What Your Checking Account Tells You
Your checking account doesn’t just tell you how much money you have. It can also be a valuable tool to monitor your spending – and provide a nudge to make some changes.
Because a checking account is often used to store money for everyday expenses like utilities, groceries and gas, it can provide a bird’s eye view of your daily financial behavior. And doing a quick check once or twice a month can help you stay on top of your finances and address any weaknesses in your saving and spending strategies.
Here are four signs to look for when checking your checking account.
1. There is no money saver
If your balance is approaching $0 before payday, you may want to keep extra cash available in your checking account. Otherwise, one missed paycheck or higher-than-expected credit card payment could leave you without enough cash to pay your bills. A general rule of thumb is to have enough in your checking account to cover one or two months’ worth of expenses, plus a 30% buffer.
Financial advisors also recommend keeping enough money in an emergency fund to cover three to six months of expenses in a separate savings account. Consider a high-yield savings account to earn more interest. Doing so will allow you to quickly fill any gaps in your checking account if the unexpected happens, like losing your job.
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2. Registration registration
Bigger expenses like housing and utilities may get more attention when you review your spending, but don’t forget to check the smaller expenses that are included. Low-cost subscriptions, such as streaming services, can quietly drain from your balance.
Check your purchases and credit card statements to see if there are any subscription services you don’t use, or would otherwise miss. You can also review existing plans to see if you can downgrade them for lower costs. If you need some help, consider a subscription tracking app like Rocket Money.
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3. Unnecessary fees
Ignoring ATM and overdraft fees may not seem like a big deal one month to the next, but a year later you might be surprised how much of a bite they take out of your savings. Moreover, they are often avoidable.
Keeping some cash in your wallet can help you avoid using an out-of-network ATM that may come with fees. If you often find yourself paying ATM fees, it’s also worth considering switching banks to more in-network machines near you. Avoid overdraft fees by keeping a savings account and banking at an institution that offers overdraft protection.
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4. Untracked spending
If you tend to use cash instead of swiping a card, you still want to make sure you’re tracking where that money is going. Review your checking account for large withdrawals that may indicate untracked spending.
Changing the way you spend money with credit or debit cards that can track your spending is one way, although you can also write down where your money goes so you can review it when checking your accounts.
