Mastering Your Budget Week 1 - Setting up a Second Checking Account
Challenge: Open a Second Checking Account
Required: $50 (minimum opening amount)
The first step to setting up the stackbacks automated budget system is to get a second checking account. This is important to get started right away because it can take upwards of two weeks to get your debit card and checks.
Your new account is going to be your planned expenses account. It’s easier to create a new account that scheduled items are going to come out of, than to create a new account for your living expenses. You’re already living out of your current checking account, so leave it as is.
UPDATE: Thank you commentors you’ve convinced me. I set my new account up originally as my planned expenses account so that I could write down everything that I setup for autodebit. I already had to change my direct deposit because I was running a dual deposit system, 80% into checking 20% into savings. However, after reading the comments on this post, I’m convinced it’s easier to setup the new account as your living expense.
A few comments I really liked:
“swapping out the ATM card I carry in my wallet seemed MUCH easier than filing the paperwork”
and
“If you set up the second account to be your ‘Living Expenses’, then it is easy to continue to use your primary account for living expenses until you get your new debit cards, etc. And when you do, then voila! You transfer over your first allowance!”
Open your new account with just the minimum amount. We’ll be depositing money in it soon enough.
What to Look For in a Checking Account
Setup your living expense and planned expense checking account at the same bank. You will need the ability to login to your bank account online and transfer money between the two accounts easily. Most banks will allow you to do this and will process a transaction almost instantly.
In addition to your regular scrutiny, make sure you get all of these options:
- Debit Card
- Checks
- Online Bill Pay
I use overdraft protection as well, because the miniscule interest rate charge is worth not paying a fee when you make a mistake.
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January 23rd, 2006 at 10:00 am
When I opened my second checking account last week, I immediately entered into an internal argument with myself — should the new account be used for planned or living expenses?
I came to the opposite conclusion that you came to, because both my bills and direct deposit are already tied to the old checking account. For me, swapping out the ATM card I carry in my wallet seemed MUCH easier than filing the paperwork required to switch all of those automated transactions.
January 23rd, 2006 at 12:14 pm
I also opened a new checking account on Friday to use as my living expenses account. I had to go to the bank to get a new debit card, as my old one has gone missing and I can’t function without it. I tied it to my existing savings account for overdraft protection, and I plan on only carrying that debit card with me and leaving the planned expenses card at home.
I bank with Bank of America, and I have my original account signed up for Keep the Change, which rounds up the nearest dollar on every checkcard purchase (which is great, because I pay most of my bills online using my checkcard!) and deposits the difference in your savings account. For the first 3 months, they match what you’re putting in savings by 100%, and after that they match 5% annually. It’s a pretty neat way to skim a little off the top in addition to my normal $xxx.xx/month savings plan, because I don’t miss it at all. I will be adding my new account’s checkcard to Keep the Change as soon as I get it.
January 23rd, 2006 at 3:28 pm
Another tip:
Open the second checking account at the same bank.
Reason: Most banks allow you to easily transfer money between multiple checking accounts that you own–online. That saves the hassle of driving to an ATM, waiting in line, etc.
I also agree with Nathan. The second account is much more easily set up to be the “Living Expenses” account, and NOT the “Planned Expenses” account.
What a pain to transfer your direct deposit, automated payments, etc., etc.
If you set up the second account to be your “Living Expenses”, then it is easy to continue to use your primary account for living expenses until you get your new debit cards, etc. And when you do, then voila! You transfer over your first allowance!
January 23rd, 2006 at 3:44 pm
Thanks for the great comments! I’ve updated the original posting.
January 23rd, 2006 at 9:55 pm
[…] Personal Budget Blog Keeping the money you earn. « Using credit cards with the system Mastering Your Budget Week 1 - Setting up a Second Checking Account » […]
January 30th, 2006 at 9:02 pm
[…] After you committed to mastering your budget, you opened a new checking account. Now it’s time to identify what your planned expenses are. Before you can automate your budget, you will need to know what your planned expenses are for a month. Grab your checkbook, computer, stack of bills, or whatever has a record of your monthly expenses. […]
February 6th, 2006 at 3:34 pm
[…] This is the most crucial step in the mastering your budget program. Without the money flowing in the correct direction you lose the benefits of the system. In the previous weeks you setup a checking account and identified your planned expenses. This week you will get that money flowing in the correct direction. […]
August 4th, 2006 at 10:15 pm
I just opened my accounts, and was going to follow the advice of JonaricAric - open two checking accounts at the same bank. As it turns out at my bank you can direct deposit and bill pay from savings. So my plan is to use the savings as the “inbox” and for automated payments. Transfer my variable expense money to the cheking.
Anything else that I actually save gets transfered to another institution with a higher intrest yield (and it takes a few days to get at it so I don’t break my piggy bank).
October 31st, 2006 at 11:02 am
[…] This week’s assignment is the audit. You’ve setup a new checking account, identified your planned expenses, and directed your cash flow. Now it is time to monitor your system. […]