I'm trying to get my finances set up better, and I'm wondering if anyone can recommend a "setup" of bank account, credit card(s), investment platform, budgeting tools, etc along these lines. Ally Bank and SoFi seem good, as does Wealthfront, but I'm just not sure if I'm using them right. I have Mint but it spams me with notifications and I'm not sure what exactly it does for me. Credit cards feel stressful to think about with keeping track of what to use for what purchase or making sure they're all paid off - I recently got a Citi card and the app alone makes me want to get rid of it.
Does anyone have a "setup" for how you manage your money that you really like? Anything that follows the "don't make me think" philosophy?
I always have €200 in cash on me which is enough to cover me at least a week. Then whatever I have left over at the end of the week I roll over. So if I have €60 left I take out 140 and transfer the difference into a savings account. I have saved a shocking amount doing this. It may seem strange but budgeting myself 800 for the month and only using cash has really helped me appreciate how much the money is worth to me. The short of it is on pay day each month I transfer 800 to my "cash account", I transfer the exact amount I need to cover my bills into my "bills" account (I also have a "buffer" of 100 in this account as a 'just in case its more than I calculated'). Everything else goes into savings. Everything.
Obviously some things fall outside the 800 cash allocation for example I bought a new coat a few weeks ago which was €230. I tried it on in store but bought it online as there was a discount I couldn't use in store annoyingly. However I have a separate budget allocation for key clothing items like coats and boots which I generally replace every other year. However I don't bother with multiple savings accounts anymore. I never found I benefited from the added complexity. If in a month or two I ruin my coat and have to buy a new one unexpectedly I will just take 230 from my savings rather than juggle things around.
I should say though that all of our expenses come from a single salary. Every month my wifes automatically goes into savings. Generally we never need to touch it. This is great for many obvious reasons but it also helps us (well me!) feel less guilty when I suggest we buy something we don't really need such as an OLED TV we got a few months ago.
Pros: no need to worry about points or blackout dates; maximize cash back; facilitates budget tracking with annual summaries and integration with budgeting sites (otherwise you’ll have to do it manually).
Examples: Double Cash 2% cash back, Apple Card 1-3% depending on payment method
2. Direct deposit your paycheck into one bank account that your credit card from 1 and investment account from 4 are connected to (set it up so only investment account can debit from the bank, not vice versa). Autopay remaining bills from 1.
Pros: only worry about paying one bill (credit card); only the hub bank account is exposed, bulk of savings is isolated in investment account.
3. Max out 401k and IRA every year using automatic deductions from your paycheck/bank account.
Pros: saving/investing on autopilot; lower taxable income
4. Consolidate and invest all savings (and roll over old 401k accounts) into an index fund at Vanguard or Fidelity. Auto-deduct from your paycheck in increasing amounts until you hit the pain threshold.
Pros: automatic diversification; one place to monitor your investments; maximum investing on auto-pilot.
First, the penalty for the strategy of "not-thinking" just on a tactical level isn't 1-2%, more like a minimum of 10%, and a maximum of 100% or more when you take into consideration accumulation over time.
Second, from a "strategic" perspective, "not-thinking" leads to "not-understanding" the myriad "choices" presented/available to you- where often what's presented is very different from what's available, and often serves someone else's interest much more than some other available-not-presented option may serve yours.
Third, the state of "not-understanding" leads to the use of seemingly helpful services like Mint. In doing so you are making an enormous sacrifice in terms of privacy. There are rules that prevent the state of your deposit/savings data from being shared by the custodian (many more than the state of your credit data, for hopefully obvious reasons). To use those services you have to provide them with your deposit/savings credentials, and once they have them, that data gets out in the wild, which can have unexpected deleterious effects, particularly if you are a person of color, or a woman, or wind up in a weak financial position, which may happen for unexpected, surprising reasons.
The financial industry is predatory. Full stop. The industry harvests from people who choose to not think about it. There is so much- too much- money in the world, but to everyone individually/organizationally it is a scarce resource. Every day I see grim occasion to think about apex predator Danny DeVito in a David Mamet movie called "Heist"-
"Everybody needs money. That's why they call it money."
Good luck!
> Anything that follows the "don't make me think" philosophy?
I don't think that exists. YNAB requires pretty diligent tracking, but the payout (heh) is huge.
- I don’t budget.
- I don’t use spreadsheets or finance apps.
- I don’t have any credit cards, loans, or debt. I don’t care about my credit score because I’m not ever going to get a car loan, electronics lease, or mortgage.
- I don’t own a car. If I did I would buy it with cash and purchase only what was necessary to get from point A to point B safely, with the best gas mileage.
