In a world of chaos, especially in 2020, simplifying your world is one of the best things you can do to set yourself up for the future. Between all the noise coming at you, notifications, calendar invites, a social life – simplicity makes everything easier. That simplification applies even more to your finances. I’m going to walk through how to set up your banks to give you the clarity to make wise decisions and get rid of the noise.
Checking Accounts
You only need one of these. You better have a great reason for needing more than one (please ping me if you do have one – seriously). Find a checking account that doesn’t charge you fees for holding your money. They already get your money; they don’t need to charge you fees as well. I prefer checking accounts like Ally. They reimburse me for up to $10 of ATM fees a month on top of solid customer service and a user-friendly website.
Which institution you use for checking may also depend on where your savings is held. If you have a hard time with impulse control (you know who you are), you probably want to put your savings at a different bank. On the other side of the spectrum, if you feel comfortable with controlling your impulses and favor simplicity, you can choose to put your savings and checking at the same bank.
Some folks will look for checking accounts with a good interest rate. If this is already within the account you plan on using, then great, but don’t fret over this. It’s really not that much money.
Things to look for in a good checking account:
- Reimbursed ATM Fees
- No monthly service fees
- A bank NOT named Bank of America or Wells Fargo (just do some Googling)
Savings Account
I also recommend only having one savings account. Refer to my comment above on whether this should be within the same institution as your checking.
Ally (they don’t pay me, I swear) has a great savings account because of their competitive interest rates and the ability to create “sub-accounts.”
I don’t think chasing interest rates at banks on savings accounts is a great use of time and effort, but if the money is there, take it. Ally tends to be competitive in this realm as well.
When saving for specific things in your life like a wedding, down-payment on a property, or a trip, having specific buckets for these goals helps you visualize your progress, stay focused, and keep things clean.
Ally has a feature called sub-accounts where you can create up to 10 digital buckets to separate your different savings goals. It’s super easy to use and I highly recommend it; other banks may offer this too.
If your bank of choice doesn’t offer this, you can also go the alternative route of opening multiple savings accounts within the same bank to separate your goals.
Creating these buckets may sound nuanced, but the psychology of doing this will increase your chances of keeping your focus and being successful.
Credit Cards
Many of you may have already read about how much I love credit cards (when used responsibly). When it comes to credit cards, I’m a huge fan of Chase (also not paying me). I’ve frankly had great experiences with them. They have decent customer service (banks set the bar low these days), great benefits, and an easy way to redeem rewards.
I’m not going to bore you with the minutia of credit card points – that shit even makes my head spin. Just use their walk-thru guide to figure it out. If you don’t love Chase, American Express is a close second.
I recommend having two credit cards at max and even one if it does the trick. If you’re doing two to get a larger credit limit, ask your current provider first. If you have good credit and a solid history, they’re likely to approve you for an increase.
Investments
I’ve always been a fan of Vanguard due to their low-cost Index and Target Date Funds paired with solid customer service. Other good options are Charles Schwab or Fidelity. I’m passionate about low-cost funds due to what even an extra percent can do to your long-term gains.
The interface for Vanguard needs some renovations (which I believe they’re working on). However, you shouldn’t need to be spending more than a handful of hours a year here. The main purpose is to get great funds at a low price which equals more returns long-term.
I used Vanguard to start my Roth IRA and it’s where I roll over, and combine, my 401(k)’s from previous employers.
Making the Change
This does take a little effort depending on your current setup. But, remember, you’re putting in the effort now for years of less stress and easier decisions down the road. I recommend planning out where you need to make the changes before starting the process and map out the structure that’s going to work for you. Once you’ve completed the process, move forward with the action, and get this all done at once. You don’t want to get started and stop half-way through. That pretty much defeats the purpose.
Notes:
- If you’re in the process of making a big purchase like a home, I would recommend waiting on the transition until you’re done with the home transaction.
- If you plan on closing out an old credit card, you can use this credit score simulator to see the implications. Sometimes, it is worth hanging on to this for credit history. Closing out your oldest credit card can ding your score because it decreases your average age of credit.
Tools
Once you’ve made the transition, I recommend using a tool like Personal Capital or Mint to track your accounts. Personal Capital is designed more towards investments while Mint is better for budgeting. Pick your poison.
Sum It Up
I think you get the point by now. Simplify your damn life so you can make good decisions. Having a messy setup has you spending more energy tracking down your money instead of focusing on bigger, more impactful decisions. A little effort will pay off over the long term.
