You're Not Poor, You're Just Saving Money
Doing more with less
I assume you're exactly or sort of like me in this way.
You have a main checking account from which you pay all or a majority of your bills. This is where you have all or a majority of your income deposited.
A few months ago, I decided to deviate from this norm—that we can probably even call a personal finance standard—to execute the strategy I detail in these Never Retire installments.
The long and short of it is that I started diverting roughly one-third of my income to an account other than my main checking/bill-paying account to plan for several late 2024, 2025 and beyond expenses related to our upcoming move to Spain.
Lately, when I look at my checking account I see a lower number than I saw prior to implementing this strategy. Obviously. But it still generates a slight whoosh in my breath. Because I forget what I'm in the middle of.
The bigger picture and immediate attendant details.
I have the fleeting thought: am I poor?
The answer is no. I’m same as I ever was. Not poor. Not even close to rich.
The quick emotional response to seeing your checking account balance is something we could all spend more time considering.
Lots of people get equal parts dopamine rush/sense of cash security when they see a large number fronting their checking account. Practically, a checking account surplus helps you avoid overdrafting your account if you overlook or mistime something. And it acts as a cushion to absorb discretionary and other unplanned spending, including relatively small emergencies, such as a flat tire.
I got one a couple months ago. And my checking account didn’t feel a thing. As in, I didn’t overdraft or have to move money from another (savings) account to cover the expense.
And this is as my Substack and Medium income no longer hits my checking to get sent elsewhere for service. It hits what is effectively a move-related savings account detailed in the above links. So this is, depending on the month, $1,000-to-$3,000 or so that I do not touch. It’s sacred cash intended to make life easier—much easier—later in 2024 and into 2025 and beyond.
The consideration: Where in the hell was that money going before I made this strategy shift?
To my credit, I can account for the whereabouts of some of it. I was transferring it out to the above-mentioned account and other pots of money for different saving purposes. But, no doubt, a fair bit of it is missing in action. I spent it on stuff like coffee, beer and Fernet Branca. Somehow, I’m still spending money on stuff like coffee, beer and Fernet Branca. But, without an inflated checking account balance—more cash on hand apparently—I guess I’m spending it with more intention (?) and effectively doing more—or, más o menos, about the same—with less.
Purge your checking account balance. It might be the best boring thing you do all year.
Or open a new pot of money or two!
Over the past 10 years I have been moving (slowly!) out of technical roles into managerial roles with more and more financial accountability to the top line of the company. Along the way, I’ve had to learn how a Fortune 500 company manages its revenues, expenses and working capital. When I was purely technical, we lived a ‘Dave Ramsey’ lifestyle - conservative investments, high savings rate, with no debt and more than enough cash in checking accounts. We felt good about it - it felt safe - but you can only save so much and living expenses with kids just grew year after year.
Eventually, I sat down and looked at what inflation during a (hopefully) long retirement was going to do to that conservative savings-based nest egg and it was shocking. Putting it bluntly, it pissed me off. Doing all the right things and living a modest lifestyle in America wasn’t going to get it done. So I broke out of my comfort zone and started to manage my money much more like I was required to at work, and I’ve finally pulled ahead of inflation, even accounting for some painful ‘educational experiences’ along the way. By the way, real inflation is >> 2-3%.
The point being, getting my checking account down to the bare minimum for monthly expenses was key — it takes more work, but that money can and should be put to better uses elsewhere. Cash really is trash, 99% of the time.
I've taken your advice to good effect. I have a savings account and what we in Canada call a TFSA (Tax Free Savings Account). It is where I put money that I use for investing, and if I later withdraw money from it I pay no tax on that money. My checkiing account still has the majority of my income, but I also divert a portion to a PayPal account that I use for paying subscriptions and other costs that repeat monthly. Like you, no pain in the checking account when unexpected events happen. I recommend your dispersion pattern to everyone who wants to manage their money to their benefit, not to that of financial institutions.