iwillescape.com

How old are you now? Why aren’t you rolling like a rock star? What am I talking about? Why so many questions? Multiple checking accounts! What? I’ll explain! Listen up - rock stars have people called accountants who sit at desks and pay their bills and make sure they have enough money in their pocket to support a $4000.00 dollar a week cocaine habit. You might be thinking, I don’t need an accountant or I don’t use that much cocaine. That’s not the point. Regardless of how much cocaine you use, the point is that the accountant separates the client’s expenditures and keeps track of their client’s accounts. Now you can do that too through a system of automation. Fortunately for yourself, you probably do not have nearly as much going in or coming out as a rock star, but you do have different types of payments leaving your account. These would be as follows:

debit/credit card activity: Debit posts immediately (pin code transactions) while using your bank card as a credit card ( Visa or Mastercard) can take up to 3 days to post.
ACH: Read automatic deductions. This would include insurance, mortgage payments, gym memberships, utilities etc.
Checks: OLD SCHOOL paper checks that you occasionally write, and then forget to write down in your check book register.

Think back to the last person you remember using a check book register. It was probably an old lady buying cat food at the grocery store. The transaction probably took 15 minutes and were thinking about making her eat the cat food for being such a jerk about making you wait for 25 minutes on your lunch break! It could have also been your grandma, or a skeleton at a museum. Basically nobody but Civil War re-inactors use checkbook registers anymore. Most people write checks once a month or so, cross their fingers and hope the check comes out when they think it should. Heckof not gangster.

What you need to do is seperate your payments so that you avoid confusion, costly NSF fees, and look like 100% gangsta when you whip out 3 check books in front of attractive women. If you have an online business, (ebay, craigslist, blogging) you can separate expenditures so that you know what you spent where. As an example, I recently sent a check to the City of Cleveland. The short version is about 6 months ago, I decided to purchase a condemned house for $1. I’m not kidding, and I don’t recommend ever doing this ( Do NOT ever do this). However part of my responsibilities were to pay some fees associated with it. So I mail off 2 checks several weeks ago and have not seen them go through my account yet. Now I keep low balances because I like to maximize my cash stash over at another bank. So I’m sitting here biting my fingernails over 78 dollars when I should have just written the check out of my other account, transfered the money there and forgotten about it.

Another example: I bought this fantastic domain name, www.iwillescape.com, to document my escape plan from corporate America. Yahoo charges an absurdly low price of 35.00 for 3 months of webhosting. They took it out, but because the authorization (banking term meaning, Yahoo wanted to see if that money was in my account before letting me register the domain) fell off before the purchase order (banking term meaning: money left my account) went through. What this looks like to most people is that 35 dollars left, and then came back. Most people would have not checked to see if it came back because merchants rarely put money back, and you wouldn’t notice it because it is not a deposit or a credit back to your account but simply a hold on those funds that fell off. I Digress, back to Yahoo. I Learned from the Cleveland incident to separate, I saw the temporary hold on my funds release and knew that the money would be coming out, and 3 days later it did. Now if this had gone into my regular checking, like most people mentioned before, I would have not noticed it returning to my account, saw my balance the next day and assumed that my balance was 35 dollars higher, spent it and overdrew my account. The typical fee for this at a national bank ranges between 35 and 42 dollars. Which would have more than DOUBLED the cost of hosting my domain with Yahoo!

The ideal setup is as follows:

Joint account/ACH: If you have a spouse or another type of long-term live in relationship. This is used to pay all household bills such as rent/mortgage and utilities, etc. Sit down and set up a budget with the other person and discuss including grocery money in this account as well, as you might be splitting it. I don’t recommend this however because the cost of food and other supplies for the home varies from month to month. If you’re single you can use this as an ACH account. Most ACH transactions are for things you have for a long time such as a mortgage or life insurance premiums. Let all automatic payments come out of this account. Transfer the set amount of money you know you will have to pay into this account each pay period.

Primary spending account: This is the account linked to your Primary debit/check card from your bank. This is the account you use for your daily spending. Use this card for gas, lunch, clothing, incidentals, etc. Set your accounts up at 1 large bank such as Bank of America, that offers free online banking and the ability to receive a daily text message with your account balance.

Check/Electronic account: Paying for your insurance, traffic tickets, fines, fees, anything that involves mailing an actual paper check should come out of this account. As well as any online purchases. Get a seperate debit card for this account, and when it arrives mark upon it with a thick black sharpie, 2ND CHECKING, or something else that will tell you not to use this card except online. This protects your primary spending account and your joint/ACH account from being improperly raped by crooks. Keep a low balance in this account and transfer money in only as needed. If an online retailer is charging you a subscription every month, give them the debit card number rather than the checking account number as it is much easier to change a debit card over changing a checking account number.

Every pay period set aside your bill money from your spending money, and then set aside any other funds such as web hosting or magazine subscriptions linked to your debit card, into each corrosponding account. Now it’s time for the Bonus Round:

Go to the bank across the street from your normal bank and open another checking account! What? Why? This is your stash account. Make sure this bank offers free online banking and that it has a national footprint. Wells Fargo would do nicely. Have your direct deposit split between your primary checking account and between your stash account. Only take the BARE minimum for feeding, clothing, and sheltering youself and your family, enough to live comfortably, and take all excess money and deposit into the stash account. As an example, I live off of roughly 600 dollars a pay check. This is food, gas, rent, clothes, nights out on the town, books, magazines, everything. Then I have another 400 per check deposited across the street over at another bank and have watched it grow into the thousands. Destroy your debit card for your stash account or hide it from yourself if you have temptations to spend. This account is what you will use to finance other things, such as starting a business, preparing to be married, buying a house, car or other major purchases.

Now you don’t crap where you eat do you? No! You separate those transactions into two different places! The bathroom and the kitchen. Do the same with your checking accounts and you will find yourself mastering the art of personal finance.

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