Update: Capital One has since bought out ING Direct. So while the name has changed, it seems that the method still works just as well.
Budgeting with Capital One 360
Capital One 360 has played a critical role in helping me get my financial life organized. They don’t advertise themselves as a great budgeting tool, but they really are. You could probably use this same budgeting technique at other banks, but I will show you why it is more beneficial at Capital One 360.
Video explaining the process
1. Open multiple Capital One 360 savings accounts
The first step is to open up multiple savings accounts at Capital One 360 (Yes, they allow you to open multiple accounts). At most other banks, this is discouraged, if not by the bank itself, by the amount of paperwork required for each. However, once you have opened up your first account, any additional accounts can be opened with about three mouse clicks.
Each one of the accounts that you open will be something that you are saving (budgeting) for. For example, I have my emergency, vacation, car maintenance, entertainment, clothing, and any other savings funds at Capital One 360. I put a fixed amount into each account every pay period (they can automate this if you would like).
2. Open up a Capital One 360 Checking account
It is really this checking account at Capital One 360 that makes this budget system possible. You could still use the Capital One 360 savings accounts to make a budget without the Capital One 360 checking account, but it will be much easier if you have the ING checking as well. And to be honest, I don’t think there is a better checking account out there that is better than Capital One 360′s.
Capital One 360′s Electric Orange checking is unique in a few ways:
- They do NOT offer checkbooks. It is a debit card based account
- You can send E-Checks to someone elses bank account for free
- It has a 3.93% (at the time of this writing) interest rate even with a $10 balance (try to find that at your local bank)
- Free ATM access at 32,000 locations across the country
- There are no overdraft fees. Instead of charging you $30 when you bounce a check, they just lend you the money until you bring the balance back up to $0. So instead of having a $30 NSF fee, you might have a $.50 interest charge. This alone is reason enough to switch. They has saved me a lot of money with this feature.
3. Use the debit card to pay for items budgeted for
Once you have the first two steps taken care of and have saved up money in the accounts you are ready to go. Now is the fun part: SPENDING!! You have to do some work on the car? Just transfer the money from you car maintenance fund (this is a real-time transfer) to your Capital One 360 Checking and head to the dealer or if you are like me and like to do car maintenance yourself, head to Autozone and swipe the debit card.
How is that for a simple budgeting tool?
I just get a lot of pleasure in simplifying my life. If you have ever used the envelope system for budgeting, you should be able to notice the advantages of this system. Like I mentioned earlier, you can probably do this at variety of banks, but I think it would be difficult to find a bank that offered all of the conveniences of ING as well as the great rates.
The negatives of using Capital One 360 as a budget tool
The two things I would warn anyone trying the Capital One 360 budget:
- Stay on top of your transfers from your Capital One 360 savings accounts to your checking. If you do a lot of budgeted spending for a couple weeks and forget to do the transfers, it can be difficult to backtrack. Like most things in life, it works better with regular maintenance.
- You can only transfer FROM the savings accounts 6 times per month. This really hasn’t been an issue for me but maybe once or twice in the few years that I have been using the Capital One 360 budgeting method. (But, I figured out a simple hack to getting around this restriction.)
How to budget with other tools
If using Capital One 360 to budget method doesn’t interest you, then you could try the envelope system of budgeting. You could also try these household budgeting spreadsheets or some of the free budgeting software. If that doesn’t work you might want to check out YNAB’s personal budget software or you could try Mvelopes Personal Budget system free for 30 days.