When it comes to organization, there’s a wide spectrum of preferences. Maybe you’re the type that watches clips of people organizing drawers on YouTube and you love seeing M&Ms split into color-specific piles? So long as there’s a method to the madness (yikes, you hate madness) you’re happy.
Perhaps you’re on the other side of the scale and your sock drawer is never matched, the day planner you received for Christmas is practically still wrapped, and you have to leave the house in five minutes or you’ll miss your flight.
Regardless of whether your plans are carefully carved in stone or you’re just a bit all over the place—you can get (and keep) your finances organized.
One of the most important—but also banal—aspects of your financial health and wellness is paying off all bills on time and in full.
While it may seem like the classic nuisance and bills are one small step below “death and taxes”, paying bills consistently can be one of the best ways to reduce money-related stress while also helping you avoid late fees and potentially positively affect your credit score.
So how do you do it? The excuses for not paying in full or on time are endless and, frankly, not entirely without merit (although your creditor won’t care one bit). It’s easy to forget to pay, to run out of spendable cash to cover your bills, or miss due dates because you are too busy with work or pleasure to get down to doing it.
For some people, getting a handle on their finances could be as simple as opening a separate bank account for paying your bills. But like any financial situation, this can have its pros and cons.
While it may be great for some, it might not work for everyone. But, weighing the following information could help you decide if having two accounts, one for bills only, could help you manage your bills.
Why a Separate Account Rocks
Having multiple bank accounts can help you through a number of financial situations. But why exactly does an account for bills only work so well?
Keeping Enough Cash On-Hand
Woohoo, just got paid. You totally want to go out on the town. New shoes. A nice bottle of wine. Shots for the crew. Dinner for two.
While these things may seem fun (because they are), wisdom keeps you from taking that check straight to the cash-out ATM. With a bank account for paying bills, you can ensure that, first things first, your bills are covered.
That might mean you have two checking accounts, one for bills only that you can deposit the estimated total of your upcoming bills. Once you’ve made sure that the full amount you need for your bills is in your bills-only account, you can portion the remaining income into fun-fund.
And then you can go get those cupcakes. You deserve them.
So you have enough money and you’ve made sure it’s in your account and ready to go. But what happens when you completely forget about your bills?
Whether you’re on vacation and far away from a computer or you’re just slammed with work and everything except typing and shoveling salad into your mouth have completely escaped your thoughts, sometimes it can be easy to forget.
Unfortunately, credit card companies, your landlord, and others aren’t in the business of justifying what to them sounds like various versions of “the dog ate my homework”.
Luckily, most bill-paying services have set up a direct deposit method so you don’t even have to think about paying your bills—whether you’re out of the country or the due date slipped your mind.
When you have an account for bills only, adding a direct deposit that can cover those bills makes managing them easier and simpler for you so you can focus on your work. Or ideally beachside margaritas.
The Downside to Adding a Bills-Only Account
Like any good argument, there’s always a counterargument and every strategy will have its detractors. Here are some of the key arguments:
Maintaining a Budget Instead of Opening Multiple Accounts
Budgeting can be an excellent way to manage your finances. In order to effectively stay on top of bills and expenses, you may find keeping an accurate budget and tracking your spending will be necessary.
Additionally, healthy budgeting requires the dreaded balancing of the books and the notation of spending. While you still might have to look at your budget occasionally, instead of pulling money from different accounts for discretionary spending versus bill spending, keeping a budget means you’ll likely be able to get a quick and compartmentalized overview without having to break out a calculator.
Dealing with Minimum Balance Requirements
Some bank accounts require that you don’t let your balance drop below a certain amount. When apportioning out your paycheck and other cash finances into multiple accounts, some people are concerned about literally spreading their cash too thin to maintain the necessary levels to keep the account afloat.
But with a little research, you can likely find an account that offers an account minimum low enough to suit your needs. A SoFi Checking and Savings® account lets you get started with no minimum balance.
Losing Out on Earned Interest
It may seem like you’re earning cash keeping your spending money in a single longer-term account in the bank.
But with the constant in-and-outflux of cash through a single month or year, it’s likely that your money isn’t working for you quite as much as you thought or hoped. In addition, the average interest rate for savings accounts in the U.S. as of October 2019 was just 0.09% annual percentage yield (APY) .
But with the rising popularity of things like hybrid accounts, you can get the best of both options without having to choose between the two.
Managing Your Money with SoFi Checking and Savings®
Having an account for bills only can be a safeguard for you. Maintaining a separate account could help you to make sure you have money allocated to pay your bills each month. Plus you could easily set up automatic bill pay so you avoid missing payments.
If the thought of separate accounts is appealing, but managing accounts with different financial institutions or login information sounds unwieldy, you could consider opening a checking and savings account with SoFi.
With SoFi Checking and Savings® you can take advantage of the new feature, Vaults. Using this feature, you can create different sub-accounts for your money, all within a single umbrella account.
Instead of housing your money in different accounts, you can have the separation you want for various purposes with the ease of maintaining a single account. You’ll even have access to easy-to-read reports with live updates so you don’t have to worry about updating a spreadsheet (well, outside of the office) ever again.
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