Paycheck into Checking or Savings?
September 18th, 2009I read this article, “4 Dumb Financial Moves in the Recession.” The four points are legitimate and seem to be pretty common. I just want to focus on one item in the first point, regarding emergency reserves.
The author, Marilyn Kennedy Melia, recommends setting up automatic withdrawal to move money out of your checking account into some type of liquid savings. I think this is a good idea; however, I would also recommend taking another step before this. We have our paycheck automatically deposited into our savings account. Then at the beginning of the month, we move only the amount we have budgeted to spend that month over into our checking account.
The benefit to this method is that it helps keep you within your budget and from spending all of your paycheck. If you want to use additional money, you have to move that money over to checking. This reduces (should eliminate) impulse buys. At a minimum it requires you to acknowledge that you are actually spending your money, not just swiping a debit card. It’s sort of like a macro envelope system.
Of course doing this assumes that you have a budget for the month (I’ve heard budgets can be useful). If you don’t have a budget set up or are not following your budget as strictly as you should, trying this step can help motivate you to create better budgets or follow your budgets better.
I’ve had a few people I’ve shared this with comment on how helpful it is. If you’re not currently doing it, I highly recommend you try it out.
That’s my two bits. What are your two bits? Do you do something similar that works well?
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I'm Michael Crowther, and I'm passionate about sharing the peace of mind that comes from budgeting, saving (including debt elimination), and investing.