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?

banking1.png

Deposit

Though there are quite a few online banks now offer interest checking (such as ING Direct and HSBC), I stick with my Bank of America checking account for four reasons:

  1. I will have to keep an account with a brick and mortar bank for whatever services (and convenience) online banks can’t offer.
  2. 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.
  3. 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.
  4. 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.

Saving

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.

Investing

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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17 Responses to “Personal Saving and Investing System”

  1. zeron |  Jun 04, 2007 at 12:12 pm

    sun,

    i remember there was an article that was posted about the finance bloggers asset allocation. just curious but it would also be nice to know if these bloggers(including you) use softwares or services/subscriptions(stock/fund picking companies) to pick your stocks or mutual funds.

    thanks,
    zeron

  2. Q at $1 Million to My Name |  Jun 04, 2007 at 12:33 pm

    Dude, you are SPREAD OUT! Nothing wrong with that, for sure, as long as you can keep track of all of it.

  3. goldfish |  Jun 04, 2007 at 1:51 pm

    Sun,

    Thanks for sharing your good practice. I am sure we can learn something from your highly disciplined investment strategy.

    -goldfish

  4. Ty |  Jun 04, 2007 at 2:11 pm

    Wow, I couldn’t imagine having that many accounts. I like it simple and my life is better for it!

  5. dong |  Jun 04, 2007 at 3:22 pm

    I have a similar system except I keep two checking accounts since my primary account did not have a local presence. The only the area that it actually bothers me to have multiple accounts is on the brokerage side. I realize I like seeing my investments in one place. Cash is cash, and putting it together is not big deal. Investments however are much more a pain in the ass.

  6. zeron |  Jun 04, 2007 at 4:02 pm

    i maintained two checking accounts. BOA is the primary one where my income and expenses are credited and debited. the other checking is where my brokerage account is being linked. i just don’t want(or don’t feel safe) to link my primary checking account or any of my savings account to any of my brokerage accounts

  7. cs |  Jun 04, 2007 at 7:39 pm

    I have many accounts that I have difficulty to manage them.

    My goals is one checking account, one savings account, and one brokerage account.

  8. John |  Jun 05, 2007 at 1:54 pm

    I am also trying to simply the number of accounts. Wells Fargo offers 100 free trades as long as you have a total of $25,000 with them (this includes the valuations of all your stocks and options). I am planning to move my tradeking account and also my IRA all within this Wells Fargo. I need to do some more research but it looks a pretty good option to me. I believe Bank of America also has a similar scheme.

  9. Sun |  Jun 05, 2007 at 5:28 pm

    Zeron: I don’t know others, but I don’t use any paid service for picking stocks/mutual funds. There are lots of places I can find all the information I need, but why pay somebody else to do it for me? Besides, when you use somebody, the information could be biased. For mutual funds, I use Morningstar to select funds. Usually, I already have something in my mind and only use it as a tool to find more details. I don’t use any tools to select stocks as well.

    Goldfish: Though so far my system works quite well for me, it’s kind of complex with so many accounts. I am trying to cut down the number of accounts I have, but it’s not easy, Actually, I am really moving to the opposite direction as I opened two new accounts recently :(

    CS: I like to make it simple, but I feel one account may not give the best deal for my money. For example, for savings account, I have used ING for several years when their rate was much better than others. But now they are like a percentage point lower than others. That could be a big difference if you have a large amount of deposit.

    John: I am not familiar with Wells Fargo, but BoA requires a total of $25,000 non-investing assets (such as assets in checking, savings, money market, and CDs) with them to get the free trading and their interests rates are terribly low. To me, that’s not worth it. At least Wells Fargo counts your investment assets for that $25,000 requirement. So it’s better than BoA.

  10. Ben |  Jun 16, 2007 at 12:49 am

    Thanks for sharing Sun, its nice to see how others do things. Gave me a few things to think about in regards to our system.

  11. Nate |  Jul 22, 2007 at 11:15 am

    Interesting setup you have there. Quite complex I personally…. 1 checking, 1 401(k), and to many credit cards!

  12. Sun |  Jul 23, 2007 at 12:50 am

    Nate: Yes, I have way too many accounts. I am now in the process of reducing the number of accounts so the system can be more efficient and easier to manage.

    Just curious, you don’t have a savings account? Or have only one?

  13. Stock Broker reviewer |  Sep 14, 2007 at 4:01 am

    Just my opinion, but don’t you think you could do essentially the same thing with fewer accounts. It also seems that with more accounts with more companies that it exposes you to a greater chance of being the victim of fraudulent charges.
    Although, I do see that it being much easier today to manage all of those accounts from your computer.

  14. Sun |  Sep 20, 2007 at 3:01 pm

    It’s true that I can essentially do the same thing with fewer accounts and I am actually in the process of reducing the number of accounts I own, especially the online bank accounts and brokerage accounts. The hardest part is the brokerage accounts as each one has its own feature and tax consequences have to be considered as well. Though it’s still at a manageable level so far, having fewer accounts to manage is my goal :)

  15. Keith |  Oct 19, 2007 at 12:58 pm

    Wow that’s an amazingly complicated system you have created. What’s the point of having 3 on-line banks? Why not just pick one on-line bank and consolidate your savings there? Better yet, consolidate everything except your brokerage account with Vanguard and use their money market fund as your back account, assuming your BofA checking account offers on-line bill pay. Personally I have one bank account with Wells Fargo which provides me with free brokerage trades and then all index funds directly with Vanguard with automatic monthly withdrawls and lastly a brokerage account with OptionsXpress. (One could argue that I could even consolidate everthing with Wells Fargo but I still like the “balance of power.”)
    The bottom line is that I really applaud your commitment to savings, it’s just that I would simplify things just to make tracking and rebalancing a lot easier on yourself in the long run.

  16. Sun |  Oct 20, 2007 at 10:07 pm

    Keith: The reason for having multiple bank accounts was that each offered a good rate when I opened the account. As other banks, especially those small players, started to offer online savings accounts with better rates, I sometimes opened accounts with them without closing the old ones. I thought having the old accounts open gives me the option to go back to them should their rates become attractive again. However, that’s almost never the case. Once they lagged, they will never be a leader again. I am in the process of reducing the total number of accounts I have. I have closed two already and will probably close another one soon. As much as I like to use only one account, I still want to get the most of my money. However, I probably won’t get any new account since the difference between rates in the top tier is small. It won’t be worth it if I only have a small amount of cash.

    As for brokerage accounts, it won’t be as simple as just close the account and move the money somewhere else though I could essentially use Zecco for all the trading. But I am not comfortable with them. What’s the benefit of OptionsXpress? I heard of this firm, but don’t know much about it. When I choose a broker, the most I am concerned is commission.

  17. Dave |  Feb 15, 2008 at 3:46 pm

    I have ING Direct for “Electric” Checking and Savings plus HSBC for savings (they usually have a slightly better rate on savings than ING). I have a brick and mortar credit union which usually holds a balance of less than $500 and I use it as my vehicle to deposit checks.

    I use Scottrade for my Roth IRA investment account, 3 years running now. I either pay $17 DODFX or $7 VTV and VWO per trade with a buy and hold philosophy. I buy about 2 or 3 times a year and have never sold. I wish Scottrade would automatically reinvest dividends on ETF’s. They also only pay a measly .42% on cash in the account, though cash has been a nice place to be the past few months. :)