Posts Tagged account
What I Use: Budget Tool
Over the next several days, I’ll be detailing all of the tools I use in my financial ecosystem, from accounts to services. I’ll explain what I use and why.
For a long time, I struggled with keeping track of our income and expenses, and as a result, we frequently found ourselves counting the days until the next paycheck came in. No matter how good things looked at the beginning of the month, we would somehow manage to end up broke by the end of it. I’d tried a handful of different budget solutions over the several-year span of our marriage. This including an Excel spreadsheet, Microsoft Money, Quicken and a few different budget-oriented websites. Nothing worked exceptionally well for us. Things would be OK for a short time. Then I would forget to update a couple of purchases here and there, and all of a sudden we would be out of sync all over again.
The real drawback to most of the budgeting systems I tried was they required input on my part in order to stay up to date. I would need to hang on to receipts and remember to enter them at the end of the day. Without that input, the systems were ultimately useless. This step may not be an issue for many people. Some have spent most of their lives entering each purchase into a checkbook register and find this manual entry as a simple extension of that practice. Not me, though. I learned that there were a few requirements if a budget system was going to work for me.
Here are some of the features I was looking for:
- No manual-entry – This is the big one. The system needs to track my expenditures for me. Unfortunately, this wasn’t really an option with most budgeting tools until fairly recently.
- Near real-time tracking – I should be able to see new transactions on a daily basis.
- Mobile access – I need to know if I have money available when deciding on a purchase, no matter where I am.
- Track changes over time – Not really a need, but something that would be useful. I’d like to know if I’m making progress.
Out of all the methods I tried over the years, nothing has come close to:
Budget Tool: Mint.com
Mint.com is exactly what I needed. If you’ve struggled with other budgeting tools, I urge you to give Mint.com a shot. While you’ll still need to put some effort into managing your finances, Mint.com will automate a good portion of it for you.
Here’s how it works. You link all of your online accounts to your Mint account. This includes banks, credit cards, loans, etc. If the financial institution has a website that you can log in to, you’ll most likely be able to add it to Mint. Mint then collects information from your accounts on a regular basis, giving you up-to-date information about account balances, transactions and more. You can even have it send you email or SMS alerts for things such as low balance warnings or bill reminders.
Typically, when I suggest Mint to a friend, the first thing they ask is, “Is it safe?” Mint has been around for a few years now, and they’re owned by Intuit, makers of Quicken and TurboTax. Of course, these days, there is no 100% guarantee that any of your information is safe online, but I feel confident that they’re protecting my financial details as much as they can. None of your specific account information (passwords or account numbers) is displayed anywhere on your account page, so even if someone were to gain access to your Mint.com login, they wouldn’t gain any useful knowledge. They would, however, know that you spent way more on eating out than you had budgeted for the month.
While there are many things about Mint that I love and use on a regular basis – things that I will go into more detail about in future posts – it’s the budget tool that is most essential in managing your finances. Upon connecting to your accounts and downloading your account histories, Mint will automatically categorize many of your transactions for you. Unfortunately, you’ll need to do some manual clean-up, as it sometimes guesses categories incorrectly. On the plus side, you can tell Mint to automatically rename and categorize future transactions based on your changes, so you won’t have a ton of recurring work as you continue using it. Once everything is tidied up a little, a fun thing to do is check out the Trends tab. Here you can view different charts and graphs illustrating different aspects of your finances. Take a look at how much you spend on eating out. Go ahead, do it. It’s a lot more than you imagined it could be, right? One of the most important things Mint did for me, was help me realize exactly how much money we were wasting on things we didn’t need.
