Help me do my own wage garnishing!

October 19, 2010 9:53 AM

What's a good way to automatically sock money away with a bank account (in the US) if you're doing everything yourself?

Being self-employed I want to automatically skim money off my bank balance daily or weekly into another account to save for taxes, rather than coughing it up manually when it's needed. This is easily done, I know, but I want the debit to be for $X every week, yet not take place if it sees that the balance in that account is below $Y (to avoid any possibility of draining the account if it's at a time when big purchases are made).

I'm wondering if there are any banks that have a provision for this kind of thing. Also if you have any creative or interesting ways for automating your savings and an employer is not doing this for you I'd like to hear about them.

posted by crapmatic to Work & Money (13 answers total)

The only way you can do it safely, since it's all on your own, is to have a reoccurring event on your computer or smart phone to ping you to do it. You might always want to look into Mint.com and see if they have some reminder things going.
posted by Old'n'Busted at 9:59 AM on October 19, 2010

How are you making your deposits? If you're doing it in person, the easiest way is to have a savings account at the same bank, and to make a transfer for Z% of the value of the deposit to the savings account every time you make a deposit. (If I were you, I'd make Z% some amount larger than your actual tax needs to help account for times when you can't afford to make the savings deposit.)
posted by ocherdraco at 10:07 AM on October 19, 2010

ocherdraco, is that percentage-transfer facility something most US banks will do? I mean, as opposed to a specific amount? (interested because am in similar situation to OP)
posted by game warden to the events rhino at 10:20 AM on October 19, 2010

One easy fix would be to switch to using a credit card to make purchases instead of a debit card or checks. You have to make sure that you pay off the full statement balance every month but it should mean the checking account always has plenty of cash. It gets even easier if the credit card is with the same bank where you have your checking and savings accounts.
posted by VTX at 10:28 AM on October 19, 2010 [1 favorite]

(Oh, maybe I am misreading your reply. I will stop cluttering this thread, but would love to know if such an automated percentage-transfer service exists, and I think it might be part of the OP's solution if so.)
posted by game warden to the events rhino at 10:29 AM on October 19, 2010

Some banks will send an alert when an account goes under a predefined balance. Maybe that combined with an automated transfer would do the trick - so you can go and pause your transfer when your balance is low.

Alternatively, if you can save up a few month's expenses, then you could put all your income (and the existing savings) straight in your savings account. Have an automatic transfer to your current account - paying yourself a salary, as it were. If your salary is affordable, your savings account should automatically have enough to pay your taxes by the end of the year.
posted by emilyw at 10:29 AM on October 19, 2010

game warden, what I'm suggesting is not an automated percentage transfer (though I'd love to know if that exists, too!) but rather forming a habit.
posted by ocherdraco at 10:34 AM on October 19, 2010

Not quite as automated as you'd like but I'd get an ING direct savings attached to an ING electric orange checking account with overdraft protection (you can select yourself between $500-1000). If you need checks or a bricks and mortar bank, you can link either (or both) ING accounts into the account at the bricks and mortar bank. Do automated debit from the ING checking account into the ING savings for your taxes. The overdraft protection will hopefully be enough to save you. Either way, ING has practically no fees, so even if you do make a mistake, it won't be as costly as other banks. Also unlike when you send money from your ING savings to another bank account, money sent from ING savings to ING electric orange checking accounts is available immediately. If you realized that you'd transferred too much from checking into savings, you can rectify as soon as you realize it.
posted by kaybdc at 10:39 AM on October 19, 2010 [2 favorites]

I do things like this:

I have three main accounts, checking A, checking B, and saving C.

I get paid every two weeks. Most of the money goes into checking A, which I use exclusively to pay student loans, car payments, rent, utilities, etc. The rest goes into checking B, which I use for things like groceries, restaurants, shopping, entertainment, etc.

But I have a recurring transfer every two weeks to move money from checking A--which is always adequately funded because I only use it for fixed expenses--into saving C, in an amount equal to my expected amortized car and renter's insurance payments. If I had money to actually *save*, I'd get another account on top of that and set up a transfer there.

So checking B is perpetually under-funded, but I don't have any recurring payments coming out of there, so overdrafts aren't really an issue, and checking A is always fine, because I basically ignore it.

I think what I'm suggesting is that if you have enough accounts and are disciplined as to how you use them, this can be made a lot easier. What I'd do is have all of your accounts receivable go into a single account, immediately skim off taxes out of there into a second account, and then use the rest to pay yourself into a third account. Keeps the books nice and neat.
posted by valkyryn at 10:43 AM on October 19, 2010

I think you're doing it backwards. Put all of your money into the savings side of things and move cash into checking as you need it. You can also "pay" yourself out of this and into checking, but my point is to not have your "bucket" be discretionary. The bucket should be more permanent, and you move cash out of it as you need it.
posted by rhizome at 11:43 AM on October 19, 2010

Just a note about moving things out of savings account as rhizome suggests. There are regulations (in the U.S.) that only let you transfer money out of savings six times a month. If you go over that more than once, banks must convert the account into a checking account.
posted by Kimberly at 11:55 AM on October 19, 2010 [1 favorite]

Yeah, I suppose I could have included something about that. By "pay yourself" I meant that you transfer some amount twice a month or whatever. I don't find it healthy to have all of my money in the discretionary bucket, that's all, so the idea is to give yourself $500 or $5000 or whatever per week and forget about everything else (relatively).
posted by rhizome at 12:45 PM on October 19, 2010

I have two accounts with my bank, a checking account and a savings account. Once a month money is automatically transferred from checking to savings. This costs me less than nothing, in that if I didn't have this setup I would pay a monthly fee and I don't.
posted by madcaptenor at 5:13 PM on October 19, 2010