How Do I Manage My Money? December 5, 2009

Sometimes I wonder how other people manage their money. I figured I would throw my own way out into the wild and see how it compares to your way. Below I have listed the various ways I deal with earning money and spending money.

Paychecks

I have a percentage of my paycheck directly deposited into my checking account. I have the remaining percentage directly deposited into my high interest savings account at ING DIRECT.

Retirement

401k doesn’t have matching so I don’t contribute to it. Instead, I have a Roth IRA at Fidelity which pulls a fixed amount from my checking account once a month. For tax reasons it doesn’t make sense for me to contribute to my old Traditional IRA.

Other IncomeI continually work to figure out ways to diversify my income streams. Two years ago I had no idea how to make money from anything, but a paycheck and some small dividend and interest income. Side work, web site ads, etc. are some of the ways I’ve found and I try to keep this money separated from my normal day job income. I like to think of it as a bonus and try to save it in a separate savings account and watch it grow. (Of course, it also helps at the end of the year when I figure out taxes which, by the way, are way too high. Sure would love a consumption tax)

Bills

I auto pay or charge almost all the bills I can so I can essentially consolidate multiple bills (gas, electric, cable, phone) into one (credit card). This saves me time every month and saves paper and stamps, too. I don’t like anyone automatically pulling money from my savings account, but I do that too in some cases where it reduces my interest rate (like on a federal student loan). I put entries/reminders in my Google Calendar so I can make sure I always have enough money in my checking account depending on when bills are due and when paychecks get deposited.

Tracking Wealth

Net worth is a great way for tracking if you’re getting richer or poorer. Take all your savings, the value of your car and other assets, and then subtract all your debt like loans, outstanding bills, and perhaps even future tax you’ll own on your 401K/IRA– this is your net worth. I use services like FullView and Mint to track this net worth. Lately, with the economy going to hell, I’ve watched this number suffer, but since I’m not one to put all my money in the market it hasn’t been as obscene as what others have seen. The trick to become rich is to grow your net worth– remember that.

Research

There are always new ways to handle your money and many times they are worth ignoring! It wasn’t long ago there were special funds being set up to invest in real estate loans– they were diversified in risk and high yielding– too bad they were all sub prime loans that even the bank was going to lose money on. Be suspicious of new investment and savings ideas (including any I’ve listed here that may be new to you). Don’t take anyone’s advice as gospel, but figure out what you’re really comfortable with in the long run.

Final Thoughts

It’s important to remember that there is not exactly a right or wrong way to manage your money. Just decide to start trying to put together a system that works for you keep at it!

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