My 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.

A map of Jim's financial network
(Photo credit: Bargaineering.com)

I didn't map my accounts with pictures. Instead, I described the connections with words, starting with the account that collects all of my income:

Business checking account

I have a business checking account at Wells Fargo, a large traditional brick-and-mortar bank. This was not a conscious decision, and is a legacy from the origins of my former computer consulting business.
Currently, all of my income is routed through this account (because all of my income comes from the business). This checking account is used to pay all business expenses, including:

  • Books and magazines
  • Computers, cameras, etc.
  • Meals with readers and colleagues

Most of the time, these expenses are made with a business credit card, which I pay in full at the end of the month.

Personal checking accounts

From time-to-time, I move money from the business account to my personal checking account at the local credit union. This process is not automated. (In fact, none of my infrastructure is automated right now, except for paying a couple of bills, which I'll explain at the end.) To transfer money, I have to write a check to myself and go deposit it.

I have a second checking account at a different credit union, but I rarely use it. I opened this about a year ago because I was intrigued by the chance to earn 5% in a rewards checking account. But the nearest branch is 15 minutes from my house and out of my way. That's a huge passive barrier to using it. I guess what I should do is just put some cash in there and see if I use it enough to qualify for the bonus interest rate.

High-yield online savings account

The bulk of my money sits in a high-yield online savings account at ING Direct. Actually, I have multiple accounts at ING, which I manage from a single screen.

When I have money to save, I move it from my credit union to the appropriate savings account. This is done electronically, but it's not automated. I consider this my main pool of money because it's where I track my progress as I save toward specific goals. I've never actually moved money out of an ING account yet, so I don't know what that process is like.

Credit and debit cards

I carry four pieces of plastic, each of which has its own use.

First, I carry a personal credit card. I lived for nine years without a personal credit card because I had a history of abusing them. But when Kris and I were preparing to travel overseas, GRS readers recommended obtaining Capital One No Hassle Cash Rewards cards for the trip.

Though I was wary about returning to credit, I signed up. Over the past two years, I've used it responsibly, always paying my bill every month, and never buying anything for which I could not pay cash. (Plus the card gives me 1% back on everything I buy!)

I also carry a debit card that is tied to my personal checking account. I use this for any purchase that I cannot (or will not) put on credit. For example, I have a rule that I won't purchase comic books or videogames on credit, so those expenses go on my debit card.

Finally, I have two business credit cards. The first is a Visa from Wells Fargo. It offers no perks, so I try not to use it. The second is the TrueEarnings Business Card from Costco and American Express OPEN, which offers cash back on a variety of purchases. I try to make all of my business purchases with this card, and I really wish I could use it for personal expenses, like fueling the car.

Retirement accounts

I have two retirement accounts. My Roth IRA is through Sharebuilder. I used to make automatic monthly contributions for dollar-cost averaging. Now I make large lump-sum contributions. (And I've considered moving my IRA to Zecco. Can anyone speak to the differences between Zecco and Sharebuilder?)

My main retirement account right now is a Fidelity self-employed 401(k). I love this account because it lets me contribute up to 25% of my income — and I do! Plus it has a huge cap on contributions, which gives me something to aim for. As much as I love Roth IRAs, I've been prioritizing this account lately because it makes the most sense for my situation. I make lump-sum contributions to this, too.

Paperless automation

In my dream world, the connections between all of these accounts (and the bills they each pay) would be both automated and paperless. I've made some progress toward a paperless personal-finance system, but little of my infrastructure is automated at the moment. I have automated payments to a few of my bills (auto insurance, natural gas), but that's it.

Because my finances have been in such a state of flux over the past eighteen months, it's been impossible to automate anything else. One month my income is up; the next month my income is down. We're making accelerated mortgage payments; then we're refinancing. I quit the day job. I'm doing dollar-cost averaging into a Roth IRA; then I'm making lump-sum contributions to a 401(k). And so on. Things keep changing!

I can foresee a time toward the end of 2009 when things will have finally settled down. When this happens, I'll begin to automate the connections between my accounts.

