This is why I don't sign up automatic bill payments. Lets say I get paid on Thursday, but Verizon, Time Warner, and National Grid all take their payments out on a Monday. End result: I'm fucked.
Here's some other advice. If you don't have enough money in your account to pay for a few months of bills, then you're doing it wrong. If it actually matters whether or not your paycheck gets in before or after your bills, then you are spending above your means. Save more, spend less.
If you don't have enough money in your account to pay for a few months of bills, then you're doing it wrong.
I rarely had more than $40 or so in my checking account (and no savings account at all) for my first two years of university. Your advice is useless to people who don't have any money to start with.
If it actually matters whether or not your paycheck gets in before or after your bills, then you are spending above your means.
Going to said university was definitely above my means. I did it anyway, and now I'm wealthy. ;^)
Overdraft protection is a fine thing, and I recommend it. Many banks actually use it to get you to use their credit card. You should have a credit card anyway, so for a low-income starter account, the free checking/overdraft protection linked to bank credit card with low limit combo is perfect.
I rarely had more than $40 or so in my checking account (and no savings account at all) for my first two years of university. Your advice is useless to people who don't have any money to start with.
If you only got $40, what do you need a checking account for?
Here's some other advice. If you don't have enough money in your account to pay for a few months of bills, then you're doing it wrong. If it actually matters whether or not your paycheck gets in before or after your bills, then you are spending above your means. Save more, spend less.
This Ivory tower you live in....
Note, I follow this rule, but all sorts of things can come and mess the equation up.
Note, I follow this rule, but all sorts of things can come and mess the equation up.
If there is a freak situation that messes it up, such as a financial emergency, then who gives a shit about some overdraft fee? If it's an emergency, then it's more important than money. The fee is the least of your worries.
That's a pretty moronic stance. I'll never be in a position to overdraft, but when I was a high school student with my first checking account and not much balance in there? Yeah that shit could have happened. Regardless of how intelligent you are, it doesn't mean it could never happen, it just means it's much less likely. Why not take free protection if it is offered to you?
This is why I don't sign up automatic bill payments. Lets say I get paid on Thursday, but Verizon, Time Warner, and National Grid all take their payments out on a Monday. End result: I'm fucked.
I do think you're more likely to be fucked by forgetting to pay one of the bills. Start each month with 1-months pay in your account, and spend from that. Ignore your paychecks as they roll in. They will just provide you some safety buffer and be saved for next month's spending. It's now the 31st of the month, do you have 1-months worth of pay in your account again? If you have more, then congrats, you didn't spend all of last month's pay and can move some over to savings. If not, you spent too damn much and need to go grab some money from your savings.
This is why I don't sign up automatic bill payments. Lets say I get paid on Thursday, but Verizon, Time Warner, and National Grid all take their payments out on a Monday. End result: I'm fucked.
Normally you can work with a company to have a certain due date for whenever take out the automatic withdrawal. Also it normally takes at least 1-2 business days to take it out. So if you're the type who can keep track of that stuff and has a decent amount of money in your checking at all times, auto bill pay is fine.
Also bank features of bill pay are great, but at the same time is really not as necessary these days depending upon the place you owe money. Most institutions have online/phone payments available through their website/phone services.
Also if you have a credit card, use that for automatic payments and pay off the credit card. Easy peasy.
Note, I follow this rule, but all sorts of things can come and mess the equation up.
Exactly.
Be default, one's savings should always be growing, even if it's only a tiny amount, and one should always have a baseline nest egg in accessible accounts. However, it's is very possible to be driven below this line. The key is to strive to get back up to it (or up to it for the first time). When you're low on cash, even a minor setback can be economically devastating. Overdrafts at that point are an unbearable expense.
There's no reason not to have overdraft protection linked to a credit line. The liquidity it (and/or a credit card) provides can be the difference between making it through tough times and bankruptcy.
Note, I follow this rule, but all sorts of things can come and mess the equation up.
If there is a freak situation that messes it up, such as a financial emergency, then who gives a shit about some overdraft fee? If it's an emergency, then it's more important than money. The fee is the least of your worries.
The only reason it matters is this kid is choosing a bank. An overdraft fee may be far down the list of competing factors, but it's not a long list to begin with. If it's the only difference between two different bank accounts, I'm saying take the one who offers it.
