How much money should you have in your bank account?

I often read personal finance blogs, especially in English, because I find interesting perspectives on various topics. A few days ago, I came across an article that addressed this very topic. It made me think about how, over the years, I've changed the way I manage my bank account.

When I started my career, Mexico was experiencing a certain degree of volatility. I didn't experience hyperinflation, but I did experience an environment of exchange rate instability and high interest rates. I earned little and already had many obligations (I was getting married, with a baby on the way).

So, every time I got paid, I immediately transferred that money to a short-term, daily-liquidity investment fund. Every day I earned a few extra pesos. I carefully managed the different payment dates—rent, phone, credit card—to transfer money to my bank account on time to meet those payments. I only left the minimum balance the bank required.

This isn't a good way to do it. It's complex, has a high probability of failure (for example, missing the withdrawal schedule because a work meeting ran late), and life is full of surprises (for example, an unexpected event over the weekend).

Still, with some adjustments (like keeping a small extra cushion just in case), I maintained this strategy for several years. Until interest rates dropped, my salary grew, and the few extra pesos I "earned" each month by moving money around like this no longer made up for the effort.

When I discovered the method that inspired my spending plan, which I've talked about several times in this space, I realized the freedom you feel when you live a month ahead (the money I spend this month is money I already earned last month). But above all, the freedom you feel when you have large, irregular expenses (like vacations, annual insurance payments, or school tuition) and the money is already there, ready to cover them without any problem. You have to experience it to understand it.

But that money isn't in my bank account. In fact, I've never liked having a large balance in it, for security reasons. If someone steals or clones my card, if someone mugs me and forces me to go to the ATM, they won't see a large balance. There's some money they could withdraw, but not much. If that happens, it will make me really angry, but it won't really change anything in my life.

What I do every time I get paid is simply execute my spending plan. At that point, I put money into my long-term investment account (retirement savings) because that's my priority. I pay myself first.

I also make all my monthly payments. I no longer wait for the due date on each bill or credit card to make them. I simply pay everything in one day. That way, I don't have to think about it or worry about it the rest of the month, and I can focus my mind on the things that are truly valuable in my life.

I send the rest to my short-term investment account, keeping in my bank account the amount I need for monthly cash expenses (which isn't much) and an additional cushion equal to the maximum automatic withdrawal amount my bank allows.

As I've mentioned before, I don't use a debit card to pay for purchases and expenses. I use a credit card: that way, I don't have to keep cash in my bank account for most of my monthly expenses. I only use it for those that require cash. Of course, I use it carefully, always keeping my spending plan in mind (and adjusting it if necessary).

For me, my bank account is simply a way to manage my money. I don't use it for "saving," nor do I like keeping money there, except for what I might need in less than 24 hours (or on a weekend). I prefer to keep the rest of my cash in my short-term investment account.

But each person is different. Many simply receive their salary in their payroll account and don't move any money around: they use their debit card to make purchases and pay for other things with their online banking. Some manage this well, others don't.

The important thing is to have a strategy that works for you and that you feel comfortable with.