My command center

And how do I track all of this information? I have two primary weapons:

I try to sit down once every week (though lately it's been more like once every three weeks) to scan my financial documents. I convert them to PDF, archive them on my iMac (and to my backup hard drive), and then update all of my bank accounts. I keep tabs on my accounts day-to-day, but I only update Quicken (and QuickBooks for the business) once per week.

Ideally, I would receive only electronic statements. It's nice that I can convert my paper receipts to PDF, but I'd rather receive them that way in the first place. That's something to aim for. Also, I do intend to give another shot at using an online money-management tool. I'm going to start with Wesabe, and if that doesn't meet my needs, I'll try something else.

Final thoughts

Writing this out makes it seem more complicated than it really is. Things are actually fairly streamlined, with only a few weaknesses.

  1. I have two business credit cards. Ideally, I'd have only one. However, American Express is not accepted everywhere that Visa is. This means I have to carry the extra Visa card around to cover the exceptions.
  2. I have checking accounts at two credit unions. Ideally, I'd use only one. If my main credit union offered rewards checking, this choice would be easy. It has branches conveniently located in all of my main stomping grounds.
  3. I would like to consolidate my retirement accounts with one provider. This means I'll probably be moving my Roth IRA from Sharebuilder to Fidelity. The Fidelity self-employed 401(k) is a fantastic product, and I'm not giving it up.

And, of course, I'm eager to automate the connections between these accounts so that I don't have to think about things. (I'd still review each account every week, of course.)

What about you? What are the key components of your financial infrastructure? Do you have accounts that you would recommend to GRS readers? Is your financial network map simple or complex? Do you have accounts that you never used? Have you automated things? Do you plan to? Do you have suggestions on how I could improve my setup?

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DDFD at DivorcedDadFrugalDad
DDFD at DivorcedDadFrugalDad
11 years ago

This is a very interesting approach . . . I have something similar (but not as deep) setup in Excel on different worksheets– makes me want to dig deeper.

Writer's Coin
Writer's Coin
11 years ago

I actually like the idea of doing a little sketch. It gives me a different perspective on things and is kinda fun. Too bad I can’t draw though.

Beth @ Smart Family Tips
Beth @ Smart Family Tips
11 years ago

My husband and I were just talking last night about reorganizing and simplifying our accounts. This would be a good approach to that. We’re looking into money management software — I “handle” most of our money and he’d like to have an easy way to look at our overall money picture. I first thought of Quicken, but have read a lot of good things about YNAB (some former Quicken users seem to prefer it). I’d love to know what other readers use and which software they prefer.

the weakonomist
the weakonomist
11 years ago

I UNautomated many of my transactions last year after a bad experience. No longer can I trust the “machines” to do my work for me. The only thing that is still automated is direct deposit. If my employer forced me to deposit to one account only I’d drop that too. Thankfuly they don’t so my DD goes into 5 different accounts.

nickel
nickel
11 years ago

Where online do you archive your documents? And what all do you archive?

Benjamin
Benjamin
11 years ago

I have all of my savings and checking accounts set up with one bank…USAA. In my opinion USAA is a cut above any other financial institution out there when it comes to customer service, bank features, and finacial products. The one exception being their mortgage division. Their rates and fees come no where near what my local credit union could do. Membership with USAA has traditionally been for officers in the US military, but they have since expanded their membership critieria to 2nd and 3rd generation family members of retired military personnel, as well as former non-retired military members. Its… Read more »

Alison Wiley
Alison Wiley
11 years ago

I like it! Getting the big picture and the flow of anything that we’re doing (or are a part of) is a good thing.

And not everything has to be fun. Lots of things in life we do because it’s the back-stage and the infrastructure (good word you used) of fun. Delayed gratification rocks, whether we’re dealing with money or life in general.

RJ Weiss
RJ Weiss
11 years ago

Self-Employed 401K’s are an amazing option for tax deferral. Probably one of the greatest benefits of being self-employed.

Glad to see you’re using it over other options like SEP’s and SIMPLE’s.

