Do you have to leave your entire salary in your bank account each month? Provide an even larger mattress to anticipate overdrafts? Here is a key rule and 5 tips to avoid unpleasant surprises.
Crisis or no crisis? On the flip side, French households have accumulated 40 billion euros more on their current accounts since the start of 2022. Pushing the average per household to 18,000 euros dormant on current accounts. A staggering average which is mainly explained by a minority of very large portfolios… On the other hand, the year 2022 is that of galloping inflation, so much so that more than one in two French people anticipates more frequent recourse to overdraft that accustoms him.
6 tips to avoid ending the month discovered with soaring prices
Between inflated block accounts and others sinking into the red, how to find the happy medium? Amassing tens of thousands of euros in a 0% account has little interest. And in any case it is necessary avoid unexpected overdraft synonym of agios. Where and how to locate the cursor?
Key rule: calculate your recurring expenses and your remaining living
The common sense rule aims to cover monthly expenses: identify recurring expenses, calculate the amounts granted each month to your various budget items, using your bank statement, and thus calculate the amount to keep in your account to allow you to spend a month without worry.
This requires establishing your remaining living. The principle: to subtract them fixed charges and the credit repayments of the total amount of your monthly resources. In the fixed charges, be sure to be exhaustive: possible rent, electricity, water, heating, internet and telephone subscriptions, taxes, insurance, mutual insurance, transport, childcare and schooling costs… To best anticipate these expenses, it is advisable to pay them monthly.
How to calculate your remaining life yourself
This stay alive must then allow you to cover the expenses offeedof clothesof Hobbies, etc. The money kept at the beginning of each month in your current account must therefore, on the one hand, cover the monthly charges and, on the other hand, be high enough so that the rest of the living is up to your usual expenses for food, clothing and leisure.
Tools to calculate your remaining living
The rest to live can be calculated by hand or via dedicated applications. In the panel of non-profit solutions, the federation for the fight against over-indebtedness Crsus has developed the application Budget High Speed (BGV): free and secure, it requires you to register and connect your accounts. For the most discerning managers, the free KmyMoney software has long attracted many MoneyVox forumers. Simpler and more general public, since without the need to connect your accounts, the application DriverBudget (on Google Play or iTunes) is again free, offered by Ansa (2)and focuses on calculating the budget weekly, monthly, and the rest live.
Tip #1: Keep a month’s salary aside to make your life easier
The standard method therefore aims to calculate its recurring expenses, the usual amount of non-recurring expenses (food, leisure, etc.), and start each month with at least the corresponding sum. In short: a month of expenses.
Prefer to avoid calculations? Start each month with at least one month’s income by sinking this savings over the month. But beware, this solution is not suitable for households with fluctuating incomes: liberal professions, independent activities, associates of companies, etc. It is not suitable either if you are regularly in the red at the end of the month: it is better in this case to provide an additional mattress.
Tip n2: always maintain a sufficient mattress to avoid overdraft
Beyond the sum to keep at the beginning of the month, you can set yourself a virtual bar below which you must not fall. Most banking apps also allow you to generate an SMS alert when you fall below a defined balance, and it is better to define a threshold other than zero!
Example: keep at least one mattress equivalent to that of your overdraft authorization. Do you have an authorized overdraft of 500 euros? Maintain your bank balance +500euros. A mattress to keep permanently, therefore, not only at the beginning of the month. Objective: avoid the overdraft at all costseven authorised, which must only be used last resort. This safety mattress is thus intended to replace the expensive uncovered.
Tip #3: Mark Recurring Expenses in the Calendar
In order to keep your account permanently above this threshold balance that you have set yourself, you have to anticipate cash outflows. Effective budget management therefore requiresidentify sampling dates or recurring transfers, in order to anticipate difficulties. And D’avoid putting in too many checkswith uncertain collection dates.
The accumulation of overdrafts to meet current expenses? A downward spiral
Tip #4: Monitor Your Account Balance
An obviousness. Be careful regularly check the balance from your bank account. In the event of an unforeseen event or a large expense, you must quickly fund your account by dipping into your precautionary savings, if you obviously have any. Otherwise, as much as possible, shift flexible or optional expenses to the beginning of the following month.
This vigilance should allow you to avoid diving into the red without realizing it. Because the accumulation of credits and bank overdrafts to meet current expenses is verified in the majority of files [de surendettement] traits, writes Crsus in his last annual report. It is an infernal spiral. The only remedy: anticipate.
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Tip n5: save, yes, but not side by side
Saving is obviously a good reflex. But place at the end of the monthly calendar! If you receive 2000 euros per month, and you have 200 euros left at the end of the month after having included all your expenses, recurring or not, then you can save these 200 euros. Because an overdraft, even authorized, costs more than what the interest on a bank investment can bring in.
If you set up regular payments into a savings product, avoid tightening your belt each month to save: in this case it is preferable to pay little each month, even if it means completing as soon as possible. Finally, one last piece of advice borrowed from the Crsus network: favor transfers, occasional or recurring, to direct debits, to your investments. In the event of occasional budgetary difficulty, a transfer is much more easily stopped.
How much should you save each month, in theory?
Risking an overdraft to avoid taking your savings? Especially not!
You arrive at the 25th of the month. A regular sample is approaching… and you know it’s going to put you in the red. Should you let it flow or draw as quickly as possible from your Livret A (or LEP, or other precautionary savings booklet)? Zero hesitation: draw!
Example. Even if you remain within your authorized overdraft, a balance of -1000 euros from the 25th to the 31st of the month will currently cost you 1.34 to 3.80 euros depending on the bank. Or worse if the authorization is exceeded. However, having temporarily drawn on your Livret A rmunr 2% will only result in a shortfall of 84 cents.
More details: Draw from your Livret A or dig your overdraft? The match of the difficult end of the month
Let’s summarize: about a month of expenses (recurring and non-recurring) keep in their current account. Then, it is advisable to place the equivalent of 2 to 4 months of income on the Livret A, the LDDS or the LEP, for precautionary savings, available at any time in the event of a hard blow. Beyond that, you can invest in medium or long-term investments (life insurance, employee savings, real estate, etc.).
(1) Federation of regional chambers of social over-indebtedness.
(2) New Agency for Active Solidarity. The PiloteBudget app was developed, among others, with the Cerise association, the Paris municipal credit, Les Clés de la banque (FBF), the Mes questions d’argent portal, etc.