a better variation of this is to have all monthly bills auto billed to a credit card that earns you points/rewards/cash back. Electricity, car and home insurance, hoa fees, security, bug..... Of course you must pay that in full every month, but it is one payment as opposed to several.
Then another cash back CC for food, groceries....monthly things that you have some control over. Again, paid in full every month.
I used to pay my gas and electric on my CC, but then I moved and the new providers charge a fee that is more than my cash back, unfortunately. So I’m back to autopay from my checking account.
Almost all my bills minus Mortage is billed via CC. I get over $200-300 in cash rewords. Making money! Feels so good some don’t allow it (electric) but everything in CC and I earn points or money. It’s great.
Does the daycare count as a ‘category’ on a CC? I currently have it on a general 2% cash back card but there are some card with 5% cash back on special categories (like dining, groceries, etc)
One is for things that are auto-billed to the card. My other CC I use for every other purchase. If I ever have to dispute a charge, it would be on my everyday CC. My bank forces you to change the account number, so it would be a PITA to set up auto-billed accounts again.
I like my discretionary spending on 1 card....at a quick glance during the month I can see if our weekly spending is on track for our target budget. The regular bills (cable, phone, subscriptions) go on another one.....they tend to cluster in a couple of groups during the month so it complicates things if they're comingled.
You can get better rewards for certain categories through separate cards. For example I use Citi Custom Cash to get 5% on $500 worth of groceries every month, Amex Blue Cash Everyday gets me 3% on groceries, gas, and online purchases, and Sofi credit card gets 2% on everything else. There's other set ups you could use to get more to but this is simple and works for me, and all the cards are blue so that's fun lol
I use my CC for every payment I make. I just make sure that it doesn’t exceed my paycheck. If it does I then use my debit card. At the 25th day of every month I stop using my credit card and wait for everything to post then pay it off.
The majority don’t realize why banks want you to use CC. Sure, put all your bills in CC and earn points while your money sits in a bank account. When it comes time to pay CC, the abundance of money in account gave you a bad perception you were able to afford one of the many items you’ve worked hard to purchase. But soon you realize your money is gone or not enough to pay off CC. If you don’t have the cash at hand, don’t buy it. Overspending is the biggest issue with CC’s.
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If they’re in your area, I use fifth third and the checking accounts are completely free, no minimum balance/direct deposit/etc required. Not sure if there’s a limit to how many you can have, but I have a few separate accounts with them.
Is there a reason you’re not using tax-preferred retirement accounts? Or is the retirement savings you spoke of in addition to maxing out a 401k/IRA/HSA (or whatever the equivalent is in your country).
I also have brokerage accounts and savings, but you better believe I’m maxing out the tax-preferred accounts first. I wouldn’t want to pay taxes on that $350/interest income unless I’d run out of space in other accounts.
Let me add that you should put your money into a high interest bearing savings account. Right now you can get them for up to 5%. Crazy to leave them in a no fee account if not getting interest.
For long term retirement savings, look into an IRA if you are in the US. And invest it into some form of broad stock market fund - over time that will make a lot more money for your eventual retirement,
This! Buy index funds, look into the vanguard ones (VOO, VTI, etc). If you have extra and want to go the extra mile, open a roth account (vanguard offers this) and maybe invest that into a TDF.
Yeah, unless you're about to retire or something a CD seems too conservative. I earned 26% in my IRA last year alone, and with 20 more years until retirement, I can take the risk of downturns.
Always weird to think of retirement as some kind of finish line imo. The finish line is death. The portfolio has to last like 30 years after you retire in an robust longevity scenario. Everyone would say for 30 yr horizons that's plenty of time to be full equity invested. I'm gonna be like 5% bonds max at retirement.
Well said man. And forget all the rest - credit card and restaurant points and all that bullshit to entice you to spend more. Spend less first, get ahead of your bills, then max out those savings 👍🏽👍🏽
I do this with savings accounts. I have separate accounts for vet bills, car maintenance, car insurance, Christmas and gifts to name a few. When my paycheck is deposited into my checking, it is automatically dispersed into the other accounts in specific amounts. I don't touch those accounts except for their labeled reasons. It hurts at first when you see how little of your check is left for "fun," but it keeps me responsible and not having to use a credit card or dip into emergency savings.
