Friday, March 4, 2011

Petty & Bills

I don't know how many people do this, but Brittni and I have a couple different checking accounts. All of them are joint, but each serves a different purpose.

Our Process

Every week we get paid, and our paycheck is deposited into our primary checking account: Petty Cash. From this account we transfer individual amounts needed to fulfill recurring payments and checks into our Bills account. For example, if I know my on of our bills, lets say our Energy bill, is $200 this month, I transfer $200 from my Petty Cash account into our Bills account and the Gas/Electric company deducts the amount from there.

Why We Transfer Individual Amounts

I've found that it's a lot easier to track where your money goes if you transfer individual bill amounts instead of just one lump sum for all the bills you need to cover. For example, knowing my Energy bill is $200 and my Car Payment is $300, I would not transfer $500 because looking at a $500 transfer on a bank statement doesn't give me a clue as to what this money is for. In contrast, a transfer of a familiar amount on your bank statement (such as $300 for a car payment every month) immediately lets to know why that money was transferred and where it's going.

This also helps when the funds get withdrawn by the biller. Using my Energy bill example again, if you put $200 into the Bills account you expect to see a $200 deduction at some point in the future. Money in..., then money out. Makes your statements look much less foreign as you can identify each transaction just by recognizing the amount. 

Also, the fact that you can add Memos to your transfers (at least, at my bank you can) give you a really good idea of where you money is going or where it went.

Why We Have A Separate Account For Bills

Call me "New Age", but I think checks are just so "Old School". I can't tell you how annoyed I used to get when people/businesses took months to cash/deposit a check I sent them. Especially when you have multiple checks out there waiting to be deposited, it makes it really difficult to know how much money you actually have in your account. Of course, if I actually had a check book (I don't, all my checks are sent via my bank's Bill Pay) I could do that balancing thing my Mom used to do, but I never got into that. It's 2011 for goodness sake... pencil and paper, really?!

Anyway, when you have a separate account that is JUST for the checks you wrote or the automatic withdrawals from billers, whatever you have left in the OTHER account (ours is called Petty Cash) is the money you really have to spend on non-bill things (like groceries, gas, entertainment, etc.) or adding to your debt snowball. AND you are never deceived into thinking you have more money at your disposal than you really do; once you transfer the money to your Bills account, consider it gone. Lastly, this also protects you from buying non-bill things (like groceries or gas) with the money you intended to use to pay bills.

Now when you look at your Petty Cash account and you see it's nearing $0, you know you're really running out of money. In the same situation, but with a joint Bills + Petty Cash account, you could be nearing $0 of your spendable money, but the account may have still have $1000; only problem is, you have to remember you can't spend that money because you either wrote checks for that amount or your billers will be withdrawing some of that.

The Question

Having a separate accounts for Bill Payments and Checks has worked for me for a long time (about 8 years) but I'm wondering what other methods people use to keep track of money for Checks & Auto-Withdrawn Bills, and money for your debt snowball or other non-bill items.

Am I making this too complicated? Do you use the same method we do, or do you have your own?


  1. I live and die by my Quicken Home & Business software. I would literally be lost without it. It tracks all of my accounts, I can see what bills are coming up, auto-debit bills that need to clear, income coming in, cheques that haven't been cashed, and so much more.

    I've been using Quicken for about 5 years now, and it is the only thing I trust to keep track of my savings, chequing, investments, retirement, auto loan, and personal loans, etc. Plus, it's awesome to have everything all in one place, instead of having to log into several bank accounts online.

  2. @Krystal I heard a lot of people have had success with quicken! I actually use another Intuit product called I'll be blogging about that in a post or two from now. Does Quicken automatically categorize your purchases?

  3. I don't think that Quicken categorizes automatically. I have been wanting to look at using, however, I have heard that it is pain for those who get paid on a bi-weekly like I do. I have a separate account for the auto debit bills, like the newspaper and so forth. I use my main checking account (being that I have a lot of e-bills set up there) for my household account. I live by an envelope system. I take out the cash I need for two weeks, and the rest goes for bills.

  4. @RHitter94 is really great; I highly recommend you check it out! I'll be doing a post on it next week.

  5. Thanks Jason - Look forward to reading it.

  6. hey bud i see you use USAA too. I do what you do to an extent. I deposit all money into a primary account and then seperate by savings goals. I still write everything out of my primary checking for regular bills though. I dont auto draft. I pay them myself.

  7. Hello,

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    Marc Brown