How Much Do You Have In Your Checking Account?

Is it to personal to ask how much is in your checking account? Are you holding your breath until payday worried that you might over draft? Maybe you read that and laugh because your checking account is overflowing?

Is that a good thing?

Most would respond of course it is! Why would someone not want to have tons of cash at their disposal? Personally, I try to have as little as I can in my personal checking account.

Why exactly? I like to feel the hurt and to stay hungry. If I have extra money sitting in my checking account I will find a way to waste it. Take this with a grain of salt as I am not as frugal as others in the personal finance world.

How I Allocate Money

My money is already spoken for before it hits my account. Since I am married every year my wife and I decide how we will allocate our money based on our priorities. Regardless of how much we earn we make priorities on how money will FLOW.

Before the year starts we set ambitious goals. Goals that most people would define as unreasonable. In my opinion I think goals are only worth making if they are extremely difficult to achieve.

Once our goals are defined we allocate our cashflows. In the beginning of your journey I would recommend doing this using percentages. As more money flows you can switch to dollar amounts as I find it more motivating.

This split could look something like the example below.

Income All Sources Monthly Flow
  • 401(k) 20%
  • HSA 5%
  • IRA 10%
  • Rental Property Down Payment 5%
  • Basic Bills (Life needs) 15%
  • Mortgage/Rent 25%
  • Big Purchase Splurge Fund (Car, vacations, etc.) 10%
  • Small Spending Fund (Dinners, entertainment, clothing, etc.) 10%

Wrapping Back To The Checking Account

If you are intentional with your money and following the example above, you will only have 10% of your income hit your checking account. The rest of your money is already spoken for.

Most people are not comfortable with this idea. Psychologically it feels better to have a bigger balance in our checking accounts from month to month. Just in case something comes up that you want to be able to pay for.

This is counterproductive to long term goals. Fight your urge to think in the short term and trust the plan that you originally laid out. Force your money to flow towards your priorities.

If you set up a system like the one above, you can scale as your income changes. Life will bring prosperous and challenging times, but you always need to be focused on your long-term goals.

That is why you should challenge yourself to have lower amounts at your disposal every month.

Your Challenge

If you are naturally a spender that is okay. Most people do not control their cash flow but instead let their external circumstances control them.

Take the time to go through last months bank statement to track your spending. Look at everything you spent including debit, credit or cash.

Break this spending out by category and see where your money is going. If you are not willing to take this step you are not ready to embrace change.

Once you get a feel for where your money is going see if you could live off less. Did you really need to go to the bars four times in a month? Get your nails done? Eat out five times a week?

Decide what is important to you. Everyone is different and that is okay, be honest with yourself and decide what is worth keeping. If its everything party on! Just realize you will not reach any of your long-term goals unless you up your income.

The reality is at any income level we can find ways to waste money. We must learn to set a budget and only buy what is important to us.

That is where keeping a low checking account balance comes into play! If you have a low checking account balance that means you are serious about your other categories, exciting!

You will see those areas of your life that are important to you grow with this strategy! It is up to you to set the level of intensity to match whatever big goals you my have.

What Are Your Thoughts?
  1. How much do you have in your checking account?
  2. How does your cash FLOW?
  3. What are the big categories you are focused on in your life right now?

Spread The Wealth!

42 Comments on “How Much Do You Have In Your Checking Account?”

  1. Some great advice. I like it how you broke down each item with allocation percentages. It does require financial decepline to follow an allocation plan like this, but it’s necessary if you want to have control over your financial future.

    Helpful and very well written post.

    1. Smart Tom. I don’t know about you but I feel that keeping my personal checking low keeps me focused. I am like many others in that I can easily be distracted from day to day. However I love reaching the end of the year and seeing that I forced my money into areas of my life that I actually still care about.

  2. Nice post, DM. I love talking account architecture and cash flow.

    On your questions

    1. How much do you have in your checking account?
    – On a non-day day, probably $300 or less. We almost have no cash sitting around.

    2. How does your cash FLOW?
    – It’s moving all over. Even better, I have auto-savings that get triggered on the transfers of other apps’ auto-saving transfers πŸ™‚
    More details here on the flows though: https://www.balanceddividends.com/semi-automatic-ecosystem/

    3. What are the big categories you are focused on in your life right now?
    – Personal care (gyms, etc.) and medical (doctors, etc.) are the big two we’re trying to make bigger gains. We’ll be looking at some utility/TV stuff (switching to Hulu soon, etc.) for smaller bangs.