AD
AD
11 years ago

When my husband and I got married, I tried keeping up with his accounts and mine as we were trying to pay debt and save money. But 2 checking accounts, 2 money market accounts, and seven credit cards was just too much to track. We paid off all of the cards, closed two CCs with low credit lines and short history, closed his bank account and moved him to mine (a credit union), and opened up joint ING accounts. So now we use only one credit card and we have a checking account, Roths, my 403b, and our ING accounts… Read more »

Baker
Baker
11 years ago

First, great job with the show yesterday. I appreciated you taking my call and thought it was awesome they let you extend it 30 minutes on the spot! This article really hit home because I know that everyone needs to do this type of mapping every quarter or so. For me, I try to simplify my accounts and infrastructure as much as possible. I don’t like the business credit card though, because for me (especially online books etc…) I always find my-self drawn to spend over 1% more on a credit card than I would on a debit card that… Read more »

J.D.
J.D.
11 years ago

@Nickel Oops. “Online” is a mis-statement. I merely meant on the computer. I’m going to change the text of the article to reflect that. I use sneakernet to archive my files and documents. That is, I don’t archive them online; I archive them on an external hard drive. Kris and I recently purchased a small safe (which was far less expensive than I had anticipated), and I keep the external hard drive stored there. Once a week, I pull out the hard drive and back up my data, including the scanned documents and the files from Quicken and QuickBooks. All… Read more »

Alan Schram
Alan Schram
11 years ago

Automation is a beautiful thing. I have everything except one bill automated, and it only comes every two months. I like to sit back and watch as my income filters itself into bills and savings without me having to force myself to save.

JD, how long do you keep your statements, receipts, etc? After you back them up electronically, do you get rid of the paper version, or store them as well?

Lisa
Lisa
11 years ago

I use Advantis CU in Portland, but live in CA. I don’t have a bank down here. My paychecks are direct deposited and any other checks received throughout the month are mailed to the bank for deposit. Haven’t had a need to step foot in a bank in 10 years.

J.D.
J.D.
11 years ago

@Alan (#12)
I keep business documents indefinitely. I immediately shred non-business documents, except those that are most important (such as re-finance docs or tax docs).

E. Smith
E. Smith
11 years ago

I have to concur with Benjamin’s comments on USAA. What a refreshing company. Great website tools. Great service. Great rates.

If you have a number of different financial institutions, retirement accounts, etc. – try using mint.com so you can view all accounts on a single screen. It’s free and easy to use.

Tim
Tim
11 years ago

I have to second the USAA site. I have a checking, savings, 2 credit cards, debit card, Roth IRA, trading account, Home Insurance, Car Insurance, Personal Property Insurance, and home loan through USAA. Other than the home loan all other accounts are viewable via one page. I can automate all transactions so I never have to manually make a payment, this includes the credit cards to pay the balance with each statement. Sounds petty but it is good cash management to pay on the due date versus a few days early. My families 401k’s are much more disjointed as they… Read more »

chris
chris
11 years ago

Great article! My finance/investment strategy professor in grad school made us do this for our final exam. I thought it was a different idea for a final (which I preferred since it was take-home). He wanted us to do this so that we could see the big picture while working at the macro level as well. He said he wished he had done this when he was younger (he is currently approaching retirement but has been very successful). After the exam at the end of class, I can honestly say that of all the exams this has had the biggest… Read more »

Paul in cAshburn
Paul in cAshburn
11 years ago

JD, everything I read about financial management software (Quicken, MS Money) leads me to believe it won’t do everything I want to do. In order to gain access to higher-powered software, I’d like to hire a fee-only NAPFA advisor who is also trained by Ed Slott on IRAs. Neither Ed Slott’s folks nor NAPFA keeps cross-references… So, I have no advisor. Have you ever done an article on fee-only advisor successes and failures regarding software interface with the advisor? If I could find an advisor who had good software, they’d have a customer for life. By good software I mean:… Read more »

jgoforth
jgoforth
11 years ago

I have recently moved to a fairly complicated financial map because it helps me stay more organized. I have automated almost all of it with the main exception of having to manually pay the balance on my credit card each month. One thing that I did recently that is really helping me is opening a second checking account for the sole purpose of paying my regular automated bills. The problem I was having was knowing exactly how much uncommitted cash I had left at any one time because most of my bills were paid near the beginning of the month,… Read more »

