14 Mar Reasons to Keep a Buffer in Your Checking Account
When it comes to managing your money, everyone has different ideas for what you should do with the surplus in your account at the end of the month. Should you transfer it to savings? Should you use it to buy yourself somethin’ nice? Should you do a combination of the things?
There’s no one right way to manage your finances, but one thing you should do is to keep some type of a buffer in your checking account. Ideally, you should have the equivalent of one to two weeks’ income extra in your bank account.
Why would you want to do this? You’re not getting interest from it like you would in savings. However, this is a very financially sound way to manage your bank accounts. Here are a few reasons why.
1. Unexpected emergency expenses.
There are so many things that could unexpectedly happen. You go to transfer clothes from the washer to the dryer and step right in a huge puddle that can only mean there’s a leak somewhere in your washing machine. Sure, it could (hopefully) be as simple as a loose clamp on a hose. But what if it’s a malfunctioning pump? Or something more expensive than your washer is worth? That’s an easy $200-400, up to the cost of a new washing machine total.
2. Avoid overdraft fees.
If you spend more than you have in your bank account, that negative balance could quickly accrue an overdraft fee upwards of $35. Sometimes more than one if multiple transactions go through. By constantly keeping a solid buffer in your checking account, you’re ruling out any possibility of an overdraft occurring.
3. Get ahead on your bills.
Eventually, if you keep enough of a buffer, you could even get ahead on your bills so that you’re using last month’s income to pay this month’s bills. That’s an entire month’s income of a buffer. So pretty much, you’re unstoppable. You would no longer be living paycheck-to-paycheck; you’d be working on future expenses instead of current.
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