Direct Deposit Strategy

[domo]

My workplace allows employees to manage their own direct deposits. About a year ago after I became debt free, I set up a direct deposit to my high-interest savings account. Since this money never hits my checking, it is practically "invisible". Month by month, I slowly increased the amount going into this account. I started at $50. I am now up to $600 per paycheck and still increasing. It really helps to keep my anti-mustachian tendencies in check, because I never think I have enough money "available" for luxuries. I know I should be able to do this with willpower alone, but honestly I am not even tempted by luxuries if my checking account balance remains low.

[johnny847]

Vanguard has (had?) a direct deposit service. They give you a routing and account humber and tell them what to invest your paychecks in.

I say had? because I think they might have gotten rid of it in their process of merging brokerage and mutual fund accounts. Not sure.

[Sibley]

Well, Vanguard keeps asking me to link my account, so I'm guessing that they do have it still.

I also send some money to a savings account every pay period. It's really nice, I agree.

[Hotstreak]

I like using my online savings account for this. I don't have Amy other accounts there so I dont have a reason to see the balance often, and if I'm tempted to use the money I have to wait 3 days. Plenty of time to reconsider a purchase!

[catccc]

My main savings account for a while didn't take DD.  But I could do recurring withdrawals, and timed them to match the DD of my paycheck into my checking account.  "Invisible money."  Kind of.  I use YNAB and follow their "live on last month's pay" rule, and the savings account is part of the budget, but the balance is divided up into sinking funds and savings goals.  So it's really hard to take $ out for one thing if it is earmarked for another.  If I get a raise, I change the recurring withdrawal amount, so it all goes to savings.  At the end/beginning of each year, I take the savings and max out my Roth and DH's spousal Roth as soon as I am able.  It's a nice feeling to be maxed out on January 2nd!  What I do with the remainder of the savings varies.  Sometimes I put it all in the kids 529, and sometimes we have a fantastic splurge-y vacation (gasp!). 

[Bearded Man]

Can you setup your own DD at various banks at your work? If I could I would start signing up for the "$300 if you open an account with us and setup direct deposit" deals at banks. I would do that for an extra few hundred bucks to sock away every year.

[Debts_of_Despair]

I have some pretty wild swings in where my money goes each paycheck so this would never work for me.

[Cezil]

I have my paycheck direct deposit going to 4 accounts so I don't need to transfer money too often.  Some goes to my emergency fund, some to my "fun money" pot so I can see there's money for little splurges without going overboard, some to my checking account for bills, the remainder to my savings account.  Once the savings gets to a certain point, it gets put towards debt and then I start building it up again.  Now that I try typing it out, it sounds like a complicated system, but it works for me: I know that each account is getting what it is supposed to, I can't forget to put money into checking to cover the bills (on auto-pay), and I don't justify not-saving anymore ("I'll catch up next month", then fail to do that) because it happens automatically.  Hardly any work required after initial setup.

[Rosy]

I agree this is the only way to curb my non-mustachian tendencies - the invisible money keeps me on the straight and narrow. I do manage a bit of extra savings along the way, but without direct depositing one of my income streams in its entirety to a different bank - the money would just disappear into my general spending/checking account.

I don't have the savings gene, but this is one neat little trick to save without a real sacrifice since the money doesn't really exist in my mind. It's just a number on paper - I gloat each time it reaches a new plateau, but I haven't spend any of it.

However, I will allow myself a time out in January 2016 and who knows I may blow all of that months income - it will make me feel good and get it out of my system for another six months without touching any of what I saved in 2015. That's the plan anyway:)

Couldn't have done it without MMM forum, it is an inspiration and the reason I keep finding a little extra money here and there to add to my stash.

[Rosy]

Can you setup your own DD at various banks at your work? If I could I would start signing up for the "$300 if you open an account with us and setup direct deposit" deals at banks. I would do that for an extra few hundred bucks to sock away every year.

Some employers will allow you to split your paycheck into different deposits or even sent each weekly paycheck to a different bank.

