The Rachel Cruze Show - How Much Cash In the Bank Is Too Much (or Too Little)?

Starting point is 00:00:05 When it comes to traditional checking and savings accounts, some people recommend a specific dollar amount to have in there at all times. And most people assume that there's no such thing as to have too much money and savings. But I have a slightly different take on this topic, so we're going to chat about that today. And before we continue, make sure to like and subscribe and share this episode with a friend who will appreciate this advice. All right, in general, the amount of money that you have in your checking account and your savings account will depend on lot of factors. So obviously your income and your lifestyle play a part of it. But it's also important to consider where you are in relation to other financial priorities. So number one, let's talk

Starting point is 00:00:46 about savings. First and foremost, your main goal should be to get $1,000 in a starter emergency fund. And 40% of Americans cannot cover a $400 emergency in cash. So $1,000 is like a great starting point. And so that emergency fund can be kept in a high-yield savings account if that's what you want. So again, once you get that $1,000, put it in a high-yield savings account. The next goal that you're going to have is bump up that savings to three to six months of expenses once you are out of debt. So once you have all of that, that can be sitting in an account that you can get to. So this can be a money market account, a high-yield savings account, you know, whatever it looks like. But from a savings goal perspective, how much money to have in savings, that's what I suggest.

Starting point is 00:01:31 three to six months of expenses. And that's at the least amount and the most amount, right? So I don't want you having a year's worth in there because I do think your money could be making money, more money somewhere else. But having that cash available is so key. Now, another savings goal is to invest 15% of your income into retirement. So once your emergency fund is fully funded, looking at retirement. So saving for just a rainy day, you know, that emergency fund, yeah, that's complete, but your savings needs to continue on. So having a rhythm, in your life where you are saving 15% of your money for the future is really, really key. Now, before I share a breakdown of your checking account goals, I do want to tell you about

Starting point is 00:02:10 one of our sponsors, Christian Healthcare Ministries. So when you guys go against what society thinks is, quote, normal, like avoiding debt, for example, it might seem weird at first, and that is totally okay, because we want you to be weird if that means you're doing things intentionally, including how you spend your health care dollars. And one way to be intentional is with Christian health care ministries. CHM isn't health insurance. They're a health cost-sharing ministry that's helped hundreds of thousands of families like yours take care of health care costs without sacrificing their freedom.

Starting point is 00:02:42 Programs start as low as $98 a month, so find out more and join at chministries.org slash budget. That's chmistries.org slash budget. All right. Next, let's talk about our checking accounts. So how much money to have in this account is going to be based on a couple of different things. Number one, your life. lifestyle, how much money you spend, your income, how much you're making. I would even say your personality. For some people, it just feels better to have more cushion than others. Also, it depends if you have kids and you have a spouse. Maybe you have parents you're taking care of or other dependents. Maybe you own a home, and so all of those expenses fall on you versus if you're renting.

Starting point is 00:03:20 So regardless of where you are in life, kind of understanding, hey, this is kind of where I'm at will depend on how much extra you need in your checking account. So remember these goals. Number one is to make sure every dollar has a purpose. So keeping a monthly budget is really key. So when your income comes into your checking account, that income I want you to have a plan for. So whether that is for giving and saving and spending and where you're spending your money, all of that needs to be decided beforehand. And if you have not checked out our every dollar budgeting app, make sure to do that because it's fantastic and it helps with this. All right, goal number two is to make sure you have a miscellaneous line item in that budget because yes, you want every dollar planned out,

Starting point is 00:04:01 but also you don't want to be spending every single dollar you make where your checking account gets to zero because stuff is going to come up that you don't expect. And if you don't plan for the unexpected, there in your checking account, then you're going to overdraft and spend money that you don't have. And so that's really key is making sure that there is a good miscellaneous category in that budget to catch all those things you didn't plan for. Now, goal number three is to get a paycheck ahead. So this is the cushion that I personally like. Some people are like, I just need a couple hundred dollars. whatever it may be. But if you can say ahead of time, especially if you're on salary and you're consistently paid, you know, twice a month, pretty much the same amount, there is something to be said

Starting point is 00:04:40 that, okay, I don't have to depend on this money hitting my checking account to make sure everything's paid. Now, there is a paycheck planning feature in the every dollar budgeting app, which is so helpful so that you can know ahead of time when money is going to be taken out of your account. Because what I don't want is you're paid on, you know, the first and then suddenly, you know, between the first and the 15th, all of your big expenses are taken out and you basically use up all your money and then you don't have money, you know, for food or other things, and you need that cash before the next paycheck on the 15th hits. So you want to be able to spread your money around throughout the month and make sure that, again, there's this order to it. But I think a great goal is

Starting point is 00:05:21 if you can have at least a paycheck ahead sitting in your checking account, there's something about that that kind of gives you some relief so that if more things have to be taken out at the beginning of the month, if you're not sitting there all freaked out, again, I think that this can take a little while to get there. And if you're a one single household income, maybe you don't need that necessarily, or, you know, maybe you're not married, you don't own a home, you don't have kids, all of that, then you would probably not need that much margin. But there is something about being a paycheck ahead in your account that I think just gives a level of peace to it. But if you don't do that, and you throw extra money maybe in a high-yield savings account above your emergency fund,

Starting point is 00:05:58 that's fine. Just make sure you can get to it if you need it. So again, this idea of having some buffers really key. And if you're looking for that buffer and you don't have it, there could be a season where you're like, hey, we're going to cut a bunch of stuff out. We're going to grab a side hustle again just to get some money ahead in your checking account that is sitting there to give you that peace of mind. Now, keep all of this in mind because these are just guidelines. You know, they're not like hard and fast rules. But this is kind of how I look at my checking account and my high-yield savings account because I want to be able to say, yeah, there's some great, a good amount of money in my emergency fund that's there, but also in my checking. And so, again,

Starting point is 00:06:38 it's all about peace of mind. Now, if you need a boost to kickstart that momentum for increasing your savings, my number one tip then is just to cut expenses. We talked about cutting expenses, getting a side hustle, but side hustles can be tough depending on your time constraints. But if you just can cut some stuff out for a month or two, again, to get ahead, I think is really, really important. Now for more ideas on how to find some extra cash, make sure to check out my episode 22 expenses to cut that you won't even miss. You can click here for that or if you're listening on podcast, click the link in the description. All right, you guys, remember to take control of your money and create a life you love.

The Rachel Cruze Show - How Much Cash In the Bank Is Too Much (or Too Little)?

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