    – Mike

    1. Love that you don’t have any cash sitting around! I think non FI readers might get scared by this and I should have emphasized having an E-fund before being this extreme.

      Yes sounds like you command your cash FLOW.

      Very nice Mike always smart to look for wins and adjust accordingly. Thanks for sharing.

    1. Thank you! We are all guilty at points in our lives. By setting up our lives in a way that prioritize our long term goals we will actually be able to reach them. It is amazing the progress that can be made after you set it and forget it…no excuses.

      The good news is that you can always back it off it it is to intense to what makes sense for you.

  3. Knowing how much we spend on stuff is great. A few weeks back my checking account got down to like $6.63 but I didn’t sweat because I knew when money was coming in and going out. πŸ™‚ Normally I like to have a bit more of a buffer, but honestly I don’t know why…

    1. It feels good to command the cash FLOW! If there is an emergency fund for overflow then there is no need to worry. If someone spends more then what is in their checking then they are not sticking to the plan and might need to adjust accordingly.

  4. Everything is automated so it’s all gone before I get a chance to see it! I even set up another account strictly for house expenses where I transfer a set amount every month (covers everything from property taxes to groceries) Whatever is left in my main chequing account I get to spend if I want to, usually not very much at all:) It is helping me control my spending in case I lose track of my expenses for whatever reason! Obviously I do have a backup daily savings account just in case.

    1. Sounds like you are already all over it Caroline!

      It feels good to be on the path that you are and look back and see how much progress can be made. If someone has never done it they may not yet realize the power that lies in a strategy like the one you outline.

  5. Very well written post DM! We also have auto-drafts set up for all long term goals. Staying lean and focused is easier to accomplish when it is not a monthly decision. Thanks!

  6. I try to keep our checking account balance to a minimum. Keeps me from impulse buying. Also makes me feel like we are living paycheck to paycheck.

    I have overdrawn once recently. Money was taken out about six hours before a deposit hit. Luckily I have overdraft protection via a credit card. Funny, I actually figured out a backasswards way of getting free points!

    Great article DM!

    1. Haha that is one way to get points that’s for sure!

      I agree I think that I buy less crap that I didn’t need in the first place. Once some money builds up it is much more rewarding to go and get something you actually need.

  7. We automated almost everything.

    So, all our money from our checking accounts would go into our TFSA (your Roth IRA equivalent) and RRSP (your 401k equivalent) accounts. Our cell phone and Internet bills are automated through credit card to reap some rewards. Other utilities, house/car insurance, mortgage, credit card payments, etc. are all automated from our checking accounts.

    So whatever left is…I guess cash lol… but we don’t spend it all. I’ve yet to come up with a plan for our “guilt-free” spending account. That’s like one thing we never did because find that we are able to control our spending (at least that’s what I THINK.. I hope… haha).

    But yes, I completely agree that having less in your checking account can keep you motivated (I know it doesn’t work for some, but it does for me to a degree). My finance always has more in his checking account than me… he brings up our average hahaha… It’s likely because he makes more and has less invested. But when my checking account is sorta low (which is most of the time), I’d say to myself: “damn, why am I so effing poor?? man, how can I increase that???” Lol…

    1. One thing that has worked well for us is throwing some cash into a short term account strictly for “guilt-free” spending.

      This can be anything from dinner out to a getaway weekend if you let it build. Fun way to make sure you are still enjoying the ride.

      Keeps your mind on it which is a good thing. Plus you can just take some cash out of his pocket when he isn’t looking!

  8. I try not to have too much in my checking account, have it at four figures!! If it goes over $10K, I would transfer it to either my investment or savings account so it can compound and thus it’s back down to four figures.
    I would keep tabs on it once a month since I manually pay my credit card bills through that account. So that gives me a way to check on it and see if I need to transfer some money out of there.

    1. Nice Kris. That is a healthy checking account. I like to keep mine much more scrappy :). Most of the extra cash gets swept into a higher rate savings account for future goals.

      It is whatever makes sense for your personal situation. I just feel it keeps me more motivated at this stage in my life to continue to act broke.

  9. Hi DM, I have everything automated but I always have extra cash in my chequing account for small emergencies or extra purchases. It might not be the smartest financially but for the little interest I loose it is worth the convenience.

    1. Nothing wrong with that. I keep an extra grand in my “mega corp” bank that I can easily access from my checking. I have yet to even need that, most situations a credit card will do.

      I like to keep everything above that in a higher interest account and out of my immediate reach, so I do not get tempted.

