Personal Saving and Investing System
I have multiple accounts.
Not just multiple online savings accounts, but pretty much every type of account: investment accounts, brokerage accounts, retirement accounts, etc. The only exception is checking account, which I have only one. Despite the seemingly large number of accounts, the whole saving and investing system so far has worked quite well for me, thanks to most automatic transactions. If everything has to be done manually, then it could be a headache.
So how does my system work?
- I will have to keep an account with a brick and mortar bank for whatever services (and convenience) online banks can’t offer.
- I have linked dozens of external accounts to my BoA checking account, therefore switching to an online bank, though only a one-time task, could be painful.
- If I have a check to deposit (like those rebate checks), I’d like to walk in the bank and make the deposit, instead of having to mail it.
- I usually maintain less than $5,000 in the checking account. Interests earned from even from the bank that pays the highest interest rate aren’t very appealing to me. I’d rather only leave a small among in the checking account and move all the money to savings accounts that pay much better rates.
Twice a month, our salaries are deposited into the checking account and from there, they will be distributed to a number of savings and investing accounts. Any other side incomes (like the money I made from selling stuff on Amazon.com) are also deposited into the checking account.
On the same day our pay checks hit the bank, a small portion ($300) will be transferred to IGoBanking savings account which pays 5.30% APY. This is our automatic saving plan. By doing this, we put saving ahead of spending. In the middle of the month after most of the bill are paid, I will check the balance at the BoA account and move any excessive money to high yield savings accounts.
Among the six online banks I own (Virtual Bank is not shown in the picture), I am only actively using three of them: FNBO, IGoBanking, and HSBC. Part of my financial simplification plan is to reduce the number of accounts I own and Virtual Bank and Emigrant Direct are my first targets. In addition to the direct link to BoA checking account, FNBO, IGoBanking, and HSBC are also connected to each other for easy fund transfer.
Most of our investments are also done automatically. All our mutual funds are purchased from the fund companies and most of them through automatic investment plans. The money is drafted directly from the checking account. In addition to mutual funds, we also invest regularly in
- Stocks: Most of our individual stocks are purchased through brokers, thus funds are transferred to the brokerage firms first before making a purchase. If the stock I want to buy pays dividends, then I will use
Firstrade (maybe I will try to use Zecco later), otherwise, Scottrade will be my primary broker. All brokerage accounts I have are linked to BoA checking account.
- DRIP stocks: All the DRIP stock purchases are funded through BoA checking account directly without using a middleman. I pay either a small amount of fees (but less than what my brokers are charging me) or no fee at all for investing in those DRIP stocks.
- Treasury bonds/bills: I use BoA checking account to buy I-bonds every month and savings account at HSBC to invest in 4-week T-bills. The reason for using HSBC savings account is to continue to earn interests after the bills are matured and redeemed.
- 529 plans: All monthly investments in our daughter’s three 529 plans are made right through BoA checking account. Besides, the accounts get some extra boosts from two credit cards we use: Fidelity 529 card connected to Fidelity UNIQUE College Savings Plan and UPromise card connected to Upromise College Savings Plan.
- Retirement accounts: We have IRA accounts at both Vanguard and Scottrade and they are connect to BoA checking account as well. Investments are made on a quarterly basis mainly to reduce costs at Scottrade (I pay $2 per mutual fund transaction with automatic investment plan).
Do you have a personal saving and investing system and how does it work? Do you mind share it with us?
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