- I have reduced expenses as much as possible, and only buy essentials: Rent, utilities, health insurance, and groceries. I don’t spend money on new gadgets, entertainment, or other things. I read books from the library, I go to the park instead of the movies, etc. I don’t go “shopping” whether online or offline. I don’t buy a new laptop or phone unless my old one breaks and cannot be easily and cheaply repaired (still using MacBook from 2014).
- At the beginning of the week I go to my bank and withdraw cash, and only buy things with this cash. I don’t buy much online except toiletries and cooking oil.
- Instead of budgeting food, I have a simple rule that if I’ve eaten out already in that week, I avoid eating out until the next week. I avoid buying groceries until I’ve eaten most of what’s in the kitchen.
- At the end of every month I log into my bank, check how much money came in, and subtract how much went out. I then invest whatever I feel like out of that month’s profit into a mutual fund. I choose mutual funds as my method of saving because they are liquid, free of management, and simply taxed (capital gains). I have them setup to automatically reinvest earnings. I don’t use IRAs.
- I’m happy with my income now, but in the past when I felt like I didn’t have enough money, I simply focused on the easiest way to earn more money (changing jobs, learning a new skill to change jobs, taking another job, etc.).
1. One account for salary and bills
2. One credit card for large purchases and spending online which I pay off each month
3. One pre-paid card which I top up weekly to use for daily spending and when travelling (as it has multiple currency accounts)
4. One savings account
(All of the above accounts are available to me on one App, due to the Open Banking regulations in Europe)
(Would be a good idea to set up auto sweeps to move funds between accounts, so that it's automated. I don't do this as I like to view the accounts regularly to stay on top of things)
Rules I try to follow are;
- Maximize income - Minimize expenditure - Save or invest the remainder - Don't use credit/debt but save up to buy what you want
I don't have a go to investment platform, but my preference would be to use a broker and value invest for medium to long term. I can't compete with pro traders and algorithms.
- you consolidate your finances in the minimum number of accounts & cards
- you have a couple of months of expenses as cash in a current or savings account
- you pay off your credit card in full every month
- you invest some amount every month
- all of this is automated - paying bills, credit card repayments, investing, putting money in savings, all of it.
Once you have these things down, you can then adjust percentages, providers and all other details according to your personal situation and preferences.
I've been following their philosophy for a while and it's been nothing but positive and very hands off:
- Emergency fund in a BofA account
- Schwab account with a lazy 4 fund portfolio [2]
- 401k with company match
- I am also working towards financial independence (FIRE), see [3]
[1] https://www.bogleheads.org/wiki/Getting_started
I pay poor people, teach them coding and help them move into middle class. I spent Most of my money doing that. 10 years of Bay Area swe pay, I only have $2k in my bank account. (Currently negative because of cc debts and holiday shopping).
Don’t be like me. I originally thought if I helped others become as wealthy as me (relatively) they’ll be able to lend me money whenever I end up in hard times. Turns out, most people don’t save up and instead just end up spending more. Their relatives suddenly appear with “investment opportunities” etc.
So now I’m just as broke as the other guy. The only bright side is I got to meet and marry another swe through doing this and our combined TC is over 600k. We plan to put everything we earned into a savings account, by a house next year and retire a few years after that.
Setup an auto transaction to move a set amount into a savings account on payday - that way at the end of the pay period when you run out of money, you've already saved how much you wanted to. If you wait till the end of the pay period to save, there will never be any left.
My trick is to increase the amount going into savings every time - just a little. Eventually you'll find the point where you're saving the most you possibly can, and you might need to back it off just a touch.
This maximizes my savings to the point where I work for a couple of years, then I can take years off and drive around the world.
Rinse, repeat.
This forces me to limit spending. After paying rent, I only have about the same amount left over for personal expenses.
Any money left over in my personal account at the end of the month is transferred into a mutual fund.
The gist of it is to automate everything as much as you can! Auto-pay, auto-deposit, etc.
All income goes to vanguard. Each year, we move our total budget for the year to checking. Then, we pay for all spending from checking. We can easily track whether our budget is on Pace at any given time. If we run out of money, we went over. (Technically, we subtract out year end expenses like property taxes to avoid a year End surprise.)
We also have a 30 year budget spreadsheet that estimates our savings, expenses, and income Up too retirement. If we exceed or income goal for the year, we put half towards retirement and half towards a virtual 'bonus discretionary' account. If we exceed our annual budget (have to do an extra transfer from. Vanguard), we deduct that from the virtual bonus discretionary account.
Note that I wouldn't recommend exactly this approach unless 1 years spending is a relatively small amount of your net worth. We only started this technique in our 30's.
1) Are you trying to get in control? This is where you are constantly living paycheck to paycheck, and bouncing checks. Than I would do the following a) Get in the habit of saving where it is painful to spend. So start putting any percentage of money into a 401k if your company offers it. Ideally target to get the maximum match. But whatever you do start. b) Start documenting all, let me re-iterate, ALL your spending big and small. I recommend Quicken, but an Excel spreadsheet, google sheet works as well. The act of becoming conscious of your spending makes you reflective.
