personal escrow vs checking acct

Was wondering on how folks handle their finances
with respect to large scheduled payments during the year
ie - real estate taxes, insurance, college tuition, IRA's, etc
Next year, we will be paying our real estate taxes directly.
They are $3,700 x 2 payments...May and August
also - have the semi-annual car insurance.
and then the college payments...
Currently just have a bunch of money stuffed into ladder CD's and MM funds.
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Some brokerages let you set up monthly deposits into any checking account, then you can permit the billers to withdraw from the checking account (it doesn't have to be a fixed withdrawel amount). I wonder if I am missing an opportunity for those few billers who allow regular charging of credit cards without surcharge. It is still surprisingly easy to have a credit card that rebates more than a percent of your charges, and some even automatically deposit that into your brokerage account. So you can stand back and watch your money go in circles...
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It's possible to get a comprehensive picture and establish a bit more control, using spreadsheet columns to set up income less expenses. There's no way to make the big payments look pretty.
Income Jan Feb . 5000 5000
Groceries 600 600 Clothing 200 200 [other classifi- cations]
Taxes 3700 Auto Ins College 1400 1400 His IRA Her IRA
Net (1900) 2800 Cumul (1900) 900
Any categories you like, but if you carry this over year after year, leave yourself some room for re-categorizing, and I strongly suggest making comments in individual cells, so you know what you spent what on (e.g. if you bought a TV and slapped it into "Furnishings" then bought a patio set at a yard sale, you want to be able to distinguish between the two, and a comment "TV 1200; patio set 250" will do that). It takes some very careful thought to get the setup right, but that work and tweaks turn into a simple and useful record. You can use estimates of income and expenses to project future years month-by- month (and plan vacations , consumption, or savings).
Fully comprehensive records are hard, but a "Cash Expenses" category will take up some of the fudge. Summary totals for income and expenses (such as those in checking or other accounts that you can reconcile balances to) should be within a few percentage points of your budget numbers. The more you simplify your cash flow, the easier it is - e.g. one checking account, one credit card. If you really work on it, you could set up exact accounting and formulas to supporting schedules (CD interest, fund income ... credit card, checking ...).
Don't forget to physically transfer $$ into checking.
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My last reply might not have been clear. I'm a big fan of automatic everything - almost no manual transfers or payments or bill approvals. Everything gets swept up from automatic deposits, interest, dividends, etc. Payments are automated, such as eftps for federal taxes (beware, I got email from some fakers pretending to be them).
And to further simplify, almost no formal budgeting or recordkeeping is needed (I am too ruthlessly pennypinching for my expenditures to need second guessing). If most of the money outlay is channeled thru an account or two, just review it for typical monthly spending. Then review quarterly or yearly payments, such as for taxes, and come up with an (automated) monthly transfer amount that builds up plenty ahead of time for your greatest crunch time.
And most of the outlays can be automated without even an approval needed. I only make an exception for the local gov't payments which demand a surcharge for e-payments, but I ought to get over that. Finally, regularly review the progress with one of those financial consolidation web pages that logs on to your umpteen accounts and shows current status of income, balance, outflow in a one page summary.
P.S. A help in this process is to never, ever, ever automatically reinvest for taxable mutual funds. While it may be true that historical statistics show reinvestment is key to returns, you would be better off consolidating dividends and investing in something else (to rebalance or redirect your asset allocation). Or use it to pay expenses without having to create yet another taxable liquidation. All that over and above the tax basis headaches that auto reinvest can cause.
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In article ,
Another account to which you make monthly equal deposits whose sum is equal to the sum of your real estate taxes, home owners insc., tuition etc. . Now draw from this account as these payments come due. Keep it simple, going after the highest yielding account may not be worth the aggravation of transferring money.
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Avrum Lapin

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