Setting up separate checking accounts

Think about it.  In your home you have cabinets and drawers to separate things.  You can go to a particular drawer or cabinet to get specific item to do a specific job. Having separate checking accounts for particular bills is just like that.  It keeps things organized.  You always know at a glance what you have, and what needs to be added.  That said….

A checking account for rent/mortgage with auto  deposits by you and auto withdrawals by the landlord/lender, is a good idea.  Another is to have an excess in the amount of 1-4 months of what the rent/mortgage is.  With your diligence of auto deposits, the auto withdrawal part is there so you don’t have to think about the payment date.  The 1-4 months of excess is there for  rent raises or moving costs, or to make a ‘principal only’ payment on your mortgage.

A checking account for monthly bills with auto deposits by you, and auto withdrawals by the creditor is also a good idea.  Keeping your check register up to date, this too will show you, at a glance, what you have in the account. And if things are getting a bit squeaky, meaning you need more money in it to cover upcoming bills, this is the time to revamp your budget.

A checking account for annual or semi annual bills and gifts.  This is worked in the same way with your deposits and the withdrawals are usually from insurance, taxes, registry fees, etc.

As far as the gift part goes, make a list of those you give gifts to…. write it out on paper.  Don’t leave any out — remember too the gifts you give to the friends of your children, all the birthday parties they go to. Some names will be there 2-4 times,(Birthday, Anniversary, Holidays, Mother’s/Father’s Day, Holiday gifts, etc). There are also Shower, Wedding, Baby gifts to add in.

Now… put a dollar figure next to each name.

Now… add up the dollar figure.

Are you surprised at what you actually spend on gifts?  While gift giving is a very nice gesture, it gets costly, and if you are scrimping somewhere else in your budget (you are on a budget, right?) ….or if you aren’t paying your bills in full and on time each month, …..then you need to cut back your gift list.  Do not let gift giving put you in the poorhouse. And remember, the money in this account is primarily for insurances, taxes etc.  You need the money there for these things.

Over time, you will get into the habit of checking a few times a month each of these accounts, making sure you are ahead of the game on each one.  This also saves any overdraft fees.

Organize your ‘financial cabinet’.  It will make things so much easier for you.  You deserve that.