that just sits in the checking account, but is earmarked by YNAB for the specific purpose.  We keep a 1K buffer in the checking account, but I'm thinking about moving towards a full month expense buffer.  Also, if you are in a joint household, YNAB is great w/ auto syncing.  I actually have yet to get DH on board with using YNAB, but he is pretty diligent about reporting all expenditures to me so that I can keep it updated.
« Last Edit: May 07, 2014, 10:50:43 AM by catccc »

HairyUpperLip

  • Pencil Stache
  • ****
  • Posts: 897
Re: Checking / Savings account / bill pay strategy
« Reply #9 on: May 07, 2014, 12:41:06 PM »
Married here.

Multiple Banks. Multiple Accounts.


Credit Union =
1 Joint Checking - used for all CC payments and bills that won't take CC. Direct Deposit here for left overs. Savings accounts and investment accounts get funded first.
1 Joint Savings - House Savings. DD here. Set amount.
2 Individual Savings Accounts - 5% on $500. So $500 in each account. No more deposits being made.

Local Small Bank =
1 Personal Checking (Husband) - Tiny amount gets deposited here. I use this money for hobbies. DD here. Set amount.

Ally Bank =
1 Joint Savings = Emergency Fund. Funded. No more deposits being made (besides interest payments ;) )
1 Joint Checking = Investment Money. DD here. Set amount.
1 Personal Checking (Wife) = Used for Instagram "Business".
1 Child's Savings Account = DD a set amount here too.

 
Bills =
All except one are paid my AMEX skymiles. CC paid with joint checking.


I think it's pretty easy to manage honestly. Once you have a good and realistic budget it's very easy to stick too imo.

thepokercab

  • Bristles
  • ***
  • Posts: 486
Re: Checking / Savings account / bill pay strategy
« Reply #10 on: May 07, 2014, 04:24:23 PM »
Married here with multiple accounts:

1) Joint checking account where paychecks are deposited and monthly bills are paid.  Hardly any other spending happens out of this account. 
2) Everyday expenses get paid via credit card.  We have two, the AMEX blue cash for groceries, and then our Barclay's Mastercard for everything else. 
2) Savings Account 1:  This doubles as a house down payment fund + an emergency fund.  We think we want to buy a house in the near future, but that's kind of up in the air. 
3) Savings Account 2:  This is sort of a shit happens account that I throw left over money to each month.  If there is some unexpected, unbudgeted expense, i'll generally pull the money out of this account.  Just keeps everything neat.   

We tend to keep a 1-month buffer in our checking account for expenses.  This just lets me set all of the bill pay stuff and forget it- no risk of ever over-drawing. 

We also contribute to our IRAs plus a taxable account which comes automatically from our checking account- but I like to consider these as monthly bills and budget them accordingly.   I have a set amount that is contributed per month and its pretty non-negotiable, just like rent and utilities.  It generally means we don't have a ton of wiggle room every month, but it works for us.     

Any money left over gets swept into our down payment savings account and/or shit happens savings account.  I suppose if these accounts start getting too big i'll move the money into our taxable investment account. 
 

DollarBill

  • Pencil Stache
  • ****
  • Posts: 902
  • Age: 44
  • Location: Austin TX
Re: Checking / Savings account / bill pay strategy
« Reply #11 on: May 07, 2014, 06:37:17 PM »
Thanks to everyone for your replies. Very helpful.

wow, @DollarBill, you're seriously organized. :) I'm not sure my wife could keep up with that system, but it would save us money for sure.

