Wednesday, March 21, 2007

Losing Interest, Keeping a Cushion

The balance in my checking account is $802.47. Why is that remarkable? Well, because tomorrow is payday, and instead of being broke as the proverbial joke, I have very nearly the equivalent of my full, biweekly take-home pay in my checking account.

Where does it come from? Well, mostly it comes from "envelopes" of money that aren't used on a weekly basis, but rather in large spurts, notably the envelopes for clothing and haircuts. Half of the money I'll need to pay my rent is there, too, plus some money for household bills (though those have just come in, actually).

It feels sort of silly to be losing the interest on that much money, but at the same time, I like having a cushion in my checking account (not so much because I'm afraid of overdrafts as that it's nice to have a sort of transient emergency fund). I like being able to buy shoes (as I did yesterday on my way home from work--just $20 cheapies at Payless, but I'm hoping they might match my dress for K's sister's wedding) without having to transfer money from one account to another, and waiting for it to clear, and all that slow, irritating jazz. So I guess I've decided by default that it's worth it to me. I can't really justify it logically, though, other than with the "do what works for you" maxim.

(There's also the peril of getting too attached to that money--I do kind of dread what it'll do to my net worth when I decide I need a haircut and a new spring wardrobe, immediately.)


finance girl said...

Sounds like a good plan you have in place! I keep a cushion too, although that's because when I use my CC I actually write it out of my checking account, and since it doesn't get paid til the CC comes in, well, a cushion is what happens.

But pretty much everything else gets quickly transferred over to my online brokerage accounts, you know, to put it to work so it doesn't get flabby :-)

Wanda said...

Try ING's Electric Orange Account, I'm going to get one and it's got a 4.00 APY. You can deposit your paychecks in it and keep another checking account for those times when you need to write checks or need a physical branch to go to.

SF Money Musings said...

I feel your pain with wait times when transferring money.

The fastest way for same-day transfers to clear is to deposit cash. But it's dangerous to carry that much cash to deposit to another account (HSBC in my case).

Anonymous said...

I just wanted to say how much I enjoy reading your blog. I've just started getting my finances in order, and although I'm older than you I always feel "better late than never" ya know? Anyway, I've been temping for the past couple of months while I looked for permanent employment, and I'm so proud of myself because I've been able to save $2,500. I just received a job offer and I start the first week of April so my plan for my savings is to start an emergency fund with ING using $1,000 and open an IRA with the remaining $1,500.

Keep up the good work, EM!

Adventures In Money Making said...

i have several months worth of living expenses in my checking earning me 0.5% interest.
the thing is that with my rental properties, i need to have a lot money handy incase the rents are late or i have a vacancy (which means no rent at all that month).
once things stabilize i usually push the money into my ING direct account which earns about 10times the 1/2 point interest!
but having liquidity helps me sleep at night knowing my credit won't get dinged because of a late payment or bounced check.

Keith Prickett said...

I had the same thing happen to me this month! I actually stuck to my budget and the end of the month there is still money in my checking account! Thanks to DAVE RAMSEY and his baby steps/total money makeover!

No longer will there be too much MONTH left at the end of my money!