Maybe I’m weird, but I love to get an inside peek at how other people manage their money. Not necessarily because I’m nosy (I’m not, really). It’s because I like to see if there’s something that might work for us and our finances.
When it comes to money management, I have a strong aversion to complexity. Simple is the name of the game. I don’t like to spend a ton of time making financial decisions either, but I do want to know that things are running smoothly.
Our finances are probably never as “optimized” as they could be. But spending a ton of time trying to figure out how to get the most out of every penny isn’t for me. I’m not saying I won’t spend a few minutes reallocating money or trying to save money, but I don’t clip coupons (usually) or agonize over .3% differences in interest rates. I like to look at the big picture.
All that to say, the way we manage our money is pretty boring. But, still, if you’re like me, inquiring minds want to know. So here you go.
Where we keep it
Checking
We probably have too many accounts. So that simplicity I mentioned just went out the window, I guess. But it works, so…
Checking account #1: This is a free checking account we use for automatic deposits and payments. All the bills are paid out of here too (80% of them are automatic). I like to keep this balance reasonably low – it’s one of those money mind games I like to use to help keep our spending down.
Checking account #2: This is our “emergency” checking account. Does anyone else do this or is it just me? It earns a higher interest rate than our other accounts (it used to be 5% several years ago!). I keep some money in there to use “just in case” we need access to funds right away. It takes at least two days to transfer money from our main savings account, so this checking account is a backup that helps me rest better at night.
Checking account #3: This one’s pretty useless unless we want to tap into our HELOC (home equity line of credit), which we’ve never, ever done. It’s at the same bank as our mortgage (thus, the same as the HELOC) and I keep a $50 balance in there to keep it alive. It’s another one of those that helps me sleep better at night, knowing we can tap into the HELOC quickly and easily if, heaven forbid, we ever need to.
Savings
Savings accounts: We have accounts with both Ally and Capital One. All accounts earn a decent interest rate, as far as savings accounts are concerned. We have a vacation account and a “true” emergency account. There’s around 3-4 months worth of expenses in the emergency account.
We have a CD too which, to me, is just another savings account of sorts. It’s money we like to keep in reserve, but also don’t want to have it sit in a savings account. The penalty for withdrawal is three months of interest, so if we need it, we won’t feel like we’re taking a huge loss.
That’s the basics. But, wait! There’s more to come. I’ll add in some entertainment to get you through.
Investments
Brokerage: This account is relatively new to us. All of our investing up until recently has mostly been in retirement accounts. Now we have a brokerage account with Vanguard. It’s allocated conservatively between a total stock market index and a total bond market index fund.
401k: In the last few years we have contributed the maximum to Alan’s 401k. Over the last 20 years, we slowly scaled this up. For many years we only invested enough to get the company match (free money!). But with an increase in income and less debt, we have felt comfortable investing more as the years have passed.
Roth IRA: We’ve each got a Roth with Vanguard. Some years we contribute to this account and others we invest in a traditional IRA. Nice thing about the Roth is the money comes out tax-free. Bad thing about the Roth is, the money is taxed going in. It’s a crapshoot, in my opinion.
Traditional IRA: As mentioned earlier, we’ve each got a traditional IRA with Vanguard. Again, it depends on the year if we use the Roth or traditional.
How we manage it
One word pretty much sums up how we manage our money: automation.
Each week, I spend a little time checking our accounts, updating balances, paying bills and tracking expenses. I wouldn’t necessarily have to do it every week – I could do it bimonthly and be fine. But like any money fanatic, I like to sit down and check in weekly.
Most bills (except 2) are scheduled and automatically withdrawn from our primary checking account. The 401k and savings are automated too.
I don’t think I’ve mentioned it here yet, but I don’t have a “budget.” Never really have. But I do track all of our expenses and spending – religiously.
In the beginning, I tracked it with pen and paper. Later I customized a spreadsheet. For the past 1 ½ years, I’ve used Tiller (and love it, btw). Tiller links to all of our accounts, including our credit cards, and automatically fills our spreadsheet with our “transactions.” All I have to do is fill in the category for each expense (and I can “split” transactions into different categories, which makes me happy 🙂 ). Tiller automatically populates our monthly spending by category into it’s “budget” sheet so I can see where we stand. I’ve never been one for fin tech, but Tiller. Is. Awesome. (<- not an affiliate link).
For 90% of our day-to-day spending (and even many of our bills), we use rewards credit cards. Sometimes we sign up for travel bonuses, other times we use our cash back cards. Here’s the critical part about the credit cards – we pay off the balances each month so we don’t pay any interest.
That’s it in a nutshell. Easy peasy. And, maybe a little boring. But, hey, when it comes to finances, boring isn’t’ such a bad thing.
What say you, friends? Is it simple? Or not so much? What’s the one thing you do that makes managing your money easy?
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