When considering how to manage monthly expenses, it helps to break your monthly budget down into categories for necessities, such as food, housing, and utilities, and non-essentials, such as streaming services and entertainment. Many of our customers opt for budgeting with multiple accounts to make it easier to manage their everyday spending while setting funds aside for their regular monthly bills. It’s one of the financial organization tips that many financial advisors recommend to their customers.
What a Bills-Only Checking Account Is
A dedicated bills checking account is one that you use only for your regular monthly bills, while your main checking account is used for discretionary and other spending. Financial advisors recommend this strategy as a simple way of making sure you have enough set aside to cover your monthly obligations, and for the peace of mind it offers by removing some of the stress involved in your monthly budget.
Many of our customers have their paycheck deposited into their main account and set up automatic transfers into their bill pay account. If your employer allows direct deposit of your paychecks, it may let you split a portion of your pay between different bank accounts as well.
Your bill pay account would be used to cover your rent or mortgage each month, your utility bills, insurance premiums, groceries, and the like. These are things you have to spend money on. Your main checking account could be used for discretionary spending, such as restaurant meals, subscription services, luxury items, travel, etc. The bottom line is your discretionary checking account would be used for your “wants,” while your “bills only checking account” would be used for your “needs.” Most people use their main checking account for everyday spending, such as groceries, since this tends to fluctuate, and you do have some discretion on how those funds are spent.
How It Helps You Avoid Overdrafts and Missed Payments
Even if you set a weekly or monthly budget for your discretionary spending, it can be hard to stick to. You might be tempted to splurge on food delivery, an evening out, or an impulse buy while thinking you’ll make up the difference by spending less later on.
How many times have you told yourself that it’ll be okay to splurge a little this week and go over budget, because you’ll find a way to cut back over the next week or two and make up the difference before your monthly bills are due? We’ve all done that, which is why we recommend splitting your accounts into discretionary and mandatory spending. Many people might rely on their credit cards, which makes it far too easy for them to fall behind, especially if they can’t pay off the balance at the end of the month and start racking up interest charges.
Keeping your discretionary and mandatory spending separate makes it less likely that you’ll engage in accidental overspending because you’ll know exactly how much money you have in your main checking account, especially if you remind yourself to check your discretionary funds regularly. This also makes it much easier to keep track of your expenses and monitor how close you are to sticking within your budget.
This also helps with automatic payments and recurring bills. You can have your automatic payments made from your main checking account, and by adding to this account regularly, you can make sure you have enough to cover those bills—especially if you save enough to maintain a financial cushion.
Simplifies Budgeting and Financial Planning
Think about the mental gymnastics you go through regularly with your budget and spending. If you spend more this week, then you’ll have to spend less for the next week or two. This can be difficult if your financial responsibilities mean there isn’t much wiggle room in your budget, especially if you have other people to support and plenty of household expenses to cover.
Having two checking accounts makes it easier to keep track of how you’re doing with your budget goals. Many people discover that this two-account method results in them checking their budget progress regularly, which makes it more likely that they’ll meet their goals and less likely to splurge on something they might not really need. Keeping your budget in mind can also help you identify areas where you need to save or adjust your budget to account for changes in your expenses.
Reduces Stress and Improves Money Habits
Numerous surveys reveal that most Americans spend a lot of time thinking about money and how much they have, or the lack of it. They may worry about meeting their financial goals, saving up for a major expense, getting out of debt, and covering their bills each month. Having separate checking accounts encourages financial discipline, especially if you make a habit of keeping track of your discretionary funds in your main checking account and refrain from spending funds from your bill pay account on anything but your regular monthly expenses.
This can also significantly reduce the mental stress of having to manage multiple bills and expenses, because you can always tell how much you have set aside for bill payments just by looking at your bill pay account. You won’t have to mentally subtract any amounts from your main checking account to make sure you’ll have enough funds allocated at the end of the month.
How to Set It Up
Setting up a separate bill pay account is easy. Just open a new checking account, just like you did with your primary account, then set up automatic transfers from your primary checking account to your bill payment account regularly. For convenience, you could choose our online banking bill payment tools and our mobile app features.
This not only makes it easy to manage your funds, but you can also easily check your balances either online or through the app. Many of our customers discover that this makes it much easier to meet their budgeting goals because it reminds them of the importance of saving, of setting enough aside to cover their bills, and they can more easily track and adjust their budget and spending to reflect any changes in their monthly expenses.
Optional Add-On: Emergency Buffer
One of the top recommendations that any financial advisor will offer is to set money aside for an emergency. A general rule of thumb is to have two to three months’ worth of living expenses in an account that you could access at any time. Of course, you don’t have to build an emergency fund overnight, but having a separate bill pay account can make it easier to do so over time.
Having a financial cushion in your bill pay account can help you avoid accidental shortfalls. For example, you might face unexpectedly high heating or electrical bills that increase your monthly expenses. Having a little bit extra in that account can help you cover those obligations. You might also link your bill pay account to a high-yield savings account for extra protection. This way, you would benefit from earning interest on your emergency fund while also reducing the temptation to spend that money on an impulse buy.
Make the Move Today
Having a dedicated bills account can make it easier to manage your budget and keep track of your expenses. Many people discover that it also makes it easier for them to set money aside as an emergency fund or for a future expense. Set up a bill pay checking account today and discover how it can help you reduce stress while giving you more control over your money. Just contact us online, or call us at (800) 242-7880. You can also visit one of our locations in Oshkosh, Fond du Lac, and Waupun, Wisconsin.