Matthew
Matthew
11 years ago

I don’t automate much, because otherwise I won’t keep track of things. But I do like to do everything from home, which is why my Etrade account is the hub for everything. Each month my paycheck goes into it, and I transfer out my budget for the month to the credit union, where I pay my bills. A second transfer from the Etrade account goes into my IRA (that’s the automated bit), and I stay well below the transaction limit on the account. I haven’t actually been to the credit union in ages, since I moved and there’s another one… Read more »

Kevin
Kevin
11 years ago

JD – scanning all your documents seems like an extra step. I get all my bills except water/sewer emailed to me or accessed through online banking where I can print them to a PDF and file in my folder called “File Cabinet” where I have subfolders for everything I need. Good idea on the infrastructure sketch though – I’m going to fire that up tonight.

Hooked on Economics
Hooked on Economics
11 years ago

I’m Canadian, and I have to say that I’m a little jealous of all the options available to my American neighbours. Of course, part of the problem is that most of the information I take in through blogs and articles comes from the U.S., so I probably don’t even know what I’m missing. Don’t tell anyone, but I’ve been with my credit union since I first opened an account (probably around age 12) and have somehow managed to fly under the radar enough that at age 26 I still use my youth account, which charges minimal fees. I don’t get… Read more »

Michael
Michael
11 years ago

This site must be running out of material. Long time reader but now its the “infastructure” map? How many angles can we really take looking at personal finance?

michele
michele
11 years ago

I Like the map. I have everything automated. I use my credit union online bill pay for free. Most of my bills are paid that way. The bills that have set rates, even the ones like car insurance 2x per year, and trash pick up which is quarterly. The bills like cell phone that fluctuate are withdrawn from my provider. The way I keep track is on my outlook calendar. I just did recurring appoitments to show when everything is being deducted and paychecks deposited. I only show base pay (no overtime)as being deposited on my calendar. By using the… Read more »

db
db
11 years ago

JD —

Do you happen to know — if you are employed traditionally and have a 401(k) with an employer, but also set up a personal side business (which you’re working on eventually turning into your full-time business) —

Can you also have one of those Fidelity self-employed 401(k)s? For your earnings from the side business?

Shara
Shara
11 years ago

My organization is in a state of flux. I had a credit card that paid 2% back on my mortgage, but the bank association between the CC and the lender was dissolved this month. So I’m looking at possible other reward cards. That may turn into two (one for gas/groceries and one for everything else). I put everything on that card then broke each purchase out by category to track against my budget. But that won’t work anymore. I am definitely going to use that chart and file it with my other money stuff. I take care of all $… Read more »

Laurie
Laurie
11 years ago

I also recently UNautomated all of my accounts. It was part of the process that also led me here, a get on top of my personal finances. Two months ago I didn’t know how much money I made a month, or even a paycheck. Everything was automated and had been for about 5 years. Then I got a notice in the mail that I had bounced a check. It is a good thing it came in the physical mailbox, otherwise I might have paid as little attention to it as everything else. Now I still use e-statements and online bill… Read more »

trynian
trynian
11 years ago

@Paul: have you taken a look at flexibleretirementplanner.com? Sounds like it has a lot of what you need, and it’s free. I’d like for it to be even *more* flexible, so I could run Monte Carlo simulations on e.g. saving for college, but then I suppose it wouldn’t be a retirement planner. 😉

Dan
Dan
11 years ago

J.D., One huge suggestion I would make, because it’s something I do and I feel helps me manage my bills which are almost all automated, is open a checking account out of which JUST your bills are paid. Use automated debiting which almost all billers offer these days, or if you’re not comfortable with that, or if it’s not offered, then use online bill pay through your bank. Because I have Wachovia and have been researching Wells Fargo, I know WF offers it. I keep a spreadsheet every month with the amounts of my bills, then have my paycheck automatically… Read more »

nickel
nickel
11 years ago

JD: You might also consider Amazon S3. Several Mac ftp clients can handle the S3 protocol (e.g., Interarchy and possibly Transmit) so you can just drag and drop to their servers. Totally redundant. As close to fail-safe as you can probably get, and it’s off-site. Pretty cheap, too, if you’re not storing massive amounts of data.