Once the shock of seeing your spending habits subsides, you can begin creating budgets to track your spending in different categories. You’ll want to start with your income budget, telling Mint how much you earn every month. After that, start creating budgets for recurring monthly expenses, such as rent, utilities, groceries, etc. I found it easiest to create one budget item for bills that are the same amount every month, and to make sure all my standard monthly bills are categorized under the “Bills & Utilities” umbrella. This cut down on the number of budget categories I’m forced to look at on a regular basis. Once the static items are out of the way, you’ll see how much left you have in your budget for irregular items, like eating out, entertainment, gas, and whatever else you need to budget for. As you’re creating these budgets, Mint will suggest amounts based on your history. Those are frequently inaccurate, since Mint doesn’t have much of your history to look at, and most likely need to be ignored for now. Lastly, you’ll want to create a budget for the “Everything Else” category. Initially, I tried to shoehorn all of our transactions into a handful of categories, which is not a great way to handle them. Create the “Everything Else” budget and all the expenditures that don’t fit in your other budgets will fall under there. As a tip, don’t stress too much about getting everything perfect. I’ve been using Mint for almost a year now, and I still tweak my budgets regularly.
After all is said and done, if you still have some scratch left over, I envy you. Also, you can use that extra money to create a Goal. I won’t go into much detail here, but simply put, you can create goals to save money, pay down debt, buy a car or really, anything you can think of. Mint will help you track the goal, show you different scenarios, give you a target date of completion and more. It’s pretty handy, although I’ve only used it for one goal so far.
One extremely helpful benefit of tracking your budgets with Mint is the fact that your spending is tracked, no matter how you spend it. Besides cash, any transaction, whether on a credit card, debit card or check, Mint knows about it. This is especially useful when using credit cards. As long as you’re paying attention to your budget, you don’t run the risk of spending more on your credit card than you should.
There are other useful features of Mint that will have to wait for future posts. If you’re anything like me, and struggled with budgets in the past, give Mint a chance. It may sound hyperbolic for me to say that Mint changed my life, but it’s true. It’s not perfect. There are issues here and there, and the company hasn’t been quick at releasing fixes, but the core features are solid enough. Start using it now, you’ll thank me later.
Check out their introduction video to see Mint in action.
What I Use: Credit Cards
Posted by Mathew in Accounts, Credit Cards on July 23, 2011
Over the next several days, I’ll be detailing all of the tools I use in my financial ecosystem, from accounts to services. I’ll explain what I use and why.
Before I mention the cards I use and why I chose them, I’d like to cover the basics of why you want a credit card and how they should be used. Unfortunately, it took the greater portion of my adult life to gain an understanding of the right and wrong ways to handle credit cards. When used correctly, they can provide huge benefits, such as extended warranties, cash back bonuses, protection from theft and a good credit report. When used incorrectly, you’ll usually only end up with stuff you couldn’t afford and a crushing burden of debt. I know this from experience.
Credit cards should only be used when you have the money to make the purchase in the first place. If you can’t pay for something with your debit card or cash, you shouldn’t be buying it. In a later post, I’ll detail how I manage our budget, and how you can track credit card purchases just like all your other expenditures. In short, if you count your money as spent, regardless of how you spent it (check, debit, credit card, etc.), you can avoid racking up unnecessary debt, and reap the benefits that credit cards have to offer.
I’ve chosen cards which provide the most benefit to me and my family. Interest rates play no part in my decision making process, because we will not be carrying a balance from month to month. Each billing statement is paid in full immediately and I intend to never pay another credit card finance charge for the rest of my life. If you’re not in a position to pay your balance in full every month, the benefits of using a card will be negated (and then some!) by the finance charges you’ll be paying. It’s simply not worth it to use a credit card in that situation. If you’re currently living in credit card debt, look for an upcoming post where I’ll provide solutions to get out.
On to the cards. In order to get the largest return, you’ll most likely need multiple credit cards. I’ve selected, what I believe to be the two best cards with respect to cash back rewards.
Credit Cards: Chase Freedom & Discover More
Both of these cards offer the following benefits:
- Cash back on all your purchases – Chase Freedom gives 1% cash back on everything. Discover More only gives 0.25% until you’ve spent $3,000 in a calendar year, after which you get 1% for the rest of the year.
