One of the worst financial habits that we have in our community is transferring money out of your savings account. All we do is move it back into your checking account to spend it on wants not goals. This defeats the purpose of saving and usually promotes more spending. Sometimes unexpected things do come up like a visit to the Vet or your kids have a field trip. The list of unexpected expenses can go on and on, but what can’t is the little money you have left in your savings account. The worst part about transferring money out of your savings account is that you have a limit of 6 withdrawals a month under Regulation D. Now is the time to start cutting this difficult financial habit and actually start saving money.
What’s Reg D?
The Feds have created Regulation D, which allows us to make a maximum of 6 withdrawals from our savings account per month. This regulation pushes the public to use their savings accounts as it was intended to be used, for savings. This allows the banks to charge a new maintenance fee and allows the banks to have a proper amount of cash of reserves. Plus, the banks now have the power to convert our savings account into a checking account if we continuously go over the 6 transaction limits.
Here is a list of the limited saving account transactions under Reg D:
- Online transfers within the same or outside banks
- Automatic or recurring transfers and bill pay
- Overdraft protection transactions from your savings into your checking account
- Transfers that are done over the phone, check, and/or debit card.
WOW, who wants to get stuck with fees for trying to save money and unfortunately needing it back? Instead of getting caught paying a new maintenance fee, I put together a few tips to stay out of this trap. These tips will help you from overly using your savings account as a secondary checking account. The goal is to save money to achieve our goals, not emotionally reacting to expenses by transferring money out of our savings account. So here are the tips to keep in mind:
- Stack up your bills checking account first before saving
- Bring up unexpected expenses to your budget meeting
- Push Play Money and Extra Debt Payments towards the end of the month
Stack up your Bills Checking Account First Before Saving
Work on saving all of your mandatory bills in your Bills Checking account before saving or enjoying any of your money. I know this is very hard, but make your Bills a top priority over fun. If the bill isn’t due until the end of the month, start saving to get that bill covered ahead of time. This will allow your bills to be paid no matter what unexpected expense comes up. Now you will be able to save only the money you don’t need. This stops you from accidentally spending your cell phone bill money on a spur-of-the-moment road trip.
Bring Up Unexpected Expenses to your Budget Meeting
Reviewing your budget on a weekly basis and make a list of any unexpected expenses for the month can make a big difference in your finances. Life changes daily and it never goes 100% to plan. That’s why it’s important to set up a budget meeting with yourself 1-2 times a month. And if married set a date with your spouse twice a month to go over your budget. At this meeting, you have to go over the unexpected expenses or events and compare them with your goals on importance. You might realize that you need to push back a short term goal or cut back on lifestyle expenses that month. These are conversations you need to have during the meeting. This is the time to consistently challenge yourself on what you truly want and value.
Push Play Money and Extra Debt Payments Towards the End of the Month
As crazy as this might sound, try rewarding yourself towards the end of the month once you have hit all of your mandatory bills. You will still have your play/fun money and be able to put extra towards your debt payments once the day-to-day is covered. This will allow you to catch any small financial hiccups that try to sneak into your budget. You will also have a better number of how much money you can spend on fun and towards debt, once the month is almost done. One change my husband and I are doing is switching our date night towards the end of the month, once we are sure that the money isn’t needed for anything mandatory. It’s the same thing for debt repayments. It’s best to put what you can and not accidentally what you need towards debt. If you are only using side hustle income to pay off the debt that is great, just don’t let anything unexpected put you back into more debt. This is why an emergency fund is so necessary.
We have to step away from using our savings for everyday expenses. This leaves us hooked on making the continuously bad financial habits that trap us into debt nor savings. Erasing the idea that we need to use our savings and any form of debt to solve our day-to-day money wants is holding us back. Focus on stepping back the credit cards and run away from your stash of money which is our savings. Hopefully, you are already using the High-5 Banking Method to help you prioritize your money with a purpose. If not, go ahead and check out that blog post. It is very important that we get routines that help us save and get better with money, instead of misusing it.