Seems like everyone is more-or-less on the same system:
- income deposited into checking (or in @Badass and @DollarBill's case, multiple checking accounts) with a small buffer
- one credit card used for all purchases when possible to maximize points and accountability, paid off at the end of the month
- all bills (including credit card) are paid through the checking
- leftover gets moved to savings/investment at the end of the month

I'll try it out!

lol...thanks! I really don't spend much time on it except to come up with the system. I might spend about 2-3 mins every two weeks to manage it. You can even set it up for automatically transfer funds and pay the bills...you can pick which day and how much. I will do this once I have more of a buffer in each account. I wish I and banks were smart enough to do this years ago. Just start tweaking things to make it easy on you and you will find a system that works.

payitoff

  • Guest
Re: Checking / Savings account / bill pay strategy
« Reply #12 on: May 07, 2014, 10:54:55 PM »
Married here with multiple accounts:

1) Joint checking account where paychecks are deposited and monthly bills are paid.  Hardly any other spending happens out of this account. 
2) Everyday expenses get paid via credit card.  We have two, the AMEX blue cash for groceries, and then our Barclay's Mastercard for everything else. 
2) Savings Account 1:  This doubles as a house down payment fund + an emergency fund.  We think we want to buy a house in the near future, but that's kind of up in the air. 
3) Savings Account 2:  This is sort of a shit happens account that I throw left over money to each month.  If there is some unexpected, unbudgeted expense, i'll generally pull the money out of this account.  Just keeps everything neat.   

We tend to keep a 1-month buffer in our checking account for expenses.  This just lets me set all of the bill pay stuff and forget it- no risk of ever over-drawing. 

We also contribute to our IRAs plus a taxable account which comes automatically from our checking account- but I like to consider these as monthly bills and budget them accordingly.   I have a set amount that is contributed per month and its pretty non-negotiable, just like rent and utilities.  It generally means we don't have a ton of wiggle room every month, but it works for us.     

Any money left over gets swept into our down payment savings account and/or shit happens savings account.  I suppose if these accounts start getting too big i'll move the money into our taxable investment account. 
 

savings #2 sounds smart, i have a lot of shit happens every month and i get frustrated, ill start moving excess here, thanks for the tip!

MrAlexMoore

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: Checking / Savings account / bill pay strategy
« Reply #13 on: May 07, 2014, 11:16:29 PM »
It seems there are a lot of strategies which involve using your checking or savings accounts to set goals, instill accountability, or maintain organization.  While this is good for some, maybe I can suggest an alternative. 

Personally I don't use bank accounts for any purpose outside of cash flow.  I make sure I invest what I want and that I have the right sized cash buffer.  This way, for singles or married folks, you can have a very simple account structure, maybe even just 1 account, preferably one that pays interest (for me it's Ally)

On the side, I use a spreadsheet.  In 1 column I have my account balances each month, my income and my expenses.  I also track the total cash on hand and change month to month to see what I'm saving.  You can set budgets for your expenses without complex account structures, or set overall savings goals for the net of your income/expense.  Mint also does this, for you non-excel using types, with the budget and goal features, although they can be a bit clunky.  Usually I write down my current goals, for savings, investing, or expenses by priority and I can easily see progress based on my account balances. 

So I have always found this to work better than trying to use bank accounts for various purposes or goals.  Maybe this can work for some of you!

Pixelshot

  • Stubble
  • **
  • Posts: 141
Re: Checking / Savings account / bill pay strategy
« Reply #14 on: May 08, 2014, 08:56:50 AM »
I could use a hand with some of the abbreviations used in these posts:

CC - Credit Card - I got that one
DD - Direct Deposits - I got that one
ACH  ?
DH ?


Pixelshot

  • Stubble
  • **
  • Posts: 141
Re: Checking / Savings account / bill pay strategy
« Reply #15 on: May 08, 2014, 10:08:20 AM »
... We tend to keep a 1-month buffer in our checking account for expenses.  This just lets me set all of the bill pay stuff and forget it- no risk of ever over-drawing....


@thepokercab - can I ask how you keep track of this? since paychecks and bills come at odd times during the month, I can imagine having a hard time knowing, at any given time, how far over the buffer I am. Or, is it that you empty out the account at the end of the month (leaving only the buffer amount)?

thepokercab

  • Bristles
  • ***
  • Posts: 486
Re: Checking / Savings account / bill pay strategy
« Reply #16 on: May 08, 2014, 10:28:21 AM »
... We tend to keep a 1-month buffer in our checking account for expenses.  This just lets me set all of the bill pay stuff and forget it- no risk of ever over-drawing....


