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Are you accidentally spending car money on cheeseburgers? Here’s help.
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I remember how stressed out my parents could get when they sat down to pay the bills when I was a kid, and once I became an adult, I began to understand why. There are a lot of potential pitfalls when it comes to managing your money, and many people struggle with ensuring the bills get paid on time and the money goes to the right places. This is especially true now, with annual inflation still sitting at 6.4% overall, per the most recent Consumer Price Index report.
I recently had a conversation with a friend who hit on a great trick. She had been trying to manage paying for groceries, gas, and other variable expenses out of her checking account, and accidentally leaving herself without enough money left over to cover her regular monthly bills like housing, utilities, and her auto loan. What’s her trick? Having two checking accounts with the same bank. Here’s how this system works.
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Account No. 1: Pay the bills
You probably already have at least one checking account with your bank. Chances are, this is the place where any money you bring in is deposited, like paychecks from your employer. You can use this account to set up payments for bills like your mortgage or rent, your utilities, and fixed monthly costs like a car loan. If the bill is for the same amount (or close to the same amount) and is due at the same time every month, use this account to pay it.
Based on your budget, you should have a pretty good idea of what your fixed monthly expenses are, and you can leave enough money (with some buffer, to prevent accidental overdrafts) in this account to cover them. Then take the rest of your month’s pay and transfer it to the second checking account.
Account No. 2: Variable spending and fun money
You fund checking account No. 2 with money for the expenses that fluctuate more from month to month (while you may have a rough idea how much you spend on groceries, it’s unlikely you know the precise dollar amount in advance). You can also transfer over the money you can afford to spend on fun expenses, like dining out.
The beauty of this two-checking-account system is that you don’t have to worry about accidentally spending money you intended to go toward a fixed monthly bill. And if you set up auto-pay, chances are the money comes out of your account within a few days of the due date, but it could vary from month to month (especially if the due date is over a weekend or a holiday some months). You might believe a bill has already been debited from your account and you’re safe to spend the money left there if you forget to double-check your bank account. If you’re wrong, you could find yourself coming up short for the bill, and possibly even overdraft your account.
Consider adding a savings account
If you really want to take this trick to the next level, make sure you’ve got a linked savings account in the mix, too. Set up an automatic savings transfer from the first checking account (where your paycheck is deposited), and you’ll ensure you’re saving money for emergency expenses or the future — all without putting yourself at risk of accidentally spending it.
It pays to do what you can to make money management less stressful. With the two-checking-account system, you can ensure you never come up short for your mortgage payment or utility bills, and you can more easily tell how much you can spend for the fun stuff.
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