When you consider opening new bank accounts, you probably think about having separate checking and savings accounts. But have you ever looked into the benefits of opening one account dedicated to paying bills, and another for general spending? Financial planner Andrew Schrage explains why you should:
When bills and everyday spending share one checking account, the balance always overstates what’s free to spend. Rent due next week sits inside the same number as money you can spend tonight.
Two accounts split the money by purpose. The bills account holds what your fixed costs will take, and every autopay draws from it. The spending account holds the rest, so its balance is your budget. You don’t need an app or a spreadsheet to know whether dinner out fits. You check one number.
The split protects your bills, too. The debit card you use everywhere connects only to the spending account, so a stolen card number or a weekend of overspending can’t touch the rent money. A bounced autopay can mean a late fee, and a payment that slips 30 days past due can reach the credit bureaus. That late mark can stay on your report for seven years, according to Experian.
Add up a month of fixed bills, including annual costs like insurance premiums divided by 12, and work out each paycheck’s share. If your bills total $2,600 a month and you’re paid every other week, that’s $1,200 per paycheck ($2,600 times 12, divided by 26).
Move that amount on payday through a split direct deposit, if your employer offers one, or an automatic transfer. Seed the bills account with one extra paycheck’s share when you open it, so a bill that comes due before your next payday never catches it short. Then switch every autopay over and leave that account’s debit card at home.
When the spending account runs low, you stop spending, and the bills still get paid.
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If you are someone who struggles to set and stick to a budget, this can be a way to help. It brings your spending into clear categories, and enables you to keep track of where your money is going. All while making sure you don’t come up unexpectedly short on an essential like rent because you chose to eat out with friends one night.