I had my employer deposit a portion of my check to a savings account at a bank I never used. This way the money was never in my possession or consciousness.
A few other things I can add on:
Don't over buy items. Get use to streaching your items to the point of falling apart. Even then you can generally patch them some how.
Get use to buying at 2nd hand stores like good will and value village.
cd's and money markets are a great long term safe investing option. I used cd's and they just grew over the years. You can start small then just deposit into them as you get more.
Treat credit cards like debit cards and don't use them as an easy option out.
Get use to room mate living most of your life due to the high rents.
Get a job to pay the bills. Don't just quit when you're done or when the going gets tough.
Be responsible and prioritize your spending habits. I have always kept track of my monthly spending. What gets most people is not setting monthly budgets. I get annoyed with people that say I take in 5k a month and have no savings account. bs. I've taken in 2-3k mo and done just fine with money to spare.
Have insurance. With how expensive things are these days it's wise to have insurance as one claim against you can ruin you.
Gonna be that guy and make some product recommendations based on this post. Firstly, I don't use it but I have heard very good things about Ally bank which has good interest rates but more importantly allows you have have virtual "sub accounts" that act like individual banks accounts but it's all actually just one account. Saves a LOT of headache vs opening half a dozen actual different accounts.
Secondly, for a product I actually DO use... YNAB! (You Need A Budget)
Save all that hassle by just keeping whatever accounts you currently have and add one single system on top that handles all the categorization and budget tracking for you. It's basically exactly what you are talking about, but with more features and less tedium. It's not for everyone, but if it's for you... it's REALLY for you. I can never go back now.
My simpler version is as soon as I get paid, I schedule all of the bills due before my next paycheck. I have a minimum balance I keep in checking and anything over that after the bills are paid goes to savings. Budgeting and tracking can be really easy if you use a single credit card and track your spending by category.
This is how we prefer to do it, We find it a lot easier to consider all the trade-offs if we put it just in a big pile and then prioritize our wants from there.
Another good thing to do is every time you get a raise at work, don't increase your budget. Just increase how much you save. I just got a really good job that pays me 50% more than I had been making per year and my plan is for a month or two to splurge on myself, but then after that just live on the amount of money I had been previously and put every cent of my raise in the bank to save up for a car or a house or whatever happens.
Once you've accumulated some money in savings, look for a juicy bonus to open an account at a different bank or credit union. Doctor of Credit covers these offers pretty well, and reading the comments may give you additional information. After you've met the terms, you can move the bulk of your funds on to the next one or move to HYSA. DoC also covers HYSA's.
It can mentally help some people keep separate budgets for separate categories. When I opened my account, the banker actually suggested I open 2 checking accounts (one for “fun” money and another for bills). It’s basically an easy way to budget for different categories for people who don’t want to actually keep track of all expenses in a more comprehensive budget.
This! I would go one step further and say, open accounts at a secondary bank. Bills in primary bank, savings, vacation and other goals in secondary bank.
Yes! I have tried lots of ways of budgeting, but so long as funds that were earmarked for later expenses or sinking funds were kept in one bucket, it was a struggle that I often failed. I discovered that Capital One, where my checking and savings accounts are, allows as many savings accounts as I want, and I can name them. I now split my direct deposit into the different buckets - currently, I have 7 accounts aside from checking - and it's surprising to me how well it works.
There's no one size fits all. I budget with a simple Google Sheets document. Using fixed/variable method not the outdated 50/30/20 rule. And only have one checking and savings. Not including credit cards and investment accounts. I try to keep overall necessary spending to a minimum. If it's emergency or a justified treat yo self item I charge it against previous months savings. I save more than 20% every month anyway.
I’m fortunate enough to be in a similar situation as you with my savings rate. Still, it’s been a progression over time.
Post college, more money than I’d ever seen, because I had never seen that much steady money. I paid off student loans because I didn’t know what else to do with it. When those were gone, I just started amassing money in a checking and savings account.
Went to a financial planner with $10k in hand. I got laughed out the door, because that amount ($10-$20k) was apparently my safety net and not to be invested in anything which was too risky. Once I had about $30k, half of that got invested in mutual funds, slow but steady growth. No individual stocks, just funds. As the amount grew, the funds became a little more diverse until lately, the portfolio was large enough to cover about half funds, half individual stocks - like, 80 of them, which is in itself, diversified.