Des
Des
11 years ago

I can speak to the differences between Sharebuilder and Zecco, I have used both quite a bit. It really comes down to cost and interface. Sharebuilder is very easy to use, and it interfaces with ING nicely. If you’re only buying shares automatically every Tuesday, its only $4, but I think its $10 if you do any real time trades. Zecco’s interface is not intuitive AT ALL, but its cheap. $4.50 a trade, and some are free if you meet certain conditions ($25k in your account gets you 10 free trades a month. I prefer (and have switched to) Zecco… Read more »

Ian
Ian
11 years ago

I use quicken as well, and don’t know how I would get on without it. I used to update accounts every few weeks. Waiting that long seemed to much like a chore. Also, I noticed that there were gaps in downloaded transactions if I waited to long to update. About a year ago, I started updating and entering transactions every morning. It takes less than 10 minutes and everything is always extremely accurate and up to date. I know to the penny how much I have at all times. I would encourage everyone who uses quicken or some auto-money software… Read more »

J.D.
J.D.
11 years ago

@Michael (#23) I’m sorry you found this topic unworthy of a post. I thought it was interesting, and that’s why I wrote about it. I think this is something each of us should do. Not every post can appeal to every reader. Hopefully tomorrow or Thursday will be more to your taste. (And no, I’m not running out of material!) @Dan (#29) Thanks for the suggestion. I think this is another topic that Jim at Bargaineering has written about. I like the idea. I do have an unused Electric Orange checking account at ING Direct, so theoretically I could use… Read more »

Courtney
Courtney
11 years ago

JD, here’s some info about withdrawing from ING: Although you can very easily use ING’s website to transfer money from your ING account to a linked bank account, for some reason ING won’t even report it to your bank until two business days later. In my case I requested a transfer of $10,000 around midnight last night and I got a message that it would not go through until March 25th. Then who knows how long it will take for my money to actually make it into the bank account? I will keep you posted on how long the whole… Read more »

Chett
Chett
11 years ago

To continue the USAA discussion, they also will open accounts for enlisted vets. I have my car, insurance through USAA and also have my life insurance through them. A 20 year term for $300,000 for $18.00 a month. I’m sure there are probably some better rates out there, but not with a company I trust as much as them.

R. L.
R. L.
11 years ago

USAA is the best. I’ve been with them for 25 years on insurance and they have great service. I just wish they paid more in interest on savings accounts. So I have an acct with FNBO. As I move towards investing more money I would have a preference for the organization also providing a great rate for a simple savings account. Seems like the big guys like Vanguard and Fidelity would see that it would be a great way to lure people in/grant entry to their investment funds.

Debbie M
Debbie M
11 years ago

One company has my mortgage and my rewards cards–they are slime, but they bought my mortgage and they have the best rewards. My credit union is not slime and has my checking account, a $500 savings account (good for instant access in emergencies) and my credit card with the good interest rate (which I haven’t used in years and years, but it’s good to have one of these, and it’s one of my oldest credit cards). Connected to to my credit union are my online savings accounts, one or two of which I should close. I’m keeping ING in case… Read more »

Slinky
Slinky
11 years ago

My set up is very simple. Credit Union Checking – Homebase for everything. Paychecks go in, savings and bills go out. Earns a small amount of interest. Savings – Money for bills that are semi annually, bimonthly, etc. CDs – These hold my emergency fund. Early withdrawal penalties are such that I will never forfeit principle except in the first 7 days of the term. ING Savings – various small savings goals that are too small to open a cd for. Funded from my CU checking account. M&I 401k – My company’s 401k provider, automatically deducted from paychecks HSA –… Read more »

Dan
Dan
11 years ago

ING works great for an emergency fund if you also have an ING Checking account. Money transferred between ING accounts is available immediately.

