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Paycheck division/saving for yearly expenses & contributions

Posted: Sat Jul 26, 2014 2:08 am
by ace1400
There has to be an easier way of doing this than what I have figured out. I have some monthly expenses/contributions, some yearly expenses, some twice yearly things, and I'm having trouble figuring out an automated way of saving for them. What I have done so far is have my HR department at work deposit my pay into several different accounts for different purposes, and now as life becomes more complicated, I would prefer not to have them deal with so many accounts and have to deal with HR if my needs change. I also don't want to have to spend time twice a month moving money around, I would really like to automate it if possible. Any ideas how to accomplish these goals? Right now I have separate accounts for the following:

1. Scheduled monthly bills on autopay
2. Regular contributions for yearly bills (insurance, etc)
3. Account for monthly taxable account contributions
4. Regular contributions for 401(k) contribution (saved through the year so early contribution can be made after Jan 1)
5. Savings for house purchase
6. Savings for I-bond purchase
7. Regular 529 contributions

Thanks,

Ace

Re: Paycheck division/saving for yearly expenses & contribut

Posted: Sat Jul 26, 2014 2:47 am
by DSInvestor
What about having all the pay go into your checking account? Keep enough in the checking to avoid bank charges and cover 2-3 months of expenses. This handles your monthly expenses (automated) and the twice a year and annual expenses which can be automated also. The house downpayment or I bond money can simply be kept in the same place as rest of your emergency fund. I assume it is possible to automate transfers between your checking and savings accounts or wherever you keep your EF.

For investments into taxable account, IRA, 529, that can be automated at the investment account side and pulls money from checking.

Re: Paycheck division/saving for yearly expenses & contribut

Posted: Sat Jul 26, 2014 9:29 am
by ddunca1944
We have everything go into a high interest checking account. I use YNAB (You Need A Budget) to create categories for monthly, annual, bi-annual expenses. I use the category balances, rather than the checking account balance, when making spending decisions.

Much easier than multiple accounts, imo.

Re: Paycheck division/saving for yearly expenses & contribut

Posted: Sat Jul 26, 2014 11:13 am
by Zabar
ace1400 wrote:There has to be an easier way of doing this than what I have figured out.... Right now I have separate accounts for the following:

1. Scheduled monthly bills on autopay Account #1.
2. Regular contributions for yearly bills (insurance, etc)Account #1.
3. Account for monthly taxable account contributionsI assume that this is an investment account. If so, it can go directly to Vanguard, Fidelity or whichever group you're using.
4. Regular contributions for 401(k) contribution (saved through the year so early contribution can be made after Jan 1)So you're saving a year ahead of time. Smart! Again, account #1.
5. Savings for house purchase Account #2. Depending upon your timetable, this could be put into CDs that eke out a little more interest than a saving account.
6. Savings for I-bond purchaseTreasury Direct account.
7. Regular 529 contributionsDirectly into 529 account(s).
In essence, you can pool 1, 2 and 4, drawing upon the funds as needed. Although you could save for a house (5) in the same account, since you aren't withdrawing from it soon you might as well keep that separate so that you can see the balance grow.

Re: Paycheck division/saving for yearly expenses & contribut

Posted: Sat Jul 26, 2014 11:29 am
by sport
Here is a simple system that I have used based on 24 pay checks per year:
1. All pay checks on direct deposit into checking account.
2. Add up all annual and semiannual amounts, divide by 24, and put this amount into a separate account each payday. This could be automated.
3. The remaining money in the checking account handles monthly expenditures.
4. Pay the annual and semiannual bills from the separate account.

Jeff

Re: Paycheck division/saving for yearly expenses & contribut

Posted: Sat Jul 26, 2014 5:02 pm
by Cash
My bank (Alliant Credit Union) allows multiple supplemental savings accounts. You can set them up online and title them as you wish (e.g., "House Purchase"). With Alliant, I would have everything deposited into my checking account and then set up automatic, recurring transfers into the savings accounts in the desired amounts. You can also automate transfers to external accounts (e.g., brokerages).

Re: Paycheck division/saving for yearly expenses & contribut

Posted: Sat Jul 26, 2014 5:09 pm
by Aptenodytes
I do what jsl11 does. Note that you can have your savings account pull money from your checking account in an automated way. So you don't need to bug HR every time you want to change things. Just have the whole paycheck put in the checking account, and then control the sluices from there. If there's a bit that never changes, it is worth taking care of it with HR, before it gets into your checking account.

In addition to an account for annual and semi-annual expenses, you can set aside money each paycheck for less frequent things like roofs, cars, driveways, and so on.

Re: Paycheck division/saving for yearly expenses & contribut

Posted: Sat Jul 26, 2014 8:15 pm
by MathWizard
Aptenodytes wrote:I do what jsl11 does. Note that you can have your savings account pull money from your checking account in an automated way. So you don't need to bug HR every time you want to change things. Just have the whole paycheck put in the checking account, and then control the sluices from there. If there's a bit that never changes, it is worth taking care of it with HR, before it gets into your checking account.

In addition to an account for annual and semi-annual expenses, you can set aside money each paycheck for less frequent things like roofs, cars, driveways, and so on.
Exactly what I do too.

Re: Paycheck division/saving for yearly expenses & contribut

Posted: Sun Jul 27, 2014 6:38 pm
by kDictavissent
We do something very similar to what folks are sharing here. We started with a simpler version of this last year (routine savings accounts for property tax and major household expenses) but have modified it significantly this year.

We use USAA for our main checking account and for clearing all direct deposits. Their rates stink but their time to credit deposits, especially phone/tablet deposits of third party bank checks, makes them good to hold on to.

We do four scheduled transfers a month for savings: one to finish growing an emergency fund, one to a household savings account, one to a property tax/insurance saving account, and one to a car sinking fund. All are in CapOne360 to maximize interest.

Separately, we use a CapOne360 checking account and bring over a fixed discretionary spending account twice monthly. Clothes, groceries, dining out, etc. all goes on there. Any excess in the discretionary account each cycle goes to discretionary savings for vacations and other big-ticket items.

The mortgage and utilities, etc. are paid from USAA. At a certain day of the month, all remaining USAA balances above a threshold are swept to our taxable investment account at our brokerage for investing.

The multiple sub-accounts have added more financial discipline, better prepared us for future big purchases, and have helped isolate money we really want to be socking away for investment.

Re: Paycheck division/saving for yearly expenses & contribut

Posted: Sun Jul 27, 2014 6:50 pm
by marielake
I also use YNAB (you need a budget). I especially love it when the annual bills come due and the funds are set aside.

Re: Paycheck division/saving for yearly expenses & contribut

Posted: Tue Jul 29, 2014 9:07 pm
by ace1400
Thanks for all the great ideas here. I think this has pointed me to the way forward. I will check out YNAB also.

Ace