Also if you have a credit card, use that for automatic payments and pay off the credit card. Easy peasy.
A thousand times yes!
Too many people I meet have a strange aversion to credit cards. They're one of the most useful tools a person can ever own, and they can only hurt you if you hurt yourself with them. Even a small credit line gives you a massive boost to your personal liquidity, and they elasticize otherwise inelastic expenses in the short term. That is to say, they buffer your expenses in regard to your income, smoothing everything out.
Not having at least one credit card in the modern world is foolish beyond measure.
Am I really that weird for having 6 months or so worth of money in my checking account? I buy a lot of fancy expensive shit and I live in New York City. What the hell are you other people buying?
Am I really that weird for having 6 months or so worth of money in my checking account? I buy a lot of fancy expensive shit. What the hell are you other people buying?
No, you're the rare sort. Most people live paycheck to paycheck and aren't raised to save money. Consider yourself one of the lucky few. I'm trying to do this right now. I'm doing well, but not where I want to be yet.
Consider yourself one of the lucky few. I'm trying to do this right now. I'm doing well, but not where I want to be yet.
Protip: Use all your yarns before you buy new yarns.
No, it's good to have a stash, however I'm holding up on buying yarns for now. I have enough projects to keep me busy for months. The only yarn I plan on buying in the near future is from Nuri and for my mom, in which she gave me money for it.
I'm also in a situation to where my debt is low and I'm making more money. So that means more savings!
Am I really that weird for having 6 months or so worth of money in my checking account? I buy a lot of fancy expensive shit and I live in New York City. What the hell are you other people buying?
We're rare sorts in that we have an expensive lifestyle, but make way more money than we need to maintain even that.
Despite my massive rent and expenses, I could live my current lifestyle unchanged for a good six months on my savings and investments alone. That's because I make crazy money: more than triple what I made with my first job at IBM.
I use my credit card as much as I am allowed to pay my bills. Like Ro said, super easy! I always pay off the balance though so I don't collect interest. I actually rarely use my credit card to get things I don't have enough money for at the time (except stuff like plane tickets). I just like using it to build my credit and have fewer sites to go to/phone calls to make to pay my bills. I now has very good credit. ^_^
Also whenever I have to pull from savings to pay my rent or whatnot (because it is a big bill and I am too afraid of overdrafting), I always pay myself back with interest as soon as I get paid.
I am definitely not one of those lucky people with tons of money to throw around, and I am definitely not getting paid enough, so I just try to be careful because I have a lot of stupid bills. Plus I like saving money, I feel safe when I see money in my savings.
Am I really that weird for having 6 months or so worth of money in my checking account? I buy a lot of fancy expensive shit and I live in New York City. What the hell are you other people buying?
I'd say that's pretty rare. The most common financial advice is to have 6-months of living expenses in an easily accessible account but few can get there.
Edit: I don't mean that they couldn't get there. People are just not prepared to change their to the drastic point it might take to achieve this sought-after 6 month buffer.
Am I really that weird for having 6 months or so worth of money in my checking account? I buy a lot of fancy expensive shit and I live in New York City. What the hell are you other people buying?
I'd say that's pretty rare. The most common financial advice is to have 6-months of living expenses in an easily accessible account but few can get there.
I've never not been there. If I didn't have that kind of padding, I would indeed be freaking out. I don't know how you people are not freaking out.
Am I really that weird for having 6 months or so worth of money in my checking account? I buy a lot of fancy expensive shit and I live in New York City. What the hell are you other people buying?
I'd say that's pretty rare. The most common financial advice is to have 6-months of living expenses in an easily accessible account but few can get there.
I've never not been there. If I didn't have that kind of padding, I would indeed be freaking out. I don't know how you people are not freaking out.
I've never not been there. If I didn't have that kind of padding, I would indeed be freaking out. I don't know how you people are not freaking out.
Because people are raised differently in regards to money and savings.
Most Americans live paycheck to paycheck and manage fine for most part. It's when those emergencies happen that can totally fuck them over. That's when freaking out will begin.
Most people don't know about the need to save which is in future years when our generation starts to retire, people are going to be in BIG trouble if they think Medicare will take care of them.
Because people are raised differently in regards to money and savings.
If indeed you think that people's upbringings is what determines how they manage their finances, then you can't complain about us Jews running everything. You let us.
Because people are raised differently in regards to money and savings.