[kpd905]

I can change my direct deposit account in about a minute online, so we've gotten $1900 this year from signing up for checking account bonuses.

2 x Chase ($300 each)
2 x Discover ($50 each)
1 x PNC ($300)
2 x B of A ($300 each)
2 x Associated Bank ($150 each)

[rockstache]

Wow Kpd905 that's great. Do you close the account after that or leave it open? I have the ability to do this but I don't want that money to be stranded in a random account that's hard to get to.

[Elle 8]

I can add/change/delete direct deposit accounts through my employer's self-service menu anytime (as well as my 403b deduction).  We can have up to, I think, ten accounts, but I've never had that many.  I currently have seven.  A couple of those are/were to get a promotional bonus.  I'm always tweaking which accounts my money is going to.  However, I think I have too many accounts and should streamline them.

[Jellyfish]

Can you setup your own DD at various banks at your work? If I could I would start signing up for the "$300 if you open an account with us and setup direct deposit" deals at banks. I would do that for an extra few hundred bucks to sock away every year.

Some employers will allow you to split your paycheck into different deposits or even sent each weekly paycheck to a different bank.

I just checked my own situation for this purpose.  I can split my DD into up to 7 different accounts.  I think I will keep the bulk of paycheck going into my existing checking account so as not to disturb the auto pay of my mortgage, and then divert enough into any new accounts to take advantage of the signup offers. $$!  Looks like PNC has a good offer right now...

[K-ice]

I have heard you should DD into your savings. Then interest starts building from day 1.

Then take out once a month what you need to pay the bills.

For some reason I couldn't set this up.

So everything goes into 1 checking account. On the second of the month I transfer that just deposited amount into my savings.

On about the 25th of the month I take out just what I need & transfer it back into my checkings where I can make my bill payments. I have phone reminders for this.

I only have "2 bills".

My Visa & my LoC. Both get paid in full every month.

Every other smaller bill is paid automatically from those two.

Ie. Visa = groceries, gas, travel, Internet, phone, day to day

Anything that can't go on the visa is:
LoC = mortgage (zero recently), city tax, insurance, daycare.

My LoC actually has a +ve balance in it. I keep just enough of a buffer all the above bills are paid with the account rarely ever hitting interest territory. If it ever goes below zero the interest is laughable. Like 36 cents! And there is no flat fee. A LoC is waaaay better than a checking account going into overdraft.

Anyway, I find this method quite simple. It would be better if I didn't need to do the first checking to savings transfer.

Here is a general month:
$4000 into checking ---> savings---> make interest for 23 days ----> $1500-$2000 out of savings.  The remaining 2000 to 2500 is always making interest.

Once that stash builds I did a lump sum on my mortgage (~10K chunks) or now I invest (~5K chunks).

[Debts_of_Despair]

Here is a general month:
$4000 into checking ---> savings---> make interest for 23 days ----> $1500-$2000 out of savings.  The remaining 2000 to 2500 is always making interest.

Once that stash builds I did a lump sum on my mortgage (~10K chunks) or now I invest (~5K chunks).

Why wouldn't you hit the mortgage or investment account first thing?  Surely they offer a better rate than your savings account.  I am paying off my mortgage now and I can't throw the money at it any faster on payday.

[onehair]

As a fed I love the fact they give us up to 16 places to allot money out of our paychecks.  Even when my savings rate had dropped dramatically it was still useful.  You just reminded me I need to go back and adjust my rates again.

[kpd905]

Wow Kpd905 that's great. Do you close the account after that or leave it open? I have the ability to do this but I don't want that money to be stranded in a random account that's hard to get to.

Lots of banks require you to keep the account open for a period of time (6 months usually) to avoid forfeiting the bonus.  There is usually a minimum balance to keep in there to avoid fees.  Chase waives the fees if you have a $1500 balance or a direct deposit, so keep the $1500 in there for 6 months and get $300.  Pretty solid return in 6 months.

Here is where I find all these offers: http://www.doctorofcredit.com/