@thepokercab - can I ask how you keep track of this? since paychecks and bills come at odd times during the month, I can imagine having a hard time knowing, at any given time, how far over the buffer I am. Or, is it that you empty out the account at the end of the month (leaving only the buffer amount)?

Yes- that is basically correct.  Not to turn this into another YNAB thread, but that's the software I use which sort of promotes the " live of of last month's income" concept.  Mustachians tend to do this anyway, but for me, it means that I end up keeping enough in my checking account to also budget for the next month's expenses.   

So for instance, right now I have enough money in my checking account to cover all of May's expenses, no matter if the expense is a credit card bill, automatic investment, or something else.  Then every pay check I get in May, which is deposited into my checking account, is actually going towards June's budget.  I get paid every 2 weeks, so my May 9th paycheck and May 23rd paycheck will be going towards all of my June's budgeted expenses.  So any autopay's in May are fine because 1- all of my expenses are already budgeted as is and 2- if for any reason I've gone over, well, June's money is most likely already in my checking account.   

In reality though, while my bill pays are set up to be automatic I do check out YNAB and Personal Capital on a near daily basis, so I can't quite say I just "forget" everything.  For me, logging my expenses in YNAB is almost relaxing at the end of the day.  But i feel pretty confident that, if for whatever reason I just stopped looking at my budget, our approach, at least in our case, would prevent over draws or anything crazy like that- as long as the income comes in that is.   

Pixelshot

  • Stubble
  • **
  • Posts: 141
Re: Checking / Savings account / bill pay strategy
« Reply #17 on: May 09, 2014, 05:50:11 AM »
Makes sense. Thanks.

Jack

  • Magnum Stache
  • ******
  • Posts: 4734
  • Location: Atlanta, GA
Re: Checking / Savings account / bill pay strategy
« Reply #18 on: May 09, 2014, 10:10:34 AM »
I could use a hand with some of the abbreviations used in these posts:

CC - Credit Card - I got that one
DD - Direct Deposits - I got that one
ACH  ?
DH ?

ACH = Automated Clearing House (i.e., the method of processing electronic check transactions)
DH = "Dear Husband"

t-rymz

  • 5 O'Clock Shadow
  • *
  • Posts: 29
Re: Checking / Savings account / bill pay strategy
« Reply #19 on: May 09, 2014, 10:22:57 AM »
Get two checking accounts: Acct Receivable and Acct Payable. Paychecks go into Receivable. Then transfer money (weekly, monthly, whatever) to Payable. Use payable to cover all you living expenses (CC, food, rent, utilities, fun, movies, etc.). Move money from Receivable to other accounts (IRA, brokerage, etc) as you need to. Summaries from Receivable let you know very well what you're making, saving, spending. And summaries from Payable let you know where you're spending money and how much.

aj_yooper

  • Handlebar Stache
  • *****
  • Posts: 1091
  • Age: 7
  • Location: Chicagoland
Re: Checking / Savings account / bill pay strategy
« Reply #20 on: May 09, 2014, 10:28:57 AM »
We use 1 checking account and YNAB to budget and track expenses so we have no need for multiple accounts; we keep a buffer of two months income in our checking.  We send automatic payments to savings monthly.

OldDogNewTrick

  • Stubble
  • **
  • Posts: 135
  • Age: 60
  • Location: Florida
Re: Checking / Savings account / bill pay strategy
« Reply #21 on: May 09, 2014, 10:33:20 AM »
I have a $3000.00 unsecured line of credit that is linked to checking account to cover over-drafts. Offered through our Credit Union which I love for low interest rates, personable service, and no/little service fees.