If indeed you think that people's upbringings is what determines how they manage their finances, then you can't complain about us Jews running everything. You let us.
You let yourselves. :P
Asians/Pacific Islanders are also good on savings, however I can be considered an outlier. But I'm also a first generation Asian/Pacific Islander American, so perhaps being raised around American culture could be an influence as well. My parents were extremely frugal during my upbringing. Now because they make retarded amounts of money, not so much. They grew up very poor in areas.
Most people don't know about the need to save which is in future years when our generation starts to retire, people are going to be in BIG trouble if they think Medicare will take care of them.
I'm sure most people understand that they need to save money, it's just that 1) they don't make enough money to cover living expenses and still save a significant amount of money, and 2) optimization bias kills them, because they wind up spending more money on things than they expect.
God knows, I'm living so far beyond my means I've practically come up on them from the other side, thanks primarily to being in college and having savings from summer jobs.
Now that I think about it, one of the reasons I don't care very much about not having 6 months of cash in the bank is I have a large amount of bonds sitting in a safe collecting 4% interest and have already matured. So while I behave like I only have enough money to survive a month, I really have the ability to liquidate some investments to cover emergencies or in a worst case, liquidate my house.
God knows, I'm living so far beyond my means I've practically come up on them from the other side, thanks primarily to being in college and having savings from summer jobs.
I used to work 60 hours during the summer in college so I didn't have to work while at college, it was a good deal, though by the spring money started to get mighty tight :-p
Comments
Overdraft protection is a fine thing, and I recommend it. Many banks actually use it to get you to use their credit card. You should have a credit card anyway, so for a low-income starter account, the free checking/overdraft protection linked to bank credit card with low limit combo is perfect.
Note, I follow this rule, but all sorts of things can come and mess the equation up.
Also bank features of bill pay are great, but at the same time is really not as necessary these days depending upon the place you owe money. Most institutions have online/phone payments available through their website/phone services.
Also if you have a credit card, use that for automatic payments and pay off the credit card. Easy peasy.
Be default, one's savings should always be growing, even if it's only a tiny amount, and one should always have a baseline nest egg in accessible accounts. However, it's is very possible to be driven below this line. The key is to strive to get back up to it (or up to it for the first time). When you're low on cash, even a minor setback can be economically devastating. Overdrafts at that point are an unbearable expense.
There's no reason not to have overdraft protection linked to a credit line. The liquidity it (and/or a credit card) provides can be the difference between making it through tough times and bankruptcy.
Too many people I meet have a strange aversion to credit cards. They're one of the most useful tools a person can ever own, and they can only hurt you if you hurt yourself with them. Even a small credit line gives you a massive boost to your personal liquidity, and they elasticize otherwise inelastic expenses in the short term. That is to say, they buffer your expenses in regard to your income, smoothing everything out.
Not having at least one credit card in the modern world is foolish beyond measure.
I'm also in a situation to where my debt is low and I'm making more money. So that means more savings!
Despite my massive rent and expenses, I could live my current lifestyle unchanged for a good six months on my savings and investments alone. That's because I make crazy money: more than triple what I made with my first job at IBM.
Edit: way more than triple...
Also whenever I have to pull from savings to pay my rent or whatnot (because it is a big bill and I am too afraid of overdrafting), I always pay myself back with interest as soon as I get paid.
I am definitely not one of those lucky people with tons of money to throw around, and I am definitely not getting paid enough, so I just try to be careful because I have a lot of stupid bills. Plus I like saving money, I feel safe when I see money in my savings.
Edit: I don't mean that they couldn't get there. People are just not prepared to change their to the drastic point it might take to achieve this sought-after 6 month buffer.
Most Americans live paycheck to paycheck and manage fine for most part. It's when those emergencies happen that can totally fuck them over. That's when freaking out will begin.
Most people don't know about the need to save which is in future years when our generation starts to retire, people are going to be in BIG trouble if they think Medicare will take care of them.
Asians/Pacific Islanders are also good on savings, however I can be considered an outlier. But I'm also a first generation Asian/Pacific Islander American, so perhaps being raised around American culture could be an influence as well. My parents were extremely frugal during my upbringing. Now because they make retarded amounts of money, not so much. They grew up very poor in areas.
God knows, I'm living so far beyond my means I've practically come up on them from the other side, thanks primarily to being in college and having savings from summer jobs.