- Rotating categories that provide 5% cash back – Throughout the year, you’ll be able to get 5% on gas stations, grocery stores, restaurants, etc. This is where you’ll get the most benefit from having two cards. For example, Chase might offer 5% back on grocery stores in the first quarter of the year, while Discover has the same promotion during the third quarter. For six months out of the year, you could potentially get 5% back on all your groceries. Not a bad deal, right? You can view their discount calendars here: Chase, Discover.
- Bonus cash back when shopping at certain online stores – Discover offers up to 20% back and Chase offers up to 10% back. You usually need to click a link in your card account before making your purchase, in order to get the bonus.
- No annual fee – Most people will dismiss an annual fee altogether. As long as the benefit you’re getting from the card is greater than the annual fee, it can make sense. I’ve read that for people who travel a lot, the American Express Starwood is, by far, the best rewards card, and it has an annual fee. But with the cards I’m recommending, you don’t have annual fees to worry about.
As you can see, the main goal here is to get some money back on things you’re buying anyway. 1% or even 5% cash back won’t end up being a ton of money, but it will add up, and these days, it helps to save any way you can. Also, it should be apparent why it doesn’t make sense to carry balances from month-to-month on these cards. If you don’t pay your statement in full each month, it won’t be long before the amount of interest you’re paying is greater than the rewards you’ve earned.
There are other reasons to use credit cards, as well:
- Insurance coverage on car rentals – Don’t pay extra for insurance when you rent a car, just pay with your credit card. Almost all credit cards offer this.
- Extended warranties on purchases – In addition to the cards above, we also have an American Express card. They will double any manufacturer’s warranty, adding up to one year. I believe all AMEX cards offer this, but it’s not as common with other cards, especially rewards cards.
- Damage & theft protection for your cell phone – If your phone is lost, stolen or damaged, the card issuer will replace it, as long as you’re paying your cell phone bill with your credit card. You’ll typically have to pay a small deductible, usually around $50. Only a handful of cards offer this.
- Piece of mind – Card skimming is all too common these days. If someone skims your credit card, it’s the bank’s money they’re spending. If they skim your debit card, you could be completely broke until it gets sorted out with your bank. I’d prefer to not even carry my debit card around, but in the rare instances I need cash, I don’t really have much of a choice.
We do use a couple other credit cards on a regular basis. As I mentioned above, we have an AMEX card that is used to extend warranties, usually on larger purchases, such as electronics. We also have a Target REDcard because it gives a 5% discount on nearly everything in the store. We do a lot of shopping at Target, so it makes sense to get that 5% discount all the time.
Other cards may make more sense for you, but the Case Freedom and Discover More seem to offer the greatest benefit in cash back rewards. If you’re only going to get one, I’d go with the Chase Freedom, as it allows you to earn 1% on all purchases right from the start, while Discover More requires you spend $3,000 first.
What I Use: Savings Account
Over the next several days, I’ll be detailing all of the tools I use in my financial ecosystem, from accounts to services. I’ll explain what I use and why.
Savings Account: Ally Online Savings
As with your checking account, you’ll want a no-fuss savings account that offers a competitive interest rate. Like my checking account, I previously used ING Direct as my bank of choice for savings. And just like my checking account, I’ve moved my savings over to Ally Bank.
There aren’t many details that need an explanation when it comes to Ally Online Savings. They offer a higher interest rate than most banks, including ING Direct, but as I mentioned in my last post, don’t base your decisions on interest alone. This account has relatively few fees, most of which are the standards, such as overdraft fees. This shouldn’t be an issue for most people, as long as you’re using your savings account for saving. There is no minimum balance to open an account and no monthly maintenance fee.