2) You are in control and saving a little bit and bonus you pay your credit card balance in full each month. Here the goal is becoming more optimized (I didn't say optimized). a) Choose a bank that tracks your spending and look at it and automatically pays bills. b) Start putting away money in something like wealthfront or betterment (I prefer the latter). Put it in a 401k or tax deferred vehicle to start since it will reduce your taxes. c) work on eliminating leakage (services you don't use, unnecessary fees etc).
2) You are in control, think more in terms of building wealth. a) Start thinking in terms of applying savings to appreciating assets (homes and eventually second properties for cash flow). Zillow and Redfin allow you to understand the market. b) Look at becoming more aggressive with investments. Look at a percentage to go to growth or dividend funds. But look for a goal of secondary sources of income. Both Schwab and TDA have good platforms to see this.
jonahbenton is right, there is no set it and forget it, but there is get the max out of the time you do when you have to look at it. You have to reconcile, with so much digital theft it is easy to have funds leak because of fraud.
If you are truly looking for a set and forget, get adopted by a wealthy person who will set up a trust fund for you, but full all others, internalize good money habits.
I keep my emergency fund in Varo. It gets 2.8 percent interest. I use SoFi as my main "bank", but also have a couple local accounts. Good luck.
- low fix cost per month
- should be possible to cancel subscriptions within a month
- rather rent than buy (flat, car sharing etc.)
- no loans
- money to save goes on a saving account
- define low limits for max. amount of money to withdraw on accounts
- get proper insurance coverage
- avoid Paypal and other 3rdparty banking services
No need for any fancy tools and I have more money available to put away than ever. I only use a tool for my tax declaration, but since I simplified my financial setup so much I could even do it without a tool nowadays...
We use a mutual bank for most of our transactional banking. We have several companies, trusts and superannuation (think IRA) accounts there.
My wife and I also have a joint account at a commercial bank. This is solely used for personal purchases on a debit card. The account has no international fees, which is unusual for Australia.
We use Ledger CLI to automatically ingest all transactions each day. I wrote a scraper for the mutual bank and commercial bank (needed to OCR the PIN pads they like to jumble around). This gives us great visibility into all expenditure and origins of funds. My wife and I get a daily email with PDF attachments for our various entities.
We use Interactive Brokers for most investments, along with IG Markets to mitigate some counterparty risk. We've mostly retired (thanks to a startup) so most of our wealth is held in there. I use IB's FTP delivery service to receive detailed daily account statements (with GPG encryption). I also use IB API to do some algo trading.
We also have some crypto with 5 different exchanges given we don't trust any of them so it's straight-forward counterparty risk management. These are also algo traded.
We avoid cash use because it doesn't auto-categorise into Ledger CLI. I wish we had more privacy but by spreading things around between the banks, brokers and exchanges no single institution has any real clue about us. Sure the government does, but they get that all the important info freely anyway via tax returns or simply asking nicely.
It's all reasonably automated, but I have to shuffle money around each quarter or so.
The shared account is very simple: Every month me and my boyfriend tops it up to 5000 USD, we have a debit card to it each, and all shared expenses including rent come out of this account. By topping it off to a high number like this, we ensure we wont run out within a month, and we just use the debit card for things we need.
For my private stuff I have a credit card that I pay everything with, and I've set it up to be automatically paid off at the end of each month.
Every so often I write the expenses we've had into gnucash so I can see how much we're spending, but I don't budget in advance.
I also have a savings account with some emergency money, but I'm a poor student so I don't really have money to invest or for long term savings.
The way I do it is to budget a yearly (or half year) expenses beforehand and then channel it through whatever account for expenses. I'm lucky enough to live in a very cheap place and make enough so I don't have to live pay-check to pay-check.
If I make more than I think enough to cover my next period, I usually spend that on a new Tech gadget, Travel or into savings. But I rarely save these days as I'm trying to maximize my lifestyle before I'm 70 year-old with too much money and little to do.
Why Schwab? They have outstanding customer service. One time I was traveling on Christmas Eve and forgot to place a travel notice on my cards. I called and got a human on the line immediately. This is the norm with their customer service whom I rarely call because 99% of what I want to do can be done via their web site from download tax docs to ordering new checks. Also, when traveling abroad they (1) still fulfill their promise of reimbursing all ATM fees and (2) give an excellent exchange rate. I could not be happier with them as my bank.
I input expenses manually and each expense has a "category". For each category I can set a monthly "Bucket" (the maximum I wanna spent) and then I can track my progress during month.
