An Interesting Idea

iVillage Member
Registered: 04-10-2003
An Interesting Idea
8
Tue, 05-07-2013 - 9:37am

I was having a conversation with BF this weekend about finances, and one of the topics that came up with this Manulife One account that we have here in Canada. The idea is that everything is combined into one large account (including your mortgage) so essentially you have a negative balance. Then when you get paid, that goes against the negative balance so you save a little on interest. As your bills come out its borrowed back again. The idea is that you are "saving" a bit while your paycheck is sitting there. Mathematically it works but in reality I can't see myself being that disciplined? You need to know where EVERY dollar is going!

But it got me thinking. I could apply the same theory to my sinking funds. If instead of putting them into accounts that only earn 0.5% interest, I could keep track of what is in them on a separate excel spreadsheet and then put the money each month on my LOC. As something comes up, I take it off the LOC and deduct it from the excel spreadsheet. The idea being it would be better to save the LOC interest when the money is NOT in use rather than have it sitting earning no interest.

I'm not sure how I feel about it to be honest. I kind of like the idea of having cash on hand. I can see why it makes sense but I wonder if I wouldn't be tempted to just take "a little extra" if I needed it. Conversely, I wonder if it would make me save more because I HATE the idea of taking it off the LOC? Any thoughts?


Bex -

iVillage Member
Registered: 10-09-1999
Tue, 05-07-2013 - 11:18am

Very interesting idea.  I agree that you would have to be very disciplined & keep track, but having an open mind about how to make your money work for you is never a bad idea!  I have kept track of how much interest we spend versus what we earn on our savings for years...but mostly I just like to see the interest bill go down & the debt go down! 

Have a good week

Cindylee

iVillage Member
Registered: 04-08-2008
Tue, 05-07-2013 - 7:17pm
I do this eact thing. We have it all calculated in an excel spreadsheet. This is why we don't have an EF. The LOC gets 4% interest and savings that are accessible are much lower than that. We have only accessed the LOC once in 5 years doing this..so we have saved a lot. Always good to re evaluate thing occassionally.
iVillage Member
Registered: 04-10-2003
Tue, 05-07-2013 - 7:47pm
Interesting! Do you do it just for efund or do you do it with sinking funds as well? I'm seriously considering it as it has the potential to significantly boost my debt repayment and save on interest. At any given time I have at least $400 just sitting in sinking funds (excluding my efund). At some points in the year its closer to $2k. Even if this allowed me to pay off an extra few hundred a year that I think its worth it!

Bex -

iVillage Member
Registered: 04-08-2008
Tue, 05-07-2013 - 11:00pm
Yes...my sinking fund reaches $5000 in July! We have car insurance, property tax and our annual family vacation all payable that month...
iVillage Member
Registered: 11-14-2008
Wed, 05-08-2013 - 9:51am

Sorry, it has taken me forever to get on the site. Will it ever get better?

This is an interesting idea. Once your debts are paid other than your mortgage can you pay off your mortgage quicker with ease this way? It would be worth considering as long as you don't change your plan on a whim. I know you are working on this area.

Good luck with what you decide!

iVillage Member
Registered: 04-10-2003
Wed, 05-08-2013 - 10:21am
It's a good point Karen. I'm not sure if I woudl be able to pay the mortgage off like this? I think this will only work because I can take money from the LOC when I need to use it for the sinking funds, but I can't do that with the mortgage? I think what I would have to do is pay off everything and then go back to the sinkung funds in separate account and then use what I was paying on the debt to pay off the mortgage? I think I'm going to give it a try for a month or so and see if I notice any trends (i.e. spending more or less). If I notice a trend (i.e spending more) then I will just pull it off of the LOC, put it back into the accounts and call it a day. No harm no foul. If however I notice I am spending less, well this may just be a gem! I'll keep you all posted!

Bex -

Community Leader
Registered: 08-25-2006
Wed, 05-08-2013 - 12:55pm

I don't fully understand what kind of account this is, but wanted to throw out my two cents.

In general, I would say you just have to find what works for you.  Lots of good ideas out there, but it has to be realistic for YOU.

Serenity

Serenity
iVillage Member
Registered: 12-31-2010
Thu, 05-09-2013 - 1:33pm
Becky - I have definate feelings on this, but it is due to all the research I have done over the years. 1. People are not machines and calculators. Things happen, we have wants and needs that trumph what should be done, so as far as using pure discipline for this approach, it is too risky a proposition. 2. Murphy - then you LOC on your home is in jeopary - not a good risk. 3. TIME - your biggest asset is time, it cannot be recouped. So look at the time you would use managing this type of account, is this worth it for someone who already is time-stressed? It is interesting and people are thinking differently about a lot of things lately. Pays to consider all options, but it is not an option I would take. -m
#Marie