What’s a good buffer?

I try to keep a decent buffer in my checking accounts.  I figure it’s easier to keep some extra money in there rather than worry about bills being paid too early or too late.  However, I’ve always struggled with the question of how much buffer I needed.

Right now, I try to keep at least $2,000 in my personal checking.  This is enough to cover about one month of expenses, even though we pay for almost everything out of our joint checking account.  The buffer amount doesn’t include my fudge factor amounts, where I budget for stuff like gifts over several months (to spare myself the pain of coming up with, say, $600 for gifts around Christmas).

In our joint checking, we have a big buffer – it’s our rent + about $2,000 ($3500 total).  I’m more comfortable keeping a big buffer in this account, just for those months where the first paycheck is later or if I make a mistake and pay off my credit card through the wrong account (it happened once! naturally, it was on the CC bill that had a few thousand dollars in charitable donations, and not my normal $10 charges…).  With two people spending out of one account (plus rent, plus everything), it just feels safer to keep a big buffer.

Anyway, I’ve been thinking I should cut back the buffer in my personal checking.  First of all, we take care of normal expenses out of our joint checking account, and money from my paycheck goes directly into that account.  The only regular expenses I pay out of my normal checking are my cell phone bill and my student loans (< $200 together).  If there was an emergency and we immediately needed money, the joint account would probably cover it;  Chad has a personal checking and a savings account linked online, so we could get a little extra, if needed.

Having a big buffer never really bothered me, just because interest rates are so low that I’d be missing out on less than a dollar of interest. Now, though, I think it might be better to cut down, maybe to $1,000 buffer.  An extra $0.83 will add up (over a hundred years or so), and it will give identity thieves less money to work with, should they bother trying to steal the identity of a person who check account balances everysingleday. I don’t know if I’m adventurous enough to keep the minimal buffer that some of my blogger friends do, even if I will earn $0.12 more in interest!

How much of a buffer do you keep in your accounts & why?

9 Responses

  1. So, I have $35 in my checking account right now. ($200 in the savings account linked to it.)

    Obviously I don’t worry about buffers much, though I usually do shoot for $200, I kind of forgot about my student loan autopayment, which is why it is abnormally low.

    I don’t worry about it because almost nothing comes out of that account – all spending is on credit cards and I control when I pay those manually. (Also I pay rent out of my money market fund, which is the only real non-credit expense)

  2. I use a cash flow budget to determin the minimum I need in there. Is there a reason you decided on $2000?

    • It roughly correlates to about a month worth of expenses… from about 5 years ago. It’s still pretty close to current. It’s been a long time since I really considered it!

  3. When my husband and I both had regular salaries, we tended to keep our current account balance very low – partly as I felt uncomfortable having a large balance in case it encouraged me to spend more. (Yes, a bit silly and immature of me, I know, and I am not convinced now that it made any difference.) Now that we are both self-employed, and money comes in in dribs and drabs at irregular times, we are more comfortable keeping enough for a month’s expenses in there as a buffer.

  4. P.S I meant to add that I really like the new blog photo – I wonder where it is?

    • No idea, it’s just the one that came with the layout. Looks so peaceful though!

  5. I’m pretty much in the camp of $50/$200/$2000. Eh?
    It’s from most to least used – the first just gets topped off at about $50 when I write a check. The second is the main checking account directly linked to many cash accounts so I just keep between $100-200 for bills and stuff. The last is for rent – I just send rent checks from there so it gets to hold onto a lot of cash to save me the trouble of transferring money into it.

  6. Hmm. None, at the moment. I need to start keeping one though – am thinking $50 to $100. We monitor our spending pretty closely and budget to a zero basis, so I don’t want a large one. I do need to stop falling back on my free overdraft, because it won’t be free after this year.

    That being said, I have a few k available to me in my savings accounts with the same bank, so if I needed to, I could transfer $ and immediately access.

    Interest rates here are like the lowest they’ve ever been, but the OCR just went up today so I hope they’ll be lifting fairly soon.

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