Using multiple checking accounts to manage variable and fixed expenses
A while back I wrote about breaking the credit cycle using ING subaccounts to help readers understand how they could use the idea of a monthly payment to save and use compound interest in their favor instead of paying interest on credit cards and loans.
That was generally written for savings, but I think there is also value in having multiple checking accounts and using them for different purposes. I will use my own set up as an example. We currently have two checking accounts, one for fixed monthly bills such as our utilities and rent, and another for food and gas. I have my direct deposit setup to deposit a specified amount into these two accounts each month according to our planned budget.
Doing this ensures that we have enough money every month to pay all of our bills instead of living paycheck to paycheck hoping that we can come up with enough for the bills. It also forces us to budget better for our food expenses and limit how much we drive, since once the money in that account is gone it’s gone.
The idea of having segregated accounts really comes down to one reason, and that’s to budget. If you can keep all of your fixed expenses in one account and all of your variable expenses in another you can limit the temptation to go over budget on the variable expenses and eat into the money that you are going to need later on to cover your variable expenses.
One easy way to get started is to open an ING Orange Checking account to use for your groceries and gas. You can then use your regular checking account for paying bills such as the utility, rent, and any debt payments (since you’re paying a fixed amount for those, right?). Or, if your regular checking account doesn’t have free bill pay, you could use ING for your fixed payments and have them automatically go out every month using ING’s free bill pay service. It’s really up to you. Another plus is that you will earn interest on any balances you maintain in the account.