  10. Nice monthly flow DM! Mine is similar. You’ll still have a high account balance, just in accounts you can’t yet touch without a penalty; and that’s a good thing

    I keep it at the absolute minimum required per the bank….my checking that is πŸ™‚
    I check it out at the end of each month, and if it goes over by even a little bit, I’ll just transfer the excess over to my MM.

    1. Hey SMM, that actually isn’t my monthly budget. Mine is even more insane! Just an example.

      I keep my checking very low as well if I go into the red on my credit card then I figure it out… The whole point is to try and stay motivated and conscious of spending. You are only in your 20’s for so long and I want to take advantage of the time value of money. I can get lazy when I am older.

  11. I keep a minimum amount in my account. Any money I have extra, I will funnel it to my investment account and have it working hard to make more money.

    I am at a point in my life that it’s important for me to achieve financial independence as soon as possible. I am currently more motivated than ever to push forward and invest my money wisely. I want them to work around the clock, so that one day, I don’t have to.

    1. I love that mentality Leo. At this point in my life I am right there with you. My goal above all else is seeking financial independence.

      Once that is attained I will decide how much to scale back. At this point though I get the most out of putting my money to work.

  12. We have only a few expenses that have to come out of the checking account as ACH transfers: Mortgage payments, gas/electric bill and insurance payments. If it weren’t for these, I’d keep the checking account at zero.

    Everything else goes onto credit cards to earn cashback/miles/etc.

    Of course we pay off the full balance every month, but that cash sits in savings accounts until it’s due.

    We bank with CapitalOne, so the checking account gets 0.20% APY while savings accounts get 1.0%. It’s a little bit more management month to month but the 80 basis points are worth it.

  13. I keep the minimum amount too so I don’t have the pay the bank fee. Sometimes this bites me in the butt like the last three months when I took too much out and then got charged the bank fee. Thankfully they reversed it each time after some sweet talking/groveling πŸ˜‰

    1. Yeah have to be careful with fees. Banks don’t mind forcing people to pay up on them that is for sure. I do most my spending with a credit card and fully pay off every couple weeks to avoid it.

  14. I keep the minimum amount so I don’t get hit with a fee.

    My cash flow is heavily decided by my check since I max out my 401k and HSA via contributions so the money I get is already after I saved 20+K. The rest goes to cover expenses and then whatever is left over is saved!

    1. Sounds like a fantastic plan! Great job at filling up that tax advantaged space and having the discipline to save the after tax money above and beyond.

      The after tax money is the important bridge for many who are planning to retire early.

    1. Paying the tax man is never fun. That is a hefty amount for a checking account! At least fight the beast that is inflation in the mean time and through it in a savings?

  15. Interesting mindset!

    I actually like the idea of keeping it low to keep you hungry, that’s a cool way of motivating yourself to control your cash flow! I only keep about 2k in our checkings. In the beginning of the years ALL of our saved cash at the end of the months goes into our Roth IRA’s. Once those are maxed out for both of us, we then will be throwing our savings into a high yield savings account to save up for our starter home.

    Thanks for sharing this cool concept!

    1. Glad you like it. It has worked for me to transfer money out and keep my spending money low. If it ever feels to extreme it is a pretty easy adjustment. Most of the time though I feel like life is great and I get to do everything I want and keep after my long term goals.

  16. Hey DM!

    I’m actively trying to reduce the money in my checking account, because it creates a temptation to spend and because the interest rate is so low. So I try to move as much as possible to investment accounts, where I know I won’t spend it.

    It’s always a balancing act, between keeping enough to cover expenses, but not so much as to have too much temptation to spend or interest-rate waste.

    Cheers,

    Miguel

    1. Hey Miguel,

      I agree it does take a bit of balance and adjusting to find that sweet spot. When in the accumulation journey I think it is important to allocate right away and not stress to much about it.

      I find it difficult to spend the money freely that is left in the checking account. I am forcing myself to get out of that mindset though, it is important to enjoy rewards along the way.

  17. My wife and I have separate checking accounts, so not sure how much she has in hers, but mine usually stays around $1000 and invest the rest. She has her 401k maxed right out of the gate and then sends me a sends me $500 per week to invest which is nice for dollar cost averaging. I am sure we could invest more but with 1 college age child we are partially supporting costs a fair amount.
    Thanks for the article!

  18. All you guys commenting are making me realize I have way too much money sitting in my checking account. What the heck have I been doing all this time? I have some “house cleaning” to do!

SPEAK UP!