One item that does need a little explanation is the limit on transactions. You can only make six transactions per statement cycle before being charged a transaction fee. This is a federal regulation, and is the same for all savings and money market accounts, not just Ally. This restriction is not applicable for deposits, which are unlimited. Again, if you’re treating it as a savings account, this limitation shouldn’t pose a problem.
There is one feature that I would like to outline a little bit. Something that I really like about Ally Bank (and ING Direct before it), is the ability to create as many savings accounts as you like. It may sound strange at first, but having multiple savings accounts allows you to funnel your money into different accounts, each allocated for a different purpose. For example, in addition to our standard “Savings Account,” I’ve created one labeled “Vacation Fund.” Once we get our car paid off, I’ll create an account for “Car Fund” so we can start saving for another car purchase down the line. Being able to keep track of your different savings goals in this manner is extremely helpful, and I highly recommend taking advantage of it, if your bank offers it.
What I Use: Checking Account
Over the next several days, I’ll be detailing all of the tools I use in my financial ecosystem, from accounts to services. I’ll explain what I use and why.
Checking Account: Ally Interest Checking
The foundation of any good financial management system is the checking account. Practically everything you do will interact with this account in some way. You want a checking account with few surprises and even fewer fees. Unless your lifestyle requires regular visits to your local branch, I can’t recommend brick and mortar banks, these days. Take a look at the fees they charge and you’ll see why. Online-only banks have lower overhead costs and are able to keep their fees low as a result.
Interest earning accounts are a plus, but in this economy, the amount of money earned from interest is negligible unless you carry a large balance on your account. Ally is offering pretty high interest rates for a checking account, currently 0.50% APY for balances up to $15,000. (Tip: When comparing interest rates, be sure to look at the APY, or Annual Percentage Yield. It will take into account how the interest is compounded.) There are a handful of other banks that offer higher interest, but they either require a larger initial deposit, have various other restrictions, or don’t offer all the features I wanted in a checking account. I wouldn’t recommend choosing a checking account based on the interest rate alone.
Ally’s Interest Checking account has very few fees, and even reimburses fees charged by any ATM you withdraw money from. You get a standard debit card and even real life paper checks – something that my previous bank (ING Direct) doesn’t offer. Being an online bank, depositing money is currently a small hassle. You either need to transfer money from another bank – I have a credit union account that is used only for this purpose – or you can have Ally send you deposit envelopes for mailing your checks to them. They’re in the process of rolling out an e-check deposit system that will let you scan your checks and deposit them directly into your Ally account. My wife and I both have our paychecks direct deposited and I very rarely need to make any other deposits, but this will be a welcome feature, nonetheless.
Some other features that Ally offers:
- No minimum to open an account
- No maintenance fees – Many banks require periodic activity or a minimum balance if you want to avoid maintenance fees. Not cool.
- Ally Perks – Money back from stores, restaurants and more, just by paying with your Ally debit card.
- No ATM fees – As I mentioned above, you can withdraw money from any ATM. Period. Ally won’t charge you anything, and if the ATM you use does, Ally will reimburse it automatically.
- Bill pay – Something that most banks offer these days, but that doesn’t make it any less useful. (Note: In the near future, I’ll write a post on automating all your monthly bills.)
- 24/7 customer service – This is something that Ally brags about a lot, and with good reason. Knowing that they’ll be there any time – and that they speak English – provides a certain piece of mind.
Full disclosure: I’m still currently in the process of switching to Ally from ING Direct. I’m waiting on my antiquated employer to finish changing my direct deposit over. I was with ING Direct for years and had zero complaints, until now. As you may have heard, ING Direct recently announced that it will be purchased by Capital One. I have no interest (finance pun?) in being a Capital One customer. Most people would call me irrational for switching before any changes have been made, or even before the deal has gone through. That’s probably true, but it’s a personal decision. If you have no reservations about what Capital One might do to ING Direct, I can still recommend them for now. It’s really been a fantastic bank for the six years I was with them. Having said that, I have yet to find anything that ING offered that Ally doesn’t.