My car unexpectedly overheated and I had to replace the radiator. I was able to transfer from my ING emergency fund to ING checking and pay the mechanic without any waiting.

Kathryn
Kathryn
11 years ago

Wow – writing it out really does make it look complicated even as it simplifies it. It’s good to get this kind of visual, though. I’ll have to see if I’m brave enough to tackle this for my own finances.

Chris from St. Mary's
Chris from St. Mary's
11 years ago

Are you sure you haven’t discussed this on your blog before? That diagram of Jim’s looks familiar … I thought I saw it here. That might have been Michael (#23)’s point.

Leanne
Leanne
11 years ago

I’ve been using ING for “envelopes” savings/budgeting, and have transferred money back to my main credit union account. It’s very easy, especially since all the things I’m paying out of the ING account are planned expenses… so I know when they’re coming up. I just schedule the transfer two days ahead of when I actually need it in my CU checking account, and it all works out.

Marc
Marc
11 years ago

4 accounts (2 banks), and 2 credit cards: Bank #1 (Bank of America) ‘Fun Money’ Account (Checking Acct) Regular Bills Account (Checking Acct) BoA likes to charge for its savings account so I only keep checking accounts with them. Bank #2 (Wachovia) Huge/Irregular Bills Account (Car insurance, Eye care etc) 6 Months of Wealth Account (Savings Acct) Credit Cards BoA Credit Card – I use this in conjunction with the Regular Bills account and pay it off at the end of the month CapitalOne Card – The original plan was to do a balance transfer (when I had maxed out… Read more »

Liz
Liz
11 years ago

I’m good at organizing the person finances. However, I would love a post on how to organize all the various 401K’s from past employers. I have no idea whether to consolidate them all to my current employer or roll them all into a IRA.

Great post. I am going to make my map this evening!

Lynne
Lynne
11 years ago

I use an ING checking account for direct deposit and several ING savings accounts. In the very rare cases when I need to write a check I move money to the linked checking account – I have done this many times and there is a slight delay of a couple of days but otherwise there are no issues. I use ING free bill pay for the bills that are not automatically deducted. To help keep track that there is enough money in my checking account for the automatic deductions I use the bill reminder feature in Quicken. It can be… Read more »

partgypsy
partgypsy
11 years ago

The biggest thing I wanted to do this year was make both payments and savings more automatic. But a couple weeks ago I was paying some big bills and cutting it very close, to close in fact because I had forgotten to take in account a couple automatic bill pays which went through and made us in the red. I found out on a Saturday. I quickly transferred money from my electronic emergency savings to my regular checking. My GMAC account recently changed from a money market to a savings account, and that’s when I found out transferring money would… Read more »

J.D.
J.D.
11 years ago

@Chris (#41)
Ah. I get it. You guys think this might be a re-run. I do think I pointed to this from a links round-up, but I’ve never actually written about my own infrastructure before.

CentsInTheCity
CentsInTheCity
11 years ago

I have almost everything automated. My paycheck goes directly into my checking account. From there I have automatic deposits set up for my ING accounts. My ING is set to automatically deposit to my Vanguard Roth IRA target retirement. Every few months I also make a larger manual transfer from ING to Vanguard into other funds that I’m interested in. My 401k is automatically removed from my paycheck. I have a rollover IRA I do not touch, since I can’t add new money to it. I have one credit card that I use 99% of the time. If for some… Read more »

Leslie
Leslie
11 years ago

I think our set up is reasonably straight forward. We will see how I feel after I write it out… Main Checking account – with a regular Brick and Mortar bank (BB&T). This is sort of the central hub of it all. Mortgage – actually with the same bank although that was not necessarily planned. Our original mortgage was with them and we just refinanced with them for the third time. Had the same rate as the CU and lower fees. Savings – Like JD I have several named savings accounts at ING. I have an emergency fund, house taxes… Read more »

Marc
Marc
11 years ago

@ J.D.

Currently listening to the radio show. You should do a post called:

“The $1500 frisbee”

I think a lot of people would love the story behind the frisbee and your bank account in college.

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