How does online banking assist with budgeting?

By Ryan Barnes AAA
A:

Setting up online banking can make a personal budget easier to manage through the use of multiple accounts or expense categories with the same financial institution (for expenses like utility bills, vacation accounts, retirement funding accounts, etc.). Some people find that by moving money out of a core checking or savings account they are less likely to spend money that is budgeted for a future expense. Also, some personal finance software programs (such as Quicken) can be linked directly to your online accounts to provide real-time analysis of all your balances and cash flows.

Once your bills and vendors are initially setup for online bill payment (and most large companies will now allow payment via this method), payments can be made electronically and instantly. You can have the payment go out on pre-determined dates (as in every month on the 15th) or simply log into your account each month and manually trigger the charges to your accounts. Either way, there is no postage to pay - and you can see the effect on your account balances immediately.

People may find that online banking makes sticking to a budget easier because you can easily sort payments to see how much was paid to specific budget categories like electricity, cell service and health care. This saves time and confusion from sorting through months of paper statements and allows you to compare spent amounts with budgeted amounts - so your budget resembles your real life as closely as possible.

For those who use budgeting with their investing, online banking can assist in transfers from banking to investment accounts. Again, a key feature here is moving money "out of sight" and directly into its budgeted purpose. Most brokerage firms will allow you to make automatic transfers to and from an investing account, so long as you have liquid assets like cash or money market funds. Many brokerage houses even offer basic banking services such as checking accounts, which you may want to consider if you are making regular cash transfers into investing accounts.

On the whole, online banking should be comparable or cheaper than standard banking. You'll want to be aware of any extra fees that exist for maintaining several accounts with the same institution, but most will offer free checking if you set up direct deposits for your paycheck.

Some people worry about the safety of online banking, but strong security measures are in place at nearly every major provider. And at most commercial banks, customers can always choose to walk into a brick-and-mortar branch to bank if they have a problem with online services or would like to talk with a bank employee in person.

To learn more about online banking, check out Keep Your Financial Data Safe Online, Choose To Beat The Bank and The Evolution Of Banking.

RELATED FAQS

  1. How do I check the balance on my prepaid credit card?

    Check your prepaid credit card balance quickly using your phone or the Internet. Keeping track of your balance is easy and ...
  2. How can I increase my FICO score?

    Find out about a few simple, consistent ways to improve your credit score, including how to manage your credit card balances ...
  3. What are the differences between a systematic investment plan (SIP) and a recurring ...

    Differentiate between a recurring deposit and a systematic investment plan, or SIP, within an investment account, and learn ...
  4. What are the main differences between a systematic investment plan (SIP) and mutual ...

    Reduce your average cost per share on mutual fund investments using the dollar-cost averaging strategy by way of a systematic ...
RELATED TERMS
  1. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  2. Gold IRA

    Definition of Gold IRA
  3. Through Fund

    A type of target-date retirement fund whose asset allocation ...
  4. Drawdown Percentage

    The portion of a retirement account that a retiree withdraws ...
  5. Debt Consolidation

    The act of combining several loans or liabilities into one loan. ...
  6. Personal Spending Plan

    Similar to a budget, a personal spending plan helps outline where ...
Related Articles
  1. Government employees don't receive Social Security and 401(k)s for their government work. Learn about these other tools to plan for a good retirement.
    Retirement

    Work For The Government? Top Retirement ...

  2. Is your idea of a budget simply spending till your checking account is nearly empty? Or worse, till your credit limit is exhausted?
    Budgeting

    What's Your Idea Of Budgeting?

  3.  Investors often spend decades working and saving in an effort to build a nest egg for retirement. During that time, their primary investment goal is to see their assets grow. When retirement finally arrives, the investment goal often changes from seeking to grow assets to using those assets to generate income.
    Retirement

    The Best Way To Build Your Retirement ...

  4. Whether you're a saver or a financial advisor who want to give their clients a leg up, these 8 tips are essential for financial planning.
    Investing Basics

    8 Essential Tips For Retirement Saving

  5. The Medicare Part D donut hole can confound the best of us. Here's what financial advisors and their clients should know.
    Investing Basics

    'Donut Hole' Essentials For The Financial ...

Trading Center