I've read a couple of articles lately from a couple of different bloggers regarding how they use their checking and savings accounts to manage monthly cash flow. I've been meaning to examine the way I currently manage my monthly cash flow. With the recent drop in interest rates, it's even more important for me to maximize the interest I earn on my idle cash.
My current checking account is with Bank of America due to the numerous ATM locations and the the ability to deposit checks at the ATM without using an envelope or deposit slip. I also have a money market account where I keep my savings account. The account used to pay over 5% interest before the rates dropped. When I checked the rate the other day, it had dropped to less than 2.5%. I keep my Freedom savings account and my Rental Property savings account at E-Trade which is currently at 4.40%. I started using a self-created budget in Excel about a year ago to manage my monthly expenses. I know exactly how much money I need to cover my monthly financial obligations.
Currently, my setup is like this:
- Paycheck direct deposited into checking account
- Rental income is deposited into checking account
- Any miscellaneous income received during the month is deposited into the checking account.
- Monthly bills are debited from checking account
- Savings contributions are automatically deducted from checking account
The new setup will be:
- Paycheck will be direct deposited into new E-Trade savings account
- Rental income will be deposited into BOA checking account. Tenant pays by check and I do not want to risk mailing the check to E-Trade and having the possibility of it getting lost.
- Any miscellaneous income that can be direct deposited will be deposited into E-Trade.
- Any income that cannot be direct deposited will be deposited into local checking account and then transferred to savings until needed.
- At the beginning of each month, I'll transfer 75% of the budgeted expenses for the month from the savings account. Around the 15th of the month, I'll transfer the remaining 25% to cover the remaining budgeted expenses.
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