I don’t have an “official” emergency fund either. In fact, I don’t even budget any more. Once I got completely out of debt (including mortgage) keeping track just wasn’t necessary any more. The frugal habits I learned as I was getting out of debt have carried over to present day and since I don’t spend much there is always an excess.

My current system to avoid overdrafts is simple — I just keep $1000 minimum in the checking account at all times. Easy to do now, but when I was struggling I used the other tips described in the post.

To set up the spreadsheet I create a list broken out as week 1,2,3,4(sometimes 5) and list what known expenses will arrive in each week, one per row. Then I add in my budgeted number for the weekly and monthly variable expenses (gas, groceries). I’ve had people look at me like I was crazy and ask how I could possibly know what I’ll spend next April, but if you think about it, most of your expenditures are predicable and repeated. Our mortgage comes off every other Monday, we get paid on alternating Fridays, house&car insurance is withdrawn automatically on the 17th or next business day. Property tax monthly installment automatically on the 1st, phone and cell week three of every month, and so on. I also keep a list of annual and infrequent expenses which I can predict but might forget to include as I extend into the future. For example, kids summer camp, annual saftey deposit box fee, the annual vet bill every May (I include it in May week 1 every year and just bump it into the next week until we get there for the appointment. For the numbers which might vary I use a plug number and when the real purchase is made I update the spreadsheet. I assume the same amount every week for gas, groceries, and a little pocket money. Since the price of gas fluctuates and I work from home different numbers of days some weeks, the gas amount is only an estimate. Same with groceries. Last week we stocked up the freezer with chicken on sale and spent $25 “over budget” but this week we were $30 under so I don’t get too concerned. For me working from a fixed amount in an envelope might stop me from taking advantage of an opportunity.
Once a year I review all the grocery amounts for the past 12 months to decide if the plug amount I’m using is still valid. Same for gas. Same for pocket money. We used to take out a lot more pocket money but unless you carefully note where you spend it, you have no way to track it. We got prepaid cash cards for our favourite coffee place. We load them online with our credit card so now I know how much I’m really spending on coffee (note to self, I need to cut that down a bit). We’ve also started using our credit card for virtually everything in order to get the air mile points, but also so we have a record of everything. As a result I’ve had the same $20 bill in my wallet for nearly a month. I just haven’t needed it. BTW – I pay off the credit card every week so I can balance up the spreadsheet and replace the estimates with the actuals, and as a result I’ve never paid interest on the card. Getting all those air miles is also a huge bonus. Last vacation our flights were free, just for buying our usual groceries, gas etc.
We don’t have an “official” savings plan or emergency fund set up in separate accoutns. We live WAAAAAY below our means so the excess just accumulates in our one bank account and every few weeks I skim off an amount to invest, or once in a while let it really accumulate in order make a large purchase (trip, major house repair, vehicle). It has the same effect as moving the money to other accounts specifically tagged for trips, future car purchase, emergencies etc, but because we run so far below our income we just haven’t bothered with the extra administration. We just aren’t inclined to spend it because it’s sitting there in the account. We typically live day to day on 50% of our income, so the other 50% is what we direct in an informal way to vacations, vehicles (always used), paying down the mortgage or topping up retirement savings accounts. For visual folks I really think the envelopes/jars and separate accounts to save for different things are an excellent idea. My visual aid is my spreadsheet. If I want to know if we can do something unplanned, I plug in the amount and look into the future weeks to see the impact. If it causes a crunch we either don’t do it or wait. Our dishwasher failed last winter. We washed dishes for a month while we did our research to choose the new one. By that point the excess had piled up more than enough to make the purchase. Of course we didn’t hand them the case, we bought it on the credit card for the points and then I went home and immediately paid it off.

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When I first started digging out of debt having a cushion was the best thing for me personally. I set Quicken up to “hide” $25 a paycheck automatically (they later came out with a feature to do that). Since I never saw the money I just forgot about it.

Months later there was over $500 extra in the account! At the time this was a good thing for two reasons:

1) It triggered the no-fee minimum balance to make the checking account fee-free. This is before the days of free checking everywhere.

2) I had $500 saved! At the time this was like having $50,000.

I kept saving the $25 a paycheck. I left $500 in the checking account to avoid those fees and put the excess into a savings account.

For me this was the beginning of my financial freedom. Even though I was in debt I was also getting into the habit of saving regularly. It paid off huge down the road…

So yeah, I’m quite fond of #5 myself. To this day I have a cushion in my checking account!

[...] 5 Tips to Avoid Overdraft Fees [...]

That is a lot better than $10 for every $100! It is good to hear you found an option that you are happy with and that works for you.