Trifecta for Budgeting, Saving, and Spending
This trifecta will get you organized and saving while generating some rewards on your everyday transactions. Stop dumping your entire paycheck into one account, and put your money to work!
One: You need a banking app with an envelope system
Don’t dump your entire paycheck into a single bank account. I don’t care if you use Mint to analyze your spending, by the time you get around to looking at it, it’s gone - spent. You need to organize your money before you spend it, and give every dollar a purpose.
First, make a budget for your fixed expenses. Use your envelope system to keep it organized.
Next, you’re going to save, but more on that later.
After you’ve set aside your expenses and your savings, you get what is left. I prefer one lump sum amount for my play money, I am comfortable eating out less one week, to treat myself to a movie. Or, I may decide to go to dinner with some friends, because I know I’ll be using less gas that week. I have found these little freedoms make budgeting more tolerable.
So, what bank do I recommend?
Well, that’s Simple. I haven’t been able to find an app that comes close to these guys. The envelope system has been around a long time, but Simple has done a superb job of making it work in a digital world.
You can pre-setup your expenses and short-term savings goals, and that money all gets tucked away into virtual envelopes for you. Just one bank account, with as many envelopes as you need - your spending money is what’s left and that’s called “safe to spend”. This is what you’ll see when you check your account balance, so no fooling yourself!
Two: You need a high-interest savings account
Sure, Simple is good for this too - they’re currently offering 2.02% APY on their savings account (which is, in fact, a different account unlike their envelopes). But, there are a couple of better options out there.
The point is, anything beyond a $1,000, that’s just in case of emergency, needs to be earning some interest, and not the shit your traditional bank offers - high interest!
It’s a bit of a new concept and you should take full advantage.
Right now, banks are fighting over who can provide the best interest rate, and this is really good for you. Not everyone has a nest egg that they can profit from, and if you did you’d probably be investing it. But, everyone should be building a nest egg, even if it’s $25 a month.
What is your best option for a high-interest savings account?
I prefer Wealthfront.
They are offering a 2.57% APY (edit: 2.32% APY), which is leaps and bounds over just about everyone else. They’re also a one-stop-shop for savings. You can open an IRA while you’re at it and start investing for retirement.
The app will plot your path to retirement, and if you’re a beginner this tool can be invaluable.
Three: You need a credit card that rewards you for your spending
If you’re spending your fun money directly out of your bank account you are missing out on a ton of rewards.
There are credit cards that will pay you for your using them, literally. Don’t get me wrong, they’re waiting for you to slip up and fail to pay your balance, at which point I would not recommend this approach. But, if you’re responsible and pay your balance completely, every month, this can be the next level for your finances.
Get free money for the vacation you’ve been putting off because I put you on a budget! It’s not a trick.
With Chase, for example, 15,000 points (depending on the card) can get you a free round-trip to New York City. You can easily earn that each year with just your normal spending habits.
Not to mention, the sign-on bonuses and perks you can find on some of these cards.
What credit card do I recommend?
This may change based on who is offering what, but right now I like: Chase Sapphire Preferred. Good bonus, decent perks, decent redemption rate, and all the protection you need.
Put your money to work!
This trifecta will get you organized and saving while generating some rewards on your everyday transactions. Stop dumping your entire paycheck into one account, put your money to work!