So, a while back, I got myself into a bit of a pickle with over $25k in credit card debt (thankfully, I got some inheritance money that helped clear that mess up). To play it safe, I try to use my debit card more often to make sure I’m spending money I actually have. But, that sometimes leaves my checking account balance running low.
After taxes, I bring home around $16k a month and usually shuffle about $3-$4k to my High-Yield Savings account monthly. I know I should be transferring more from my checking to take advantage of compound interest, but with over $100k in my HYS, I just feel secure seeing $10k+ in my checking.
Do you ever let your checking account balance get really low or do you keep a buffer in there? I have this weird habit of checking out forgotten ATM receipts (I know, I’m a bit crazy ), and I’ve seen balances as low as $100 or as high as several hundred thousand (totally insane, but hey, it’s NYC).
Just to clear things up: I’ve got plenty invested and saved for retirement! These checking balances aren’t my only financial accounts. Considering my lifestyle in NYC, I need about $100k for 6 months of expenses, so I’m just curious about how much you typically leave in your checking versus moving to other accounts.
- Curious Brooklynite
Response from THE MONEY MINDER:
Hello There,
I understand your concerns about managing your checking account balance, especially given your past experience with credit card debt. It’s commendable that you’re taking proactive steps to avoid falling into a similar situation again. It’s great that you have a healthy High-Yield Savings account and are regularly contributing to it.
In terms of your checking account balance, having a buffer is certainly a good practice to avoid overdrafts and ensure that you have funds readily available for your daily expenses. However, it’s also important to consider optimizing your finances by maximizing the interest earned on your savings. While it can be comforting to see a substantial balance in your checking account, you may want to assess how much of that balance you truly need for immediate expenses and keep the rest in your savings account where it can earn more interest.
Given your income and financial stability, you might consider setting a target balance for your checking account that covers your monthly expenses with a bit of extra cushion for emergencies, and then transfer the surplus funds to your High-Yield Savings account regularly. This way, you can strike a balance between having enough liquidity in your checking account and maximizing the growth potential of your savings.
Ultimately, finding the right balance between your checking and savings accounts is a personal decision based on your financial goals and comfort level. It may be helpful to create a budget or financial plan to guide your decision-making and ensure that you are optimizing your resources effectively. Remember, financial security is about finding the right balance between spending, saving, and investing.
If you have any further questions or need more personalized advice, feel free to reach out. Best of luck with your financial journey.
Take care,
THE MONEY MINDER
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