Saving account vs checking (or tracking vs budgeting)
I've been budgeting successfully for years and really turned to ynab when I actually started saving money. It has been great to give me a real picture of what funds I need (even if it isn't right now) and shouldn't be spent (thank you True Expenses) and what I can enjoy guilt and worry free.
The question now is that I have a good chunk of money sitting in my checking account. This money is pretty much all earmarked for things within the next two years (some of them are for the current month like groceries and gas, some are for vacation in the next year and some are for orthodontist expenses in two years, for example).
I know that money for the next 2 years is typically recommended to keep out of the market, but it's not like all my expenses are rigid and I should be able to roll with market changes.
In addition, I should be making money and continuing to save. It seems like constantly running with $10,000 sitting in a checking account is giving up on a decent passive revenue stream.
There’s a pretty standard rule of thumb to only invest into the market funds that you won’t be touching for 5 years or longer. But that doesn’t mean you can’t try to maximize savings that are meant to be used less than 5 years. Why would you keep all of it in checking making a percentage of nothing point nothing? Just keep enough in checking to cover your upcoming payments and put the rest in interest bearing accounts.
I currently keep the majority of mine at Betterment making 2.39%, last I checked. There are lots of alternatives to the stock market with no risk on your investment such as online savings accounts, money market accounts, CDs, government bonds, etc.
Keep the majority in a 2+ % savings account. Look at outflow amounts over the next month (or more often) to gauge what to leave in checking. Repeat. The more often you plan, the tighter your balances can be -- more interest.
(I wouldn't add up "long-term" categories. Since even short-term ones don't come due all at once, you would be missing out on a fair bit of interest.)
Also depending on your accounts, you may be able to pay some bills from a savings account instead of checking. I'm now doing this with 2 credit cards and my car loan. That way the only money I need to keep in checking is for things that have to come out of checking (like weekly pulls for retirement fund and a yearly bill that has to use checking account). Just be aware of the withdrawal transaction limits from savings accounts if you do this.