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4 Reasons to Have Two Checking Accounts

2013 January 21

charlie_imageLast year when I talked about about how to stop living paycheck to paycheck – passive income, I started putting into practice one of the key concepts by splitting up my fixed and variable expenses. By doing so I was able to differentiate my re-occurring bills from every other expense. My wife has even said, and I quote, “It was the best thing we’ve ever done with our finances. I don’t know why we didn’t do it sooner.” I had to do a double take when I heard that one! :)

Seriously, though it has been a huge convenience of breaking these accounts up. It is also helping fuel me on working my passive income streams into my regular 9 to 5 income by helping pay down my mortgage principal and continuing to invest in silver by buying Morgan Dollars. Graphically, here is how it looks. 



Passive Income Streams2

Along the way I’ve found there a lot of benefits for having two checking accounts for fixed and variable expenses. Here are my reasons for setting up two checking accounts for these two expenses.

Guarantees Funds Will Be Available To Pay All My Bills

Before we had two checking accounts we struggled with ensuring that our single checking account had enough money in it. For instance, when our mortgage payment would come due the 1st of the month (our largest bill) we’d sometimes need to transfer money from our checking account, because we’d overspent the previous month. Do ever have this problem? Sure made it stressful when we’d look at each other, and feel like the blame is on the spouse (can you say – PRIDE!?!).

Takes Less Time To Manage My Finances

Prior to implementing these changes I probably spent about 3-6 hours a month working on our bills and transferring money. Now I probably spend 30 minutes per month (tops). By automating the specific dollar amount to both accounts and setting up automatic withdrawals for fixed expenses it makes it so much easier.

No Overdrafts

I admit it. I struggled with getting overdrafts prior to implementing this two account system. It wasn’t pleasant experience. How could I (someone who’s suppose to be good with money) get overdrafts? For me it was a big dent in my character. However, since moving to this new system over 8 months ago we haven’t once gotten an overdraft. Ultimately this is saving us money ($30 a pop!), and lowering our financial stresses!

Motivates Me To Save $$$

This new system has really enhanced my motivation to save, because week over week I’m able to watch our #2 account grow. This growth is a direct result of the variable expense choices we make everyday. Anywhere from going out to Jimmy John’s for lunch or buying a new pair of jeans at the mall. With this motivation it has allowed us to funnel money into our passive income investments which could be anything from tax liens to shares of Apple stock to Morgan Silver Dollars.

Overall, we’ve been more than happy since switching to two checking accounts for our family’s bills & expenses. I’d especially suggest it if you are trying to create passive income streams. Have you considered setting up two checking accounts (one of fixed expenses and one for variable expenses)? Do you already have multiple checking accounts for specific needs? How do you like it?

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Charlie

An IT professional, Charlie also buys and sells liens, lives on the cheap, runs marathons and helps to run his family farm. In his spare moments, he raises 3 children, does the dishes and writes one post a week. His former blog, Frugal Retirement Plan, has been cited by US News and World Report.

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7 Responses
  1. Savannah G. permalink
    January 21, 2013

    We have a “home checking” which is a joint which we each put a set dollar amount into each month that is used for the mortage and other fixed home expenses – it is also a “savings” account for any and all unexpected bills that come with home ownership – I LOVE IT! We do not ever have to worry about those bills!

    I need to set-up a personal one for the grocery, my personal student loans and other fixed expenses personally – I didn’t think of doing that until I read this article – on my list for this week :) THANKS!

  2. Laura W permalink
    January 21, 2013

    I don’t have two checking accounts, but I do have two savings accounts. One is my “regular” or “emergency fund” savings. The second is for taxes. I am self-employed, so if I’m not careful, it’s really easy to not set aside the 25-30% of my pay for the quarterly and April bills to the IRS.

    I’ve found the envelope system works well rather than two checking accounts. I take out the cash I need for the various spending categories of food, clothing, etc. and leave money in the checking for household bills and gas for the car. Helps that I’m single, but all the more reason I have to be vigilant about my spending – no one to blame but me.

  3. Sally Newton permalink
    January 21, 2013

    I have had two checking accounts for years and it does help you not spend monies you don’t have. It was the only way to make sure all of our bills are paid on time. I haven’t paid a late fee in years. In my younger days I spent about 40.00 a MONTH in late fees and over drafts. And I felt like I was always robbing any savings that I had left to take care of that 40.00. Which meant I wasn’t saving a dime in my younger days. But the hubby had a mad fund I didn’t know about and he managed to save enough money for us to both retire early. We are not rich but we don’t have to worry about many bills now..we pay cash for everything.

  4. January 21, 2013

    Great Savannah! Are you going to have these checking accounts at seperate banks? I setup my checking accounts at two seperate banks to keep this seperation. This is to make sure we have no single point of failure in terms of banks.

  5. January 22, 2013

    Nice post. While I don’t have two checking accounts, I do have several savings accounts set up in ING, and just have money funneled their every month. One for stock investments, one for a vacation fund, and one for “one-off” expenses that tend to pop up every now and then. I then use my checking account as kind of the main hub, from which all these other accounts are funded. It works for me, and seems to be roughly the same idea behind yours.

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