My Financial Habits

By | June 14, 2005

My philosophy of personal finance is to keep things as simple and organized as possible. This way I can keep track of all my credit cards and bank accounts in my head. I would say the numbers should be like this: two to four credit cards, two or three bank accounts, and one or two investment bank accounts. I also like to have no debt, but that would be difficult in the future when I buy a house or start a business. Also, it’s good to have some money put away in savings and retirement accounts.

Pay Credit Cards Bills Immediately. I don’t play the float. As a matter of fact, my checking account which my paycheck goes to every payroll does not even have an interest rate. Besides, I just like to pay off the debt as soon as possible and get it over with. I don’t like to deal with the hassle of remembering to pay near the grace period. Therefore, I also avoid paying late fees and penalties.

Say NO to 0% APR Credit Card Offers. I have decided that it’s not worth doing a 0% balance transfer from the credit cards. I have enough money to work with, I don’t need to borrow extra at this point. Also, I don’t like to have too many accounts. And I rather not take a hit in my credit history.

Minimize Number of Accounts. I like to keep things as simple as possible. I don’t like to keep track of dozens of accounts. I like to have only a few accounts I can remember all the logins. I don’t want to deal with too much paperwork either.

Online Billing and Automated Debits. I signed up for online billing for all my bills and almost everything is automatically debited every month. The bills get charged to my credit cards whenever possible, and if not, it gets deducted from my checking account. I use MS Money to look at all the bill payments in one screen. I look at the numbers once a month and make sure they’re reasonable. If anything goes wrong, I would call my credit card company or the vendor. I like to make paying bills as efficient as possible. Once again, I don’t like to spend too much time handling bills.

Use Financial Software. I keep track of my earnings and spending in MS Money. I have most of my credit card and bank statements electronically downloaded. I like using MS Money because it helps me keep an up-to-date status of my financial situation and it gives me details of every transaction and helpful reporting tools.

Stay Organized. I still receive paper statements and I have a drawer just for them. Every time I get a mail I would just file them there. When the drawer starts filling up, I move them to a shoebox I used for archive. I normally dispose mail after two years. With online statements so convenient nowadays, I probably only need to keep mail for a maximum of one year.

Read Financial Magazines. I have subscriptions to Kiplinger’s Personal Finance, Smart Money, Forbes, Money, and Business Week. I receive more magazines than I can read. I’m still playing catch up. I bring a magazine to work every day during my commute to and from work.

401(k) Savings. Pay yourself first. I have dedicated 10% of my paycheck to 401k savings. My company offers a match of 25% up to a maximum of $1,000. I have enrolled in the 401k plan as early as possible (when I was working part-time in college) and I have used the technique of dollar-cost averaging into the market to help me take advantage of market volatility. It really does pay to start early and contribute a set amount regularly.

A Dedicated Savings Account. In addition to saving for retirement, I also put some money away in a high-yielding savings account. This is a permanent account where I would save money out and not touch the money unless I absolutely need to. I have designated ING DIRECT as my account holder, and because it’s an online bank, it makes it that much harder for me to withdrawal money.

Contribute to ROTH IRA. I take full advantage of a tax shelter account. I like the fact that I have an opportunity to invest money and let it grow tax-free. I have been making full contributions every year and I like to contribute at the beginning of the year to allow more time for compounded growth.

Keep Cold Cash. I keep about $500 to $1000 of hard cash in case of emergency. The thing is you never know what may happen. Think of it as insurance. I’ll give you a quick example. The Northeastern blackout of 2003 has rendered all the ATMs useless. Even if you had money in the bank, it was pointless. If anything like that would happen, I could quickly pull out cash and buy food or anything.

9 thoughts on “My Financial Habits

  1. frugalgirl

    For someone who titled their blog “Growing Money”, I would have thought you’d be all over collecting interest on the CC company’s money via 0% BTs.

    As you get more assets and start earning a return on them, you may see the value of float. It also helps if you have a bill payment service in which you can schedule the payment when you receive the bill, but it doesn’t go out until the date you specify.

    Reply
  2. Smarty

    I have done the 0% BTs before, but the amount of interest I earned (low cc limit) is not worth the extra hassle. I’m not against it, though. If you are disciplined and can profit signficantly from the 0% offers, then it may be more worth it for you. I just don’t want to keep track of so many accounts now. You should understand why I would want to keep certain things simple.
    =)

    Reply
  3. frugalgirl

    I agree, they aren’t worth the hassle if you have low CC limits.

    I also enjoy Dawn’s Frugal for Life blog, she has some great ideas for slowing down and enjoying life, rather than chasing things and belongings.

    erin
    frugalgirl.blogspot.com

    Reply
  4. Jose Anes

    FrugalGirl:

    A Balance Transfer Card may allow you to transfer lets say: $20,000 at 0% for a year. If you put $20,000 on Ing Direct, it gives you 3% or $600 on a year. After taxes it is about $400 USD.

    It is an interesting idea… but:
    1) It requires a large credit limit to make sense.
    3) It require long 0% time (around a year). Difficult to find such a card.
    3) It requires some paperwork.

    I prefer to spend my time on other money generating ventures. But if you find such an opportunity to make money, share your ideas.

    Money and Investing

    Reply
  5. Ray

    0% Credit Cards are no different than taking responsibilty and paying off loans. I’ve used 0% credit cards for years and the interest they have saved me has accumulated into the thousands.

    From time to time I’ve been able to use 0% credit cards in conjunction with a car loan and saved a lot of money. Since I can save $50 a month interest on a car loan, a 0% interest rate saves me $50 a month, all at the same time I’m paying off debt, increasing my credit score, (besides the 3 month hit, you take initially when you apply), and I’m increasing my ‘Credit to Debt’ ratio all at the same time. If I have $10,000 of available credit and I’m using $5,000 then I’m at 50% Credit to Debt, but if I have $50,000 of credit available and I’m only using $10,000, then I’m at 20%, and that helps my FICO score.

    0% credit cards are a reward for having good credit and you should utilize the benefits. If you can get $50,000 or as much as $100,000 in 0% credit cards and you can put that to work in a 5% or greater money market account, you can make $2,500 to $5,000 a year.

    If that’s too much work, then I guess making money is too much work. Even if you can only do 15,000 in total credit card 0% deals, that adds up to about $750, $20,000 = $1,000 and so on.

    Now if you have trouble paying your bills on time, then DO NOT do this. But if you happen to miss a payment by mistake do not be afraid to call and have any and all charges removed. I have done this numerous times and I do mean numerous across different credit cards. If you call and ask that they not only remove any late charges and any interest because them, they should remove them and also ask that the 0% offer is reinstated.

    That’s about all I have to say. FREE MONEY is FREE MONEY. You just have to take responsibility if you decide to go this route. It’s no different than any other bill you have. You just need to make sure you pay it on time.

    Reply

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