How I bank and manage cash

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Piggy Bank
Piggy Bank

Notice that I didn’t title this as “the best way to bank”, because it may not be. This is simply what works pretty well for us and we haven’t had a late payment in years. Heck, we have emergency funds setup just in case the emergency fund goes dry. Before you roll your eyes and think it’s impossible, know that I am a normal guy and not some super-suit executive – I just started early.

If you take a portion and implement it, great. If you have a tip that you use, I would love to hear it.

Day-to-Day Stuff:

Chase Checking Account A: This is where my paycheck goes and where the bills are paid from. We try to have bills first go to a credit card to collect enough points to pay for an annual vacation. We then pay off the credit card each month before financing charges are applied (don’t try it if you cannot commit to paying the credit card off). There are NO debit cards issued to this account, only a checkbook if we need it – which is never. All bills are paid electronically and NO, I don’t wait until the last minute to collect extra interest. I am not playing timing games, I have enough stress so I pay bills within 48 hours of receiving them.

Chase Checking Account B: This is my personal expense account. We transfer money here from Account A bi-weekly, when I get paid. Gas, Gifts, Personal Cell phone, etc. are paid from this account and the transfer amount never changes. Regardless of what I make, I get $150 per week. If I don’t have enough to watch Monday Night Football at the bar with the guys, I don’t go. If I win at poker, my winnings go here and the wife is none the wiser. If an event is coming up, I skimp in other areas to make sure I have enough money.

Chase Checking Account C: This is my wife’s personal expense account. She currently gets $280 per week. She gets a lot more than I do because she is paying for the groceries and kids’ activities. Nevertheless we treat it the same way as my account. If she doesn’t have enough money for Girls Night Out, she doesn’t go. When she goes 200 minutes over her cell plan, she gets docked. This forces her to clip coupons and be frugal. Before anyone says this is mean, know that we agreed on this before implementing it.

Harris Bank: We have a savings account in each of the kids’ names here. This is for the kids’ birthday money. Through online banking we also contribute random amounts of money each time we pay the bills. For example, if I pay the bills one day and the balance in the checking account shows $1123.30, I will send $3.30 to one of the kids’ accounts. Kind of dumb, but its an easy way to keep money flowing into their accounts for college or whatever.

Back-up / Emergency Funds:

Chase Money Market:
This is a holding account. I always want to have 3 months of bill-money set aside in this account. If I get canned, hurt, or otherwise cannot bring in an income, this will pay our way until I can find something else.

This took a while to save up, but it’s there now. While it’s not the best interest rate in the world, I’d rather have the funds there immediately if needed as opposed to make an extra $30/year.

Chase 13-month CD: This is the emergency fund. It took a minimum of $10K to open and that’s what I put in. If something really bad happens and we go through the ‘Jay got fired’ money, we tap into this. It gets over 5% interest so we’re looking at $600/year. Again, this took a while to accumulate so don’t get discouraged or irritated.

Investment:

My company matches $0.50 on the dollar up to 9%. So I contribute 9% of my paycheck to 401K. I manage the fund selections myself and am pretty aggressive because I still have a while before retirement.

We had 4 other 401k plans consolidated and are now managed by Chase. This is one of the ways that we got out of all the service fees at Chase.

I have an account at Schwab with $0.02 in it. A long time ago I put in a couple thousand and bought a bunch of garbage. Believe it or not that $.02 is actually a share value, I hold shares of a stock now worth .0001 per share. Just don’t do it, I wanted to try it out and I learned a lesson fast.

Business Accounts:

You guys may remember that I have rental property listed under my LLC. This is mainly for liability purposes, however you will run into people saying that an LLC is worthless. I just do what the lawyer says and it makes sense to me – if a tenant slips and falls, they can sue the LLC but not necessarily me.

Anyway, I chose a bank that was less than a mile from my house and had branches next to the tenants. The tenants just go there and deposit their money orders into my account using the deposit stubs I gave them. This account just grows based on the monthly profit. Each year we take money from this account as a ‘paycheck’ and then deposit it into the Chase IRA.

Paying Bills:

Quicken. We have used Quicken since 1999 and regardless of all the cute little tools and websites out nowadays, my opinion is that Quicken is the best option. I have a ridiculous amount of reports available and every expense has a category. To this day my wife makes fun of me because when we were saving for a down payment on a house, I actually entered a .25 gumball she bought from one of those vending machines.

College Funds:

We have 2 kids and the plan is to use the appreciation gains and monthly profit from the rentals to pay for college. I bought these things with 10% down and although the depreciation tax write off slows as the property ages, I will have a fair amount of money for the kids’ college by the time I sell them. Plus, I am going to buy more at some point when I have time to find a new lender.

Like I said, some of this may work for you and I know it’s not ideal. However, we have most things covered which unfortunately is more than most people do. Several years ago my income went from $28K to $44K in one year. I thought I was rich until I realized I blew it all and had nothing to show for it. Now that I am making substantially more than that, it’s those early lessons that guide me.

Do yourself a favor – build a plan.

– Jay

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8 COMMENTS

  1. This all makes sense but I cannot see getting all of these statements each month. How do you reconcile and balance your cheackbook?

  2. Dan – good point and you are right. I’ve often thought about moving to an online savings account. With HSBC there appear to be no fees or minimums and that interest rate is solid. For people in Chicago, it’s imporatant to note that HSBC is the company that bought the old Household International so use of their ATMs is free as well.

    Full Disclosure – HSBC is a client of mine.

  3. You have a good system in place, but I really recommend that you take a peek at the book “The Automatic Millionaire” by David Bach. Beyond just having a plan, you MUST pay yourself first if you are to have a prayer of ever being financially independent. It sounds like you may be closer than many, but I would hate to see you advocating your techniques and self-discipline to the readers of this blog when that doesn’t work for very many people. Trust me, go read the book and you’ll see what I mean. No, I’m not the author, just a satisfied consumer (and implementer) of its ideas.

    VincePlatt @ Yahoo

  4. I expected someone to ask that sooner or later.

    No, we used to have everything at Citibank and actually liked them more. However we moved and the closest Citibank is now 10 miles away from us. Chase has a branch in my grocery store and a stand alone branch 1 mile the other direction. Just convenience really.

  5. I was actually kidding about the ad deal.

    And I’ve had waay(almost waaay) better experiences with Chase than Citi when a bank error occurs.

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