6 Ways to Budget Using Your Bank Account
BY RUTH SARREAL
If you’re having trouble sticking to a monthly budget, the solution might not be in a fancy app or a complicated spreadsheet, but rather in your humble bank account. Whether your goal is prioritizing essential expenses or curbing a takeout habit, you can put your bank account to work to manage your money, not just store it. Give these tactics a try.
Keep your checking balance low on purpose A simple approach to combat overspending is to get your money out of plain sight. Keeping a low checking account balance “holds temptations at bay and makes it more likely you’ll stick to the plan,” Anand Talwar, deposits and consumer strategy executive at Ally Bank, said in an email. Having just enough money accessible allows you to cover what you need without going over budget or dipping into money that can go toward savings. If you opt to keep a low checking account balance, use an account that has no overdraft fees or easy ways to avoid them in case you spend more than you mean to. Split your money into 2 different checking accounts One way to keep your checking balance low is to split it up. Pamela Capalad, a certified financial planner in New York City, recommends having two accounts. One account is for recurring expenses, with a buffer for variable expenses such as electricity or gas. The second is for discretionary spending — that is, purchases that are nonessential but still important or useful. This way, you know exactly how much of your discretionary funds are left for the month, Capalad says. Use automatic transfers to safeguard money for essentials If having two checking accounts is too much hassle, you can preserve money for necessities like rent and utilities by moving cash into a savings account using automatic transfers. Then, set up another automatic transfer to move it back into your checking account in time to make payments. When using a savings account this way, check how many transfers you can make each month without incurring a fee. There could be a limit, though some accounts, including high-yield savings accounts, are currently allowing an unlimited number of withdrawals each month.
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