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
With this setup, sometimes I end up with a lot of extra cash just sitting in the checking account until I move the extra into my savings account or into my freedom account. The interest rate on my checking account is a measly .05% so I'm missing out on a few extra dollars in interest income.

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.
Did I confuse you yet? It's actually a lot simpler than I made it sound. How do you manage your monthly cash flow? Here is how Plonkee Money does it.
  • Sponsor: Washington Mutual - Free checking & High Yield savings account currently paying 4.25%. Sponsor: Do you know your credit score? Find out with MyFico.
  • Reminder: Please subscribe to SingleGuyMoney. I promise you won't be disappointed.

3 comments

  1. RacerX // February 9, 2008 at 3:10 AM  

    Kind of similar here. It all initially goes into checking, but each weekend I do the following:

    Checking:$300 plus bills
    Savings attached to checking: Emergency fund
    Etrade: Future medium term bills, like Property taxes

    It basically flows like a fountain from the top down.

  2. Kristin // February 9, 2008 at 10:34 AM  

    Good article - it motivated me to update my cash flow process.

    I direct deposit to my checking acct only enough to cover routine expenses, the rest is DD to Vanguard. To make a big ticket purchase, I have to transfer $ - that takes time/effort and forces me to think about the purchase a little longer!

  3. SingleGuyMoney // February 10, 2008 at 12:33 PM  

    @kristin: That is a good idea to avoid making impulse purchases!