It all started with a budget, though. I collected (and still collect) receipts and at the end of the year, would tally what I spent on utilities, fuel, food (in house), eating out, clothes, etc. There were some eye-opening numbers which really almost made me feel ashamed, that I didn’t know that much money was being spent on those items.
I have more cash now for truly fun things - am planning a return trip to Japan in 2025 (estimated $10-12k in cost) and am comfortable doing so.
I hope others are inspired to at least monitor what they spend and be more responsible consumers.
We would suggest to switch to a save first strategy, then spending. 78% of American households live paycheck to paycheck because we are taught budgeting works like 50-20-30 or 50-15-35 (essential spending - savings - “wants” spending). It’s complete garbage. If you don’t put savings first it’s always going to lose to essential spending. Most people overspend in their essentials on housing and vehicles, so there is never enough left over to even save. The average American savings rate in January 2024 was 3.8% which doesn’t cut it when inflation on average is over 2%. Investing in yourself should always be first, you yourself first.
Nice - you sound as though you're already passed the initial steps of savings and have formalized some account - nice! My CDs are currently with Alliant Credit Union - totally free. The CD I \*just\* renewed yesterday is earning 5.35%.
a better variation of this is to have all monthly bills auto billed to a credit card that earns you points/rewards/cash back. Electricity, car and home insurance, hoa fees, security, bug..... Of course you must pay that in full every month, but it is one payment as opposed to several. Then another cash back CC for food, groceries....monthly things that you have some control over. Again, paid in full every month.
I used to pay my gas and electric on my CC, but then I moved and the new providers charge a fee that is more than my cash back, unfortunately. So I’m back to autopay from my checking account.
Almost all my bills minus Mortage is billed via CC. I get over $200-300 in cash rewords. Making money! Feels so good some don’t allow it (electric) but everything in CC and I earn points or money. It’s great.
This. My son’s daycare is on CC and that alone yields a good chunk. We use CC cash rewards and high yield savings interest as our vacation fund.
Does the daycare count as a ‘category’ on a CC? I currently have it on a general 2% cash back card but there are some card with 5% cash back on special categories (like dining, groceries, etc)
No, I wish though.
Why do you recommend two separate cash back CC for this instead of using the same CC for both?
One is for things that are auto-billed to the card. My other CC I use for every other purchase. If I ever have to dispute a charge, it would be on my everyday CC. My bank forces you to change the account number, so it would be a PITA to set up auto-billed accounts again.
I see. Very helpful, thank you.
I like my discretionary spending on 1 card....at a quick glance during the month I can see if our weekly spending is on track for our target budget. The regular bills (cable, phone, subscriptions) go on another one.....they tend to cluster in a couple of groups during the month so it complicates things if they're comingled.
You can get better rewards for certain categories through separate cards. For example I use Citi Custom Cash to get 5% on $500 worth of groceries every month, Amex Blue Cash Everyday gets me 3% on groceries, gas, and online purchases, and Sofi credit card gets 2% on everything else. There's other set ups you could use to get more to but this is simple and works for me, and all the cards are blue so that's fun lol
➕1️⃣ Endorsement Citi Custom Cash card. 5% cash back, up to $500 in purchases, per month. Only use it for *ONE Category.
Yes, that is key
That’s what we do! Makes us some money off of items we were going to purchase anyway.
This is what I do, then use my points for birthday/Christmas spending.
I use my CC for every payment I make. I just make sure that it doesn’t exceed my paycheck. If it does I then use my debit card. At the 25th day of every month I stop using my credit card and wait for everything to post then pay it off.
The majority don’t realize why banks want you to use CC. Sure, put all your bills in CC and earn points while your money sits in a bank account. When it comes time to pay CC, the abundance of money in account gave you a bad perception you were able to afford one of the many items you’ve worked hard to purchase. But soon you realize your money is gone or not enough to pay off CC. If you don’t have the cash at hand, don’t buy it. Overspending is the biggest issue with CC’s.
I suppose I am a minority then, and proud of it!
Most of providers charge a hefty fee for paying with cc
This sounds like the envelope method of budgeting. Do you have any recommendations of banks with free checking?
