Finding a System for On-Time Payments
Doing Damage Control with "Safety Valve" Accounts
Consider how one couple's acceptance of reality led to a brilliant idea for creating a workable system for paying bills on time. Like every other couple, Beth and her husband hate bouncing checks, but when two people use a single checking account, it's easy to lose track of the available balance and spend yourselves into overdraft. This problem can occur for a number of reasons:
- One of you is a spender and the other a saver.
- One is good at tracking spending and the other is not.
- The one who pays the household bills doesn't always communicate the balance to the other.
- One or both rely on the ATM's balance statement instead of their own calculations.
Beth accepted that there was no way she and her husband could expect to never bounce another check they're just not able to be that precise. What she could do, though, was minimize the damage. She made a few changes and immediately saw a huge improvement.
Follow Beth's system to address this problem for yourself:
- Open two new checking accounts: one for you and one for your spouse. These can be individual or joint accounts, but each must be used by only one of you. You will now have the old joint checking account (the main account) and two new ones (we'll call these the safety valves).
- Do not carry checks or ATM cards for the main account in your purse or wallet. File them away at home.
- Deposit all income from both of you into the main account.
- Pay the big household bills (mortgage, insurance, utilities) from the main account.
- Transfer a set amount from the main account into each of the safety-valve accounts, making absolutely sure you've left enough in the main account to cover the checks you sent out for bills.
- Use your safety valve for your day-to-day purchases and cash withdrawals at the ATM. Never transfer money from the main account into a safety valve without thoroughly balancing the main account!
- The person who pays the bills from the main account keeps that account balanced and reconciles the bank statement. Each of you is responsible for balancing your own safety valve account.
More on: Family Finances
Reproduced from Organize Your Personal Finances in No Time, by Debbie Stanley, by permission of Pearson Education. Copyright © 2005 by Que Publishing. Please visit Amazon to order your own copy.