How much do you keep in checking?

[PatientSaver]

I don't like to run the risk of running out of money if I need it, so i generally have between $4,000 and $5,00 in my checking. It it gets much beyond $5K, I make a point to make a transfer to my online money market, which earns some interest. Not much, but it's something.

[LivingAlmostLarge]

$2-3k probably. Right now around $12k, but we're refinancing our mortgage, paying annual car insurance/home/life, and taking a trip. So cash on hand for the month.

[PMMM]

I keep about $15,000 in my checking. I have running totats for once or twice yearly bills like property tax, house insurances, car insurances (we have six), car tags, christmas, medical, new car fund, etc. I get paid interest on this account.

I do the exact same thing. I accrue money each month to pay those once or twice per year expenses and generally the account is around 10K. But it fluctuates depending on when the bills come due. I have direct deposit for our paychecks and our mortgage payment is sucked out automatically each month.

I too get interest on this account. Money that is destined for the emergency fund or savings account gets transferred to the respective location designated for that purpose which pays a higher rate of interest than our checking.

PMMM

[curtis.lesa]

I keep $ 1000 in checking and rest in savings. Consumerism has hit us so badly that we all have become prone to impulsive buying. It is part of life now.

[glock35ipsc]

Everything except for our blow money stays in one checking account. What is in that checking account is there because it is in the budget. Blow money comes out as cash when the checks are deposited. So at the beginning of the month, there is close to $10k in it. By the end of the month, there is close to $0.

The emergency fund is in another account, at another bank, with it's own check book and debit cards.

[JBL]

We keep about $4000 in our checking account. Our mortgage (piti) is almost $1900 and is auto pay, so I like to keep a very healthy balance so I don't need to worry about it.

[FrugalDad123]

It depends

It's a really interesting question -- "How much do you keep in Checking?" I guess the answer is, "It depends, but we never want to go negative." Questions that many have raised include, "What does 'keep' mean?" Does "keep" mean active monitoring on a daily basis to make sure that the balance is X? Weekly? Monthly? Less frequently?

I wish I could say that we (my family) try to exercise will power and keep our balance at zero. In reality we struggle weekly -- peeking at our balance and trying to keep the balance from going negative. It's because my income and expenses are very comparable to each other. We pretty much spend what I make just to get by. For my fellow geeks out there, on a chart, the amplitude of my periodic income signal is almost perfectly hidden in the noise floor of my cashflow chart. Wack.

Anyway, enough about me. Maybe the question should be changed to "How should one determine how much to periodically INSERT IGNORE INTO checking?" My guess is the answer contains another question, "What is the time period over which the person is trying to avoid crossing zero?" The answer should also always require one to look forward. We need our budgeting tool to provide the ability to look forward. Here is a picture of someone's predicted checking balance -- given a budget. Months are labeled on the horizontal axis.



Say we're looking forward and we are at the beginning of month 3. One method could have the person subtract the lowest point of month 3 from the highest point in month 3 and say, "OK, that's how much I should have to make sure month 3 is covered." But, if we allow ourselves to be placed at or near zero at the end of month 3, then imagine where we would be at the end of month 5. We would need to play a game of "transfer funds back and forth" to prevent going negative at the end of month five. We might be driven to keep playing that "transfer funds" game every month. That might be a frigging headache.

I would suggest the answer to the question is the question, "What is the time period over which the person is trying to avoid crossing zero?" Use your budgeting tool to look forward and forecast that entire period -- be it a couple weeks, month or year. Take the highest predicted balance minus the lowest within that entire period, and put that amount in checking. Every once in a while, check yourself and mark the chart. If you are above line, cool. If you find yourself below line, do something about it.

My two cents.

Peace,
FrugalDad123

[disneysteve]

It's a really interesting question -- "How much do you keep in Checking?" I guess the answer is, "It depends, but we never want to go negative."

I guess it depends on how you manage your money. Your answer doesn't really describe us at all. I would never let our checking balance get anywhere near zero. If we drop down close to $2,000, I transfer money in from another account, so for me, $2,000 is the bare minimum I'm comfortable having in the account, and only temporarily.

Your hypothetical graph also wouldn't look anything like ours. Our income and expenses are much more stable than that but I could see it looking like that for someone with an inconsistent income or large variable expenses. Of course, in that case, keeping a large cushion in the account would be far more important. That line comes close to zero twice during the year. That is way too close for comfort IMO.

[FrugalDad123]

Hi DisneySteve,

Thank you for your feedback. I catered my sketch to those that indicated on this thread that they like to keep their checking account balance minimal -- sometimes close to zero -- and keep their EF elsewhere.

If someone wanted to keep a specific bare minimum amount (bma) during a given time period, I guess they could tweak the startingAmount formula for said given time period to "startingAmount = max - min + bma"

But, back to your suggestion...

....in that case, keeping a large cushion in the account would be far more important. That line comes close to zero twice during the year. That is way too close for comfort IMO.

Great points.

Thank you,
FrugalDad123