Ten Steps to Simplify Your Finances, Part 1

I just ran across a nice article from Consumer Reports that lists ten easy steps that you can take to simplify your financial life… It’s a great topic, so I thought I’d run through it and include my thoughts on each point as we go along. Today I’ll take on the first three steps.

(1) Put your savings on autopilot. Have your employer deposit your paycheck directly into your checking account and then instruct the fund company of your choosing to move a specified amount from checking into a money-market or other fund once a month. Direct deposit might even save you money because many banks waive fees if you use it.

(2) Pay bills online. The process is speedy, cuts down on paper clutter in your home, and spares you from scrounging for stamps. All major banks and credit unions now let you pay bills online, and an increasing number allow you to receive your bills at their web sites as well. Most banks provide the service at no charge. If you’re worried about online identity theft, relax. Paying bills online is actually safer than sending checks through the mail.

(3) Consolidate investment accounts at one company. You’ll receive three rewards. First, you won’t have to open, read, and file as many statements. Second, keeping an eye on your portfolio’s performance will be easier. Finally, you’ll save some money because, generally, the more you keep at a single company, the less you’ll pay in custodial fees and other expenses.

My thoughts on these:

(1) Done and done. My checks are direct deposited, and our investments are largely automated. My base retirement plan gets pulled straight out of my check, as does my optional 403(b). On top of this we have a chunk of cash auto-debited out of our checking account every month and sent to Vanguard. The only thing we don’t do automatically is our Roth IRAs, mainly because I like to knock that out in bigger chunks, as opposed to putting in a little each month all year long.

(2) I love online billpay! We pay everything that we can through our bank’s website, and have even automated things like preschool tuition payments (the bank prints and mails a check for those payee that can’t accept an electronic payment).

(3) Great idea in principle, but not always possible. We’ve done this for the majority of our investments by consolidating everything at Vanguard. This includes my 403(b), my SEP-IRA, and both of our Roth IRAs — we love their Target Retirement Funds! But Vanguard isn’t available for my base retirement plan, so we’ve had to settle for Fidelity. The fund selections are fine, I’m just not happy about having yet another login to keep track of.

See also: Part 2, Part 3, Part 4

[Source: ConsumerReports.com]

3 Responses to “Ten Steps to Simplify Your Finances, Part 1”

  1. Anonymous

    After more than 30 years investing with Vanguard and transferring my Fidelity funds, at their suggestion, Vanguard has announced that as of December 14, 2007, American investor/shareholders residing in Canada are no longer welcome at Vanguard.
    I began with Vanguard in 1975, moving to Canada in 1983 to pursue professional opportunites. I have been receiving an IRA pension since 2000 with no problem. Now I am invited to sell out.
    As an American I am personally offended that Vanguard wishes to dictate where American investor/shareholders may live in retirement. They have failed to give a good reason for this discrimination nor have they ever published this “policy change” which needs to be made known to American investors.
    Vanguard cannot be trusted and will dishonor their word at their whim to the prejudice of the so-called “investor/shareholders” who are supposed to be the “owners”, or so John Bogle used to say.

  2. Anonymous

    I agree with consolidating for one other reason: you can get premium banking benefits for combined deposits and/or loans with one bank. Things like a personal investment/banking consultant, higher rates, and other bennies.

    Normally it’s around $50k-$100k combined deposits, investments, lines and loans or $250k-$500k combined balances with mortgage. Bank of America is Premier banking and investment, HSB is Premier, Citi is citigold, chase is Premier platinum just to name a few.

    some banks offer lower requirements that offer better rates etc around $15k minimum deposits, but not all the personalized services as the higher minimums. When I started out, I went with Bank of America Liberty Gold for military banking, which gives you 15cents every time you use the debit card as a credit card transation, extra .25%APY on cd’s (this is good since you have to have $15k to avoid maint. fee), $200 CD bonus for a 2 yrd cd, plus the .25%APY. those 15cents added up, especially when my wife and I would buy one thing each at a time.

    so if you have high deposits or loans and consolidate, check into the premium banking services at your bank.

  3. Anonymous

    I’ll go one step further and suggest you bank and invest with the same company. I was doing this with TD Waterhouse before they merged with Ameritrade and subsequently closed the associated bank. I now have my checking, Roth, Trad IRA, and taxable savings/investment accounts at eTrade. The combined assets qualify me for no account fees and the lowest commissions.

    But the best thing is being able to move money between accounts. It’s free and much faster.

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