How Simple or Complex Are Your Finances?

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Dan Kadlec of Time magazine offers up 9 Ways to Simplify Your Finances. I always swing back and forth, wanting a nice simple financial life one day, and the next day itching to try out all the cool new financial tools out there. I tend to split up my accounts into “core” and “explore”. The “core” accounts hold the vast majority of my money, while the “explore” accounts result from sign-up promotions and/or pure curiosity. Anyways, let’s see how I did one the 9 ways listed:

  • Get down to one mutual fund. The article recommends target-date funds, which I think are fine if you go Vanguard, Fidelity Index, or maybe T. Rowe Price. Right now my portfolio holds 10 mutual funds/ETFs and some individual TIPS. If it weren’t for different 401k providers, I could get down to about six.

    I really don’t feel these funds are very hard to manage though as I have my target asset allocation already determined and I simply rebalance with new funds and once a year otherwise.

  • Keep two credit cards. Fail. I go through a lot of credit cards. Right now I’m meeting the spending requirements on the Barclays Arrival Mastercard and the Chase Ink Plus. It’s a profitable hobby, I tell myself.
  • Pay bills online. Stamps cost way too much to do it any other way. I charge what I can on credit cards, and the rest is done with online banking.
  • Choose one financial institution. Does this mean bank or brokerage? Probably both? Well, I have one local regional bank account and an Ally checking/savings combo as my core bank accounts. Vanguard and Fidelity are my core brokerage accounts. I guess another fail, but I am unwilling to give up features here for simplicity.
  • Automate everything. Direct deposit for both of us, check. 401ks are always automatic, so check. Automated IRA funding? No, I just do a lump sum early in the year. I’ve tried, but I don’t like to automate credit card bills.
  • Get overdraft protection. Ally Bank checking account has a feature that I can automatically use my savings account for overdrafts with no fee. I don’t even know if my local bank account has overdraft protection or not, as I’ve never had to use it.
  • Create an emergency fund. Check. I haven’t done any rate-chasing recently, as there has been very little to chase. But I know I would if some bank offered a crazy-high APY.
  • Pay yourself first. I don’t do this explicitly, although I do make sure that both of our 401ks and IRAs will be maxed out early on in the year.
  • Get organized through new technologies. I do use the recommended (free) to aggregate my spending transactions only. I also use one of their recommended password managers, 1Password ($40+). I like both. I hadn’t heard of the other password keeper mentioned – Dashlane – but it does look polished and the basic version is free.

I like playing around with finances, so I’m okay with my level of complexity for the most part. Things are set up so that most of the important stuff in a few limited places in case something happens to me, but maybe 5% of our net worth might be spread out in some experimental accounts.

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  1. You don’t have nearly enough credit cards from sign-up and category bonus spending if you are living without auto-pay :). It’s impossible to keep up for us with ~40 cards combined. Risk of missed payment is way too high. Requires keeping your one main checking account with a healthy balance that is net positive over all of the credit card balances of course.

  2. Typical Time Magazine hard hitting, insightful and cutting edge reporting…..that would appeal to any third grader. No wonder the magazine has been downsized to 14 8×5 pages.
    Maybe Dan has been in coma for the last 5 years and doesn’t realize that life at least in America has changed and not for the better.

  3. Looks like your set up is similar to mine, although we do put all retirement savings into just one Vanguard target date fund. Still, it’s not that simple to someone who does not look at the finances every day so I went one step further and wrote up a plan for my wife. Like you, I would be worried if someone had to take over and try to figure out how everything works under pressure. I wrote a post about it as well:

  4. Donnetta Byrd says:

    I use for my passwords. So far I really like it. you can have it free, but if you want to use the phone app, it’s $12 a year.

  5. My finances are very complex, because I have several brokerage accounts, and 2-3 checking accounts.

    However, at the end of the day, I think the most important thing is to maximize potential while minimizing risk, rather than strive for the cleanest picture possible, which could lead to excess risks or missing out on huge opportunities.

  6. Young Limey says:

    by your comment “Pay yourself first. I don’t do this explicitly, although I do make sure that both of our 401ks and IRAs will be maxed out early on in the year.”

    You may be missing an opportunity in company match. For example, say you make $100K per year, and your company matches your 401k contribution at 3%.

    If you max out your 401k to the full $17.5K by June , you are missing out from the company match for last 13 of your paychecks. You miss a $1500 company match for the 2nd half of the year. ($115 a check x 13 checks)

  7. My last scummy company had that rule. If you maxed 401k early they stopped matching. Seriously evil way of doing business. I got just up to the max and then cut the contributions to $25 a month after learning that had lesson.

  8. Hard lesson.

  9. @Young Limey – That depends if your company provides what is called “true-up” contributions (mine does):

    In any case, I actually meant that I make sure the percentages work out so that I am maxed out sometime around October or so. That way I don’t leave too much for the true-up later, but also make sure I can still probably max out if income drops.

  10. Why do you 1password. ?

    Use it is free.

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