How to Calculate "Unused" Cash In Checking Account
I can't find an answer for this question anywhere. I am trying to determine how much of the cash in my checking account can be moved to my savings account.
For context, I use a budgeting tool and am aware of where every dollar I earn/spend is going. This allows me to calculate an "excess" for savings. That is not my question.
My question is this...if I have $5,000 in my checking account, how can I calculate how much of that is not needed for monthly expenses (e.g. mortgage, student loans, IRA contributions, paying off credit card statement, etc.) and can be moved to savings? Another way to ask the question is...what method can I use to make it so that there is only $1 left in my checking account at the end of the month so that all of the other cash is earning interest?
I thought about adding the current balance of the checking account to the "excess" I am projecting for the month, subtracting out my credit card statement balances, and subtracting out any direct draws on my checking account such as my mortgage. But that gives me a negative number, which I know isn't correct since my checking account has never been overdrafted.
Any help would be appreciated.
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To start, I believe this is unwise. it is good to have a safety buffer on your bill pay account for numerous unforeseen reasons. I carry a 1 month float in my checking. but I will still try to answer your question.
My advice is to work your budget weekly, not monthly.
I have mapped my finances mostly the way you describe, i have a lovely spreadsheet i am working on making available to others that shows not only monthly expense but focuses on weekly in/out. obviously your expense are not all calculated and settled at the last day of the month, they are variable week to week(first week being mortgage/rent day), also they are usually not fixed rate(power, gas, water etc all fluctuate for me) so i don't think you will maximize your savings to the dollar by automated way. this is why i carry a float.
My budget philosophy is to have the money in my account on on April 1 to cover any bill that is due APR 1st thru 7th. and have on hand the 7th money to cover every bill due 8th-14th. and so forth. this means(in my case and budget) that money deposited on Mar 19 and 26 is being used to pay bills due on Apr 1-7(mortgage/rent due on the 1st is greater than 1 paycheck).I would have to actively manage these expenses every week in advance, to optimize my savings account down to the $1 .
if you budget for 4 pay checks a month, actively manage your upcoming bills in advance by the week of the month the bill is due, retain the money for the upcoming weeks bills in your checking acct and transfer the excess immediately to your savings, this will get you as close as possible. it will also provide you with 4-5 extra paychecks over your budget every year(assuming you are paid weekly) that can go straight into interest earning savings.
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