Mapping Your Financial Infrastructure

Mapping your financial infrastructure is a mundane task. It’s not exciting. It’s not likely to save you big bucks. Instead, it’s the sort of Big Picture exercise that each of us ought to perform from time-to-time just to be sure that everything’s working the way we think it is. If you do this every year or two, you just might catch some inefficiencies that need to be corrected. I did.

J.D. Roth – GetRichSlowly.org

Over the last year, my approach to personal finance has become much more deliberate. Through a college class, I was exposed to a wide range of fundamental principles, principles that, at 22 years old, I had never really thought about before. Buzzwords like dollar-cost averaging, compound interest, and amortization now make sense. In an effort to continue my education and ultimately optimize my finances, I subscribed to two personal finance blogs – one focused on finance for post-college graduates and entrepreneurs (I Will Teach You To Be Rich), the other focused on sensible core philosophies (Get Rich Slowly).

This morning, I read a post by J.D. Roth of Get Rich Slowly titled My Financial Infrastructure. J.D. writes about how important it is to look at your big financial picture every couple of years – mapping out how your money is handled and filtered is the first step in optimization. Below is my own attempt at financial mapping.

Personal Checking

I use Bank of America as my personal checking account. Through my employer I have a direct deposit into this account, and any cash I withdraw or check that I write will come from this pool of money. I have used BoA’s Bill Pay to automate all of the following bills/payments:

• Bill: Apartment rent, once every other month
• Bill: Comcast Internet and Cable, once a month
• Bill: BoA WorldPoints credit card, once a month
• Transfer: to ING Savings account, once a month
• Transfer: to AmericanFunds investment, once a month
• Bill: Student loan #1
• Bill: Student loan #2

Credit Cards

For work, I use a corporate AMEX. All of my statements and reward points are available online, and I sign on a few times a year to do my expense report. My personal card is a Bank of America World Points Visa, and both this card and my BoA checking account are synced together into one online portal. I pay off my credit card in full every month (I am fortunate to be able to do so), and each year I get 50% more reward points for maintaining my BoA checking account. I also have a CitiBank credit card that I used as a backup card during college. The account is still open, but I haven’t made any charges on it in over a year. Hmm. I should probably call them up to see if canceling the card is a good idea – will that affect my credit score? Note:  at some point I will be reevaluating my choice in credit cards, as I’m sure there are better offers out there. For now, I am happy with BoA as my primary card.

Savings

I use ING Direct for my savings account. Their Orange Savings account has two features that I find attractive. 1) They offer competitive interest rates and 2) You can create and label multiple savings accounts on one screen. For instance, I have one “emergency fund” account that I put money into in case of – you guessed it – an emergency, and another one for a climbing trip I plan on taking in the next couple of years. Setting up targeted accounts is incredibly easy. For a fantastic list of other high-interest savings accounts, check out this page.

Investments

Through my employer I have a 401K account setup with Nationwide. My current plan is to invest 13.3% of my gross monthly income into my 401K. I’m all about those tax-free dollars! I also invest monthly into two long-term mutual funds through AmericanFunds. Because I invest at regular intervals, I am taking advantage of dollar-cost-averaging – hopefully I can ride out the economic storm and see some growth over the next 10, 20, 30 years. at this point in time, I do not own shares of single stock.

Student Loans

I have one small loan through the Missouri State Government at a non-variable 6.8% interest rate, and one much larger loan through SunTrust Bank at a variable interest rate, which is now at 2.75%. I am set up to pay back both loans in 10 years, and I automatically have the payments deducted each month from my checking account. As long as the market generates historical returns of 8-10%, my money is more valuable in the market. Each month I make the minimum payment and no more. For peace of mind, though, I may try to pay back the 6.8% loan in the next couple of years.

Syncing It All Together

I use Mint.com for my financial snapshot. Mint aggregates all my online accounts into one portal. Their usability is strong, and I foresee using Mint much more regularly as my finances become more complicated in the future. For now, I have them send me weekly updates via Email.

Those are my finances in a nutshell. Hope this post was more useful than dull! How do you handle your money?

(image from Flickr user sirwiseowl)