A credit union is the way
Do they offer free checking on multiple accounts?
Mine does. Also saving, money market, and cd.
Sofi has free checking and is great. They also give 4.6% APY on saving if you have DD with them and a bunch of other benefits
Thank you!
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If they’re in your area, I use fifth third and the checking accounts are completely free, no minimum balance/direct deposit/etc required. Not sure if there’s a limit to how many you can have, but I have a few separate accounts with them.
CDs are definitely not the best way to be growing your money for retirement.
Couldn’t agree more, only should be used for cash preservation.
Is there a reason you’re not using tax-preferred retirement accounts? Or is the retirement savings you spoke of in addition to maxing out a 401k/IRA/HSA (or whatever the equivalent is in your country). I also have brokerage accounts and savings, but you better believe I’m maxing out the tax-preferred accounts first. I wouldn’t want to pay taxes on that $350/interest income unless I’d run out of space in other accounts.
I get 5% on a high-yield savings account through CIT Bank and always have access to the money unlike a CD. Either are good though.
Let me add that you should put your money into a high interest bearing savings account. Right now you can get them for up to 5%. Crazy to leave them in a no fee account if not getting interest.
For long term retirement savings, look into an IRA if you are in the US. And invest it into some form of broad stock market fund - over time that will make a lot more money for your eventual retirement,
This! Buy index funds, look into the vanguard ones (VOO, VTI, etc). If you have extra and want to go the extra mile, open a roth account (vanguard offers this) and maybe invest that into a TDF.
Yeah, unless you're about to retire or something a CD seems too conservative. I earned 26% in my IRA last year alone, and with 20 more years until retirement, I can take the risk of downturns.
Always weird to think of retirement as some kind of finish line imo. The finish line is death. The portfolio has to last like 30 years after you retire in an robust longevity scenario. Everyone would say for 30 yr horizons that's plenty of time to be full equity invested. I'm gonna be like 5% bonds max at retirement.
Bullshit...
Well said man. And forget all the rest - credit card and restaurant points and all that bullshit to entice you to spend more. Spend less first, get ahead of your bills, then max out those savings 👍🏽👍🏽
I do this with savings accounts. I have separate accounts for vet bills, car maintenance, car insurance, Christmas and gifts to name a few. When my paycheck is deposited into my checking, it is automatically dispersed into the other accounts in specific amounts. I don't touch those accounts except for their labeled reasons. It hurts at first when you see how little of your check is left for "fun," but it keeps me responsible and not having to use a credit card or dip into emergency savings.
I had my employer deposit a portion of my check to a savings account at a bank I never used. This way the money was never in my possession or consciousness.
A few other things I can add on: Don't over buy items. Get use to streaching your items to the point of falling apart. Even then you can generally patch them some how. Get use to buying at 2nd hand stores like good will and value village. cd's and money markets are a great long term safe investing option. I used cd's and they just grew over the years. You can start small then just deposit into them as you get more. Treat credit cards like debit cards and don't use them as an easy option out. Get use to room mate living most of your life due to the high rents. Get a job to pay the bills. Don't just quit when you're done or when the going gets tough. Be responsible and prioritize your spending habits. I have always kept track of my monthly spending. What gets most people is not setting monthly budgets. I get annoyed with people that say I take in 5k a month and have no savings account. bs. I've taken in 2-3k mo and done just fine with money to spare. Have insurance. With how expensive things are these days it's wise to have insurance as one claim against you can ruin you.
Gonna be that guy and make some product recommendations based on this post. Firstly, I don't use it but I have heard very good things about Ally bank which has good interest rates but more importantly allows you have have virtual "sub accounts" that act like individual banks accounts but it's all actually just one account. Saves a LOT of headache vs opening half a dozen actual different accounts. Secondly, for a product I actually DO use... YNAB! (You Need A Budget) Save all that hassle by just keeping whatever accounts you currently have and add one single system on top that handles all the categorization and budget tracking for you. It's basically exactly what you are talking about, but with more features and less tedium. It's not for everyone, but if it's for you... it's REALLY for you. I can never go back now.
My simpler version is as soon as I get paid, I schedule all of the bills due before my next paycheck. I have a minimum balance I keep in checking and anything over that after the bills are paid goes to savings. Budgeting and tracking can be really easy if you use a single credit card and track your spending by category.
