I know some people keep hundreds or even thousands in their checking account at all times as a buffer. Well I am not one of those people. I transfer everything I can into savings (maybe even to a fault) and only leave the necessary amount in checking. See if there is any money in my checking account it seems to disappear somehow. A few years ago I had a line of credit (LOC) at my local bank. I used my LOC all the time. I was horrible with it, paying $2 fee everytime it advanced money into my checking account plus something like 18% interest. Everytime I got paid I would pay it back right away. But within a few days it would be advanced again....and the cycle would continue. In 2008 we switched banks. The new bank had a different LOC system. Their LOC did not have any fees when it advanced, it just had a once a year fee of $20 - you had to pay the $20 fee up front, and whether or not you used the LOC throughout the year you still pay the $20 fee plus interest if it is advanced. This was not something I was willing to pay for as a "what if" (I realize I was probably paying way more then $20 a year when you add up all the $2 fees from the old LOC but it just didn't register). So I decided not to sign up for the LOC. Instead I started my own LOC/Cushion. Each week I would write $10 "out" of my checkbook. I would write a line item in the check registry that says "Cushion $10" and subtract the $10 from my balance. Then the next week I would write "Cushion $20" and subtract the new $10 from the balance. I kept doing this each week and now my cushion is up to $600 and still growing. So if I dip under our actual balance a little that $600 is in there just in case. I am thinking once I get to $1000 I will take $500 of it and send it to the mortgage. Then move back up again etc. The trick to keeping this simple (at least for me) is that each week when I add the new entry I keep the balance added up on the new line "Cushion $600" so that I always know how much it is and don't have to add up every $10 entry, and when I write the new entry in, I check the "cleared box" for last weeks entry so there is always only one line that is showing as an outstanding amount. Then when I balance my checkbook I can just subtract the total as an outstanding check. I am pretty proud of my self made cushion and it has worked great for us so far. It is a FREE LOC!
My Cushy Cushion
October 25th, 2009 at 03:45 am