Friday, August 04, 2006

Checking account tango, or, The peace of mind from always knowing your balance

So I applied for a KeyBank checking account in order to get the free iPod nano, and was thinking of what I should use the account for, or whether it would be better just to wait and close it after enough time had passed. My first idea was to put $200 or so in it, and just leave it there, for "uber-emergency" money - ie if I needed money NOW and couldn't wait for it to be transferred from ING. I had a $200 savings account cushion at Fifth Third, but at the credit union you only have to keep $25 in your savings account (it's your "share" account, ie your membership stake.) So I'd want to have a little money there too. Not that I foresee having that many emergencies, but hey, no emergency is foreseen.

The other idea I had was to use the account for revolving bills that are generally billed to my credit card. I know that these expenses come (the cell phone bill, Netflix, and Lingo accounts) but I still get a little upset when there are charges to my card that I didn't precisely make. (Well, I ran up the charge, but it's not like I handed my credit card to T-Mobile.) So I might feel a little better if I had a direct deposit going to that account that would cover those charges, so I wouldn't have to pay the credit card every month. I don't want to have them auto-charged to my regular checking account because that would drive me nuts in a very short period of time, when $60 goes missing and it takes me a while to remember where it went. (Also, sometimes it gets down that low, especially when we are close to the end of the month and we just went on a big food shopping trip or something, I don't bother transferring in any money since we're not likely to need to spend any more before I get paid again.)

I have a great online direct deposit system where I can divert my pay (by percentages, not fixed amounts unfortunately) into any account I want. I don't think that they even have a maximum, because at one point I had money going in four different directions at once. (My obsession with multiple accounts at ING.) I think it would make me a lot calmer and happier to not have charges appearing on my credit card, and to have a checking account dedicated to this purpose. Also, over time extra will build up (because I can't allocate in my direct deposit the precise amount that will be needed) and that will be a nice cushion if I need it.

So here's what I'm going to do. I'm actually going to go all the way and have ALL of the money that I need for bills, other than rent, deposited into the Key account and all of the bills will be paid out of there. They have a great online system (I used to have an account before I moved) so it should be pretty easy. My regular checking account (at the credit union) will contain just rent money and the spending money for the month. Boyfriend writes me a check for his half of the rent plus parking pass and half the cell phone bill, but during the regular school year, since he gets paid the same day I do, the check doesn't actually make it to the bank for a day or two. So I need to be able to cover the whole rent out of my regular checking and still have some money left over.

Here's my fixed expenses:

Netflix - $13
Phone bill - $57
Newspaper - $5
Lingo - $10
Student loan - $150
Credit card - $250
Electric bill - $75
Gas - $15
Roth IRA - $125
Total: $700

Obviously in the winter I will have to raise the allocation a little for the gas bill going up.

So here's where the money will go. I have to divvy things up by percentages since that's how my direct deposit works, and 1% is about equal to $18.

KeyBank - $702 or 39%
ING: $162 or 9%
Normal checking: $936 or 52%

Our rent is $695, so that will leave me a comfortable margin of about $240 in the account between when I write the rent check and when Boyfriend's check clears in my account. Then I will have about $660 to spend for the month on all non-bill items, which I think is a good amount. I was budgeting $500 before and always ended up a little over. (Since I make more than Boyfriend, I buy all the groceries.) I spent a while playing around with the percentages, as I decided how much should go to savings and how much to the Roth and how much to the credit card. I had originally set the savings at $198, but decided to up the debt payment instead. Which actually worked out quite nicely because now the actual needed amount for the Key account is $700, and what will actually get deposited is about $702, so the extra $15 can go into savings instead.

I am extremely pleased with myself! I bet you can tell. With this system, I won't have to worry about anything clearing. All of the bills will just zip out of the Key checking account. And I'm also bumping up my savings and debt payments - my minimums are actually $137 for the student loan and $140 for the credit card. I really want to get my emergency fund up to a good size, so once I do, then I'll probably cut down the ING contribution and put it towards debt. But it just makes me really happy to know that I won't have to put anything on my credit cards anymore, won't have to pay them off even for the automatic things anymore.. it'll be great.


Then Things said...

Why aren't you including rent in your fixed expenses?
What my boyfriend and I do is pay our shared fixed expenses out of a joint checking account then use the leftover money as vacation savings. We both have a set amount that we contribute each month which it makes it way easier for me, it's one monthly "bill" so I can always predict my expenses. It seems like just a few bucks over for your fixed expenses is cutting it pretty close (especially since some like gas and electric aren't truly fixed). We budget for the winter and have extra in the summer.

Kira said...

Rent isn't in the expenses of the KeyBank account mostly because I pay my landlord by check, and I'll get free checks from the credit union, but have to pay for them from KeyBank. ;) I feel okay with cutting it close because all of those, with the exception of gas, are indeed fixed for me - we're on a budget plan for electricity so it's $75 a month no matter what. And I'll still have the ability to transfer money into my KeyBank account, or send more money from my other account, if there isn't enough. I abhor automatic withdrawals, so only the phone, netflix, lingo, and newspaper money will be automatically withdrawn. So if I need more, I can deposit more before things are due. (Also, I am a compulsive before-it's-due payer. I have no idea when the bills are actually due because I pay all of them as soon as I get paid, even the gas bill which I don't actually get until the 10th.)

My boyfriend and I have discussed a joint account and don't want to do it until we get married. We split the rent and the utilities (I pay gas and electric, he pays for cable and internet) so things are pretty even, considering that he makes a graduate student stipend and I have a full time job.