Jack

  • Magnum Stache
  • ******
  • Posts: 4734
  • Location: Atlanta, GA
Re: Checking / Savings account / bill pay strategy
« Reply #22 on: May 09, 2014, 10:54:26 AM »
My wife and I have the following:

  • A joint 3% gas/2% groceries/1% everything else cash back credit card that we use for as much of our spending as possible and pay in full each month
  • My wife's checking account, which gets direct deposit from her job and pays the mortgage (which, along with the house deed, is in her name only), her student loans, and her credit card (for 0% balance transfer arbitrage)
  • My checking account, which gets direct deposit from my job and pays utility bills, my student loans, the joint credit card and my 0% balance transfer card
  • A joint Ally savings account supposedly for our emergency fund
  • A Sharebuilder brokerage account which is effectively our emergency fund

The reason for the Ally and Sharebuilder accounts is that I opened the Ally account intending to use it as an emergency fund, then found out about a "invest $5k and we'll give you $100" deal from Sharebuilder (which is a 2% risk-free return) so I put my money in that instead. Plus the Sharebuilder money-market cash sweep account pays 0.03% 7-day yield (paid out and therefore compounded monthly), which works out to something like 1.5% annual return (I think), while the Ally savings account would only pay something like 0.8%. (By the way, for comparison, the FDIC-insured Sharebuilder cash sweep option pays 0.3% APY.)

All bill pay (including the "spending" credit card) is set up to be automatic, but I do not currently keep more than a couple hundred dollar "buffer" in our checking accounts because I'm trying to shovel money into things that give a return as quickly as possible. Instead, I use the credit card's grace period as a buffer. Each payday I add up all the bills due between then and the next, round it up to the next $100 or so, and then manually transfer all the rest to investments or paying off loans. (I do that manually because our spending varies and because my investment priorities change from month to month -- before April 15 I was trying to max my IRAs; this month I'm planning to put some money in a real estate deal that closes in June; next month I'll be adding to my emergency fund, etc.)

(I'm strongly considering closing the Ally account and one of the checking accounts, but haven't gotten around to it yet.)

Pixelshot

  • Stubble
  • **
  • Posts: 141
Re: Checking / Savings account / bill pay strategy
« Reply #23 on: May 10, 2014, 05:50:54 AM »
Get two checking accounts: Acct Receivable and Acct Payable. Paychecks go into Receivable. Then transfer money (weekly, monthly, whatever) to Payable. Use payable to cover all you living expenses (CC, food, rent, utilities, fun, movies, etc.). Move money from Receivable to other accounts (IRA, brokerage, etc) as you need to. Summaries from Receivable let you know very well what you're making, saving, spending. And summaries from Payable let you know where you're spending money and how much.

Thanks all for your comments!

@t-rymz - thanks for this suggestion. I'm very intrigued by this approach. Seems like that would be a simple modification on my current plan which would help to keep the IN and OUT money separated so I know what's going on. Trying to think of the down side...  I guess the manual transfer is it, but that may be a good thing - keeping tabs on how much I put in the OUT account every month - and I can do it once at the beginning of the month instead of paychecks that come in sporadically.

So, adding in the idea above, this would be my system:
- two checking accounts ("receivable"-Checking1 and "payable"-Checking2) and one savings account
- all income deposited into checking1 ("receivable"), no cash buffer needed
- all autopay, ATM, rent, etc, come out of Checking2 ("payable"); $1000 buffer stays in this account for overdraft protection.
- one credit card used for all purchases when possible to maximize points and accountability, paid off at the end of the month by Checking2 ("payable")
- all leftover cash gets moved to savings/investment at the end of the month

a nice side benefit from this approach is that it gives me a throttle control of how much goes into the spending account each month (similar to several other suggestions in this thread). Perhaps once I get used to this approach, I'll go more granular with additional "payable" accounts for things like household, travel, etc.
« Last Edit: May 10, 2014, 05:55:39 AM by Pixelshot »