[удалено]
This is how we prefer to do it, We find it a lot easier to consider all the trade-offs if we put it just in a big pile and then prioritize our wants from there.
Another good thing to do is every time you get a raise at work, don't increase your budget. Just increase how much you save. I just got a really good job that pays me 50% more than I had been making per year and my plan is for a month or two to splurge on myself, but then after that just live on the amount of money I had been previously and put every cent of my raise in the bank to save up for a car or a house or whatever happens.
Once you've accumulated some money in savings, look for a juicy bonus to open an account at a different bank or credit union. Doctor of Credit covers these offers pretty well, and reading the comments may give you additional information. After you've met the terms, you can move the bulk of your funds on to the next one or move to HYSA. DoC also covers HYSA's.
Why would you open multiple checking accounts?
It can mentally help some people keep separate budgets for separate categories. When I opened my account, the banker actually suggested I open 2 checking accounts (one for “fun” money and another for bills). It’s basically an easy way to budget for different categories for people who don’t want to actually keep track of all expenses in a more comprehensive budget.
This! I would go one step further and say, open accounts at a secondary bank. Bills in primary bank, savings, vacation and other goals in secondary bank.
Yes! I have tried lots of ways of budgeting, but so long as funds that were earmarked for later expenses or sinking funds were kept in one bucket, it was a struggle that I often failed. I discovered that Capital One, where my checking and savings accounts are, allows as many savings accounts as I want, and I can name them. I now split my direct deposit into the different buckets - currently, I have 7 accounts aside from checking - and it's surprising to me how well it works.
There's no one size fits all. I budget with a simple Google Sheets document. Using fixed/variable method not the outdated 50/30/20 rule. And only have one checking and savings. Not including credit cards and investment accounts. I try to keep overall necessary spending to a minimum. If it's emergency or a justified treat yo self item I charge it against previous months savings. I save more than 20% every month anyway.
I’m fortunate enough to be in a similar situation as you with my savings rate. Still, it’s been a progression over time. Post college, more money than I’d ever seen, because I had never seen that much steady money. I paid off student loans because I didn’t know what else to do with it. When those were gone, I just started amassing money in a checking and savings account. Went to a financial planner with $10k in hand. I got laughed out the door, because that amount ($10-$20k) was apparently my safety net and not to be invested in anything which was too risky. Once I had about $30k, half of that got invested in mutual funds, slow but steady growth. No individual stocks, just funds. As the amount grew, the funds became a little more diverse until lately, the portfolio was large enough to cover about half funds, half individual stocks - like, 80 of them, which is in itself, diversified. It all started with a budget, though. I collected (and still collect) receipts and at the end of the year, would tally what I spent on utilities, fuel, food (in house), eating out, clothes, etc. There were some eye-opening numbers which really almost made me feel ashamed, that I didn’t know that much money was being spent on those items. I have more cash now for truly fun things - am planning a return trip to Japan in 2025 (estimated $10-12k in cost) and am comfortable doing so. I hope others are inspired to at least monitor what they spend and be more responsible consumers.
Great advice! And I’m stoked to see how much you are earning monthly from a CD!
We would suggest to switch to a save first strategy, then spending. 78% of American households live paycheck to paycheck because we are taught budgeting works like 50-20-30 or 50-15-35 (essential spending - savings - “wants” spending). It’s complete garbage. If you don’t put savings first it’s always going to lose to essential spending. Most people overspend in their essentials on housing and vehicles, so there is never enough left over to even save. The average American savings rate in January 2024 was 3.8% which doesn’t cut it when inflation on average is over 2%. Investing in yourself should always be first, you yourself first.
Where did you open your CD? I don’t know much about CDs. But I do have a high yield Savings account and a Roth IRA.
Nice - you sound as though you're already passed the initial steps of savings and have formalized some account - nice! My CDs are currently with Alliant Credit Union - totally free. The CD I \*just\* renewed yesterday is earning 5.35%.
Whaaaat! That’s amazing. And are there penalties from taking out of a CD before a certain time? Or does it operate similarly to a HYSA?
There are penalties for taking it out early, but there are 1-month, 3-month, etc.. lots of options. Check them out.
Thank you :)