Idle Cash is the Devil’s Workshop

3 Ways to Put Your Cash to Work ASAPOne thing I’ve learned as a parent is that “idle hands are the devil’s workshop.” Keep children busy and you keep them out of trouble. The same is true with money.

Cash sitting in your checking account is just begging to be spent mindlessly. The longer it sits there, the more likely we are to fritter it away. That’s one of the things I love about YNAB.

This budgeting software encourages you to give every dollar a job. But once you give a dollar a job – whether it’s going to be saving or paying down debt or whatever – put it to work immediately. Here are three ways you can do that.

1. Make full use of direct deposit

With direct deposit, you can put your money to work without every having to touch it. It can go right from your employer to the place you need it to go. I take full advantage of direct deposit, and there are a couple of different ways to use this tool.

The most obvious option is to take advantage of a 401(k). It’s terrific because your employer simply takes the amount of money you choose out of your check and puts it right into your 401(k).  You never see it, and you don’t touch it. It goes right from your employer to your retirement account.

The other thing you can do is to set up multiple direct deposits. You don’t have to have your whole paycheck deposited into your checking account. If you’re trying to save money, you can direct deposit a certain amount into a savings account, and the rest into checking.

In fact, with some employers, you can have more than two direct deposits. So your money can automatically go into a number of accounts. Try not to over-engineer this, but it could be a good way to save money.

2. Automate your bill paying and savings

Most of our bills – from the mortgage to utilities to cell phone bills – are paid automatically. It avoids the hassle of having to make the payments and the possibility of paying a bill late.

I do this same thing with savings. For example, we have an automated deposit into our Betterment account each month. It happens every month as soon as we get paid on the first. That puts the money to work immediately, and it’s out of our checking account, so we don’t risk spending it.

3. Physically or electronically transfer the money yourself

I invest in real estate with a really good friend of mine. We started investing with our first two homes in 2005. So it’s been nine years, and we’ve already earned back the money that we put into the homes. Recently, we started paying ourselves a monthly dividend from the cash flow.

We have a business checking account that’s got money in it for repairs and vacancies, and we’re earning a nice cash flow to the point where we are automatically sending ourselves $250 a month each from the account. I get that in the form of a check, but we’re going to work on direct deposit to automate it.

For now, it’s just an old-fashioned check that comes in the mail. I immediately deposit it into my checking account. Then, before I spend it, I transfer it – in this case – to my Vanguard account. Will that $250 a month make a big difference? You bet! Over decades, that investment of $250 a month will make a huge difference.

My concern is that if I just let it sit in my checking account, I’ll spend it and not even remember where it went. So I don’t waste any time. As soon as the check clears, I transfer it right over to Vanguard, and put that money to work.

So that’s just three simple ways to put your money to work right away. It’s better than frittering it away, and you could even get slightly better returns (or pay less interest on debts) if you move that money to the end goal sooner rather than later.

Published or Updated: April 10, 2014
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Beth Anne says:

    I started using YNAB last summer after constantly struggling to manage my money/budget after several people had recommended it. And I think giving every dollar a job has really helped me understand where my money needs to go and helps me not blow money on stuff just b/c it’s sitting in my checking account.

    • Rob Berger says:

      Beth, that’s one of the reasons I use YNAB, too. Excellent budgeting software.

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