How Much Should I Keep in Checking?

Why it's important to know how much you need in checking.

We like to think of accounts as containers for your money; it doesn't really matter which account your dollars are in, what matters is what job they've been given. Because of this, we recommend having fewer accounts, while recognizing that when payments are being withdrawn from an account, it's important to know how many dollars you need to keep in there!

Keeping it simple, you may have only one checking account, and one savings account, with the majority of your bills each month being withdrawn from your checking account. It's important to keep enough in this account to cover your bills and expenses for the month, with a small cushion, to avoid any overdrafts. Here's how you can figure out how many dollars to keep in your checking account:

How to check (...get it? 😉)

Follow these steps to determine how much you should have in checking to cover your monthly expenses, without fear of going into overdraft:

In your budget, select all categories that you regularly spend from using funds in your checking account. This often includes Immediate Obligations and True Expenses, plus any other category you spend from regularly.
Look to the right of your budget to see the Total Available in these categories. If you pay all of the selected expenses, your Total Available is how much will be leaving your checking account this month.
Compare the selected Total Available number to the balance in your checking account. We recommend having a higher balance in your checking account compared to this Total Available value by about 10-15%. This way, you will avoid overdraft, and have a cushion when you need to Roll With the Punches.
If you already have more than enough in your checking account to cover those expenses—hooray! You're ready to pay those bills! If you don't  have enough in your checking account, transfer funds from your savings to your checking to increase your balance. 

Now you know that you have enough in your checking account to cover your monthly expenses!

To read more about how to apply these steps in your own budget, check out this blog post!

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