I have a stranglehold on my finances.
I’m not saying I earn my dream salary or always pick the best investments, nope.
But I have developed a money management system that I feel great about.
This system has enabled me to start on the path toward achieving my financial dreams. My hope is that it can help you too.
Managing personal finances can either be a total bore or a lot of fun. How much fun you have (or boredom you endure) is entirely dependent on the services you choose.
Through years of experimentation, I’ve landed on 4 core services. Each has a killer user experience.
The best part? I do it all on my phone.
What are these magical services?
Here's an overview.
Simple Bank is my command center. Income arrives and is automatically portioned out into different buckets for expenses, investment, and goals. This takes guesswork out of paying for expenses, saving up for things, or knowing how much I can spend this weekend.
Wealthfront, a robo-advisor, allows me to automate my investments at a low cost across a diversified portfolio that is constantly optimizing itself.
Mint is where I do my money analysis. Where am I spending? Am I being responsible? Am I on track to achieve my financial goals?
Google sheets is my reference point. I look to a basic, single sheet to set everything up
Here's the whole family. Isn’t it a beautiful bunch?
The Best Bank - Simple Bank
I am of firm belief that Simple bank is the best bank for majority of people.
It’s a totally online service with an incredible phone app. Simple Bank is the single biggest reason why I feel in control of my finances.
Here’s my favorite feature. Unlike the big Banks, that keep your money in one giant account (or bucket), Simple allows you to divvy up your money into as many buckets as you want.
This is extremely handy for saving towards goals or paying recurring expenses.
You can even create buckets that automatically set aside income, taking the chore out of budgeting and saving.
There are two types of buckets in Simple: Goals and Expenses.
Expense buckets are geared toward recurring payments.
Goal buckets are geared toward saving up a single amount by a specific date
Each have their own tab in the app. It takes about 30 seconds to set one up.
Below you’ll see an example expense bucket that I set up to automatically set aside income and pay for a Rent/Mortgage bill.
Goal buckets are similar to expense buckets but are geared towards saving a specific dollar amount, by a specific date. Simple does the hard work by contributing set amounts towards that goal on a set schedule. Here is a short video that showcases creating a goal:
After my income is automatically divvied into expenses or goals, a small amount will remain in my “Safe-to-Spend” category which is always viewable at the top of the Simple app.
The “Safe-to-Spend” category exists for me to have confidence in knowing how much I can spend without ruining my ability to pay for expenses or achieving my goals.
For example, if I only have $25 left in my safe to spend and I want to go to the movies, I know with confidence that I can purchase a movie ticket without derailing my financial plans.
Here is a chart outlining safe-to-spend, goals, and expenses in Simple Bank.
Hopefully that all makes sense. Safe-to-spend is a fantastic feature.
Signing up For Simple
Simple is totally free and includes single debit card linked to your account. If you have a significant other, you can open a Shared Account (with a separate “Shared” debit card) in literally a few clicks.
There are no physical simple bank locations that you can walk into, but their app and customer service is incredible.
A few other reasons why I love Simple Bank:
Zero fees (It’s actually impossible to get a fee on Simple)
Transactions appear instantly and allow you to add notes or entirely change the transaction name
Customer service can be contacted via chat service in the app. It’s like texting your bank if your bank was a friendly, helpful companion.
You earn up to 2.02% APY interest on savings (30X the national average interest rate)
They have a massive network of ATMs (mostly the ones you find in gas stations, convenience stores, and bars)
It’s just