The Buffer Method Ensures That You Never Overestimate Your Account
The worst is the overdraft in your account. Fees and fines add up, especially if you’re just trying to make ends meet and pay bills. The Buffer Method can help you always keep the right amount in your account to pay all bills and know how much you can spend or save.
The correct cash buffer protects you from overdraft without delaying funds that you might have deposited in higher yield accounts. All you have to do is ask yourself three simple questions:
- What is your monthly income?
- What are your monthly bills (rent, utilities, groceries, transportation)?
- When do you pay your bills?
It may sound simple, but if it were, no one would overestimate. The latter is also key, as it removes the possibility of bank-related errors when they write off funds in a different order, so you overdraft either by amount, not by date, or vice versa. Even though you can only estimate some of the larger costs, it will help ensure that you always have enough to cover them. Once you know how much of your income will go towards paying bills and when those bills need to be paid, you will know how much to keep in your checking account. Add to this a buffer proportional to your spending habits. For example, I rarely use cash and put most of my purchases (even in emergencies) on my credit card, so my buffer hovers around $ 200. I always leave the amount I pay until the next check, plus a buffer in my account.