Every month I get email with spending stats and I sit down together with my girlfriend to consider our finacial situation. We can change the buckets, etc...
I think the most inportant part is manually writing expenses and then talking about it after we get the email.
I have a checking account, vanguard account, and fidelity account. The checking account is used for business to pay me. The vanguard account is 100% VTSAX as is the fidelity has account. I’ve just been keeping a couple thousand I the checking and rolling into VTSAX. Should be enough, if VTSAX tanks we need to be buying ammo if anything.
I also churn credit cards. Chase sapphire/capitol one savor/Amex platinum should all get you $500 or more. But if you are making >100k like it seems most people in here are then this is not such a large concern.
Seeing some interesting things in this thread, may be that some of them are normal for Europe or what have you.
Other things talk about automatic this and auto that - but not specific about what makes it automatic? You bank web site?
Interesting just thinking about how some of these things are working, and if there are business account type solutions that are similar.
Charles Schwab is my main bank <3, broker and 401k investment holder (employer forced).
Local credit union finances my car loan (almost paid off), my secondary checking/savings and my only credit card.
CashApp for any type of sharing/transfer of funds.
YNAB does all the budgeting. (I've become better at spending money that I have!)
Every month, I put $600 into my TSP, $1000 into savings, and my total bill amounts into my billing account. The rest goes into my spending account.
Whenever I get tempted to buy nonsense, I ask whether I'd rather buy that or put that money in my savings. If I don't really need it, it goes in savings.
When savings gets over a certain amount, I transfer a chunk into my mutual fund.
It imports all your transactions into a Google Sheet via Plaid, and it's free to try out with a single account linked.
Disclaimer: I made BudgetSheet.
So whenever I look at the balances on my cellphone and there is "too much" I flush it out to an investment a/c
And when I get a bonus same
So very little active managing tbh.
The jury is still out, but so far it is good.
I use a credit union for checking. I'm currently planning to open up a second checking account with the same credit union to split my income stream into fixed and variable expenses as some have mentioned here.
General idea is as follows:
1) Deposit income check each month into checking account #1. Draw from this account for monthly and yearly expenses. Add some buffer so as not to over draw.
2) Initiate an auto-transfer from checking account #1 to checking account #2 after check is deposited each month. Work within the budget set by checking account #2 for variable expenses.
Why use a credit union? A for-profit bank does not share the same incentives as their clientele. If they can separate you from your money, they will. I'm generally wary of any industry that is rewarded financially for stealthily screwing their customers, e.g. insurance industry. Credit unions are also known for having very reasonable loan terms.
Why two checking accounts? It's nice to know what I'm spending each month on stuff like gym membership, streaming music, cellphone bill etc, versus things like coffee and dining out.
Investing setup
I'm young. I'm willing to incur risk for better long term returns (on average). I also recognize that I am not Rentec. If I were to outperform the S&P500 picking stocks, it would be almost entirely due to random chance.
I keep enough money in checking to survive an emergency that requires immediate access to funds. Everything else that I earn above what I need for the month goes straight into an S&P500 index fund. Both Vanguard and Fidelity are essentially fungible.
I'm open to others convincing me that this is a stupid strategy. It is entirely possible the S&P500 tanks, and I lose a large fraction of my money. Few counter points though. First, it is by definition a diversified portfolio of stocks. Second, it has performed very well historically. Third, it has enough people invested in it that it couldn't just "go away" without serious repercussions for the US and the world.
Perhaps the largest concern, is that there is way more wealth in the S&P than there are people actually trading it on a day by day basis. If there was a flash crash, there simply wouldn't be enough people on the buy side of the equation to drink from the firehose of people selling. This is really beyond my depth though so I'll stop here.
Other principles
I'm trying to avoid debt like the plague. Mostly for my mental health; I know it can be important to your credit score to carry some continual debt. Be wary what you sign up for (college, grad school, etc).
Keep in mind though, you always want to maximize your net effective interest rate. If your student loan rate is 4%, consider paying the minimum on your student loans and put the difference (what you would have paid) into the stock market. Only do this if you can automate the process as you will be inclined to spend the money and not save it.
A for income, ex. when I get a check I put 80% here
B taxes, when I get a check I put 20% here (taxes in Poland are 18%)
then:
C for business expenses, I know how much I spend each month, and I wire that amount each month from A
D personal account - whatever is left in A after business expenses, I wire here
Finally:
E, joint account with my partner, I know how much we spend each month and I wire that from D -> E
F, saving account for myself. Whatever is left in D at the end of the month, I put here
ING lets me manage all these accounts from their app, and wire money instantly from one to the other. All these accounts cost about $2/mo. each, but if there's enough action (ex., if you spend at least $500/mo.) the price drops to 0.
This setup is useful to not go splurge every time you get paid.