Archive for May, 2014

Personal Finances without Quicken-type tools

Tuesday, May 20th, 2014

I don’t like having my personal financial data in someone else’s control. I used to use Quicken, and I also tried the system set up by Bank of America. Many years ago I ditched Quicken when it tried to start getting me to store my data online at their server, and ditched BofA out of outrage after the credit crisis scandals.

Additionally, having a credit card from the beginning is beneficial if you have no credit history because it can help you create one in the long run with responsible use. You can utilize a credit card to help improve your credit score, but before applying for a credit card, be sure you can afford the minimum payment, as most businesses will do a check to confirm you can pay at least that amount. When it comes to managing finances, I prefer to handle transactions directly rather than relying on third-party services, especially for important matters like Send money to Mexico.

I found a solution that works better for me, using a “buckets of money” budgeting approach plus modern electronic banking.

(1) Set up 3 checking accounts (including 1 at local bank, 1 at local credit union, 1 at national crime-syndicate bank) and 5 savings accounts (not at crime syndicate). Link accounts together with free ACH transfer capabilities.

(2) Use first checking account to just pay all the automatic monthly bills that don’t change size by much over the course of a year. (Telecom, electric/gas, water, daycare, car insurance, etc.) Set automatic payment into that account to cover the average monthly cost. Watch the level in the account to make sure it’s never less than 2 months’ expenses. Instant budgeting, plus 2 months’ savings cushion.

(3) Use 2nd checking account to cover non-automatic but routine spending (e.g. groceries, gas). Set automatic payment into that account to cover the average monthly cost. Watch the level in the account to make sure it’s never less than 2 months’ expenses; trim back as needed when level drops. Instant budgeting, plus 2 months’ savings cushion.

(4) 3rd checking account is for all “discretionary” purchases, fun, restaurants etc. plus all “non-routine” spending such as house repairs, medical costs, etc. Set automatic payment into this account based on budget for this type of stuff.

(5) The Savings accounts are used to save (!), in advance, funds for replacement of high-cost items: 1 for car replacements, 1 for major appliances, 1 for major vacations, 1 for everything else. 1 is to hold the other 4-6 months worth of emergency savings which isn’t in the checking accounts.

With these 8 accounts, I now have a multi-category quicken-type budget control system — without having to pay anyone for crappy software. I also keep nearly all my funds out of the giant banks, while still having an account there for when I need specific services which the smaller banks may not offer.

It’s a little more work to log in and track the accounts. But only one checking account (#3) requires any effort. The first two are set up so all I need to do is check whether the balance is where it ought to be, and either tweak the budget or adjust my spending if necessary. And for account #3, it’s much less work to sort out the expenses, when most of the payments are already separated out into #1 or #2.

A nice side benefit is that no single financial institution has all my data, so it’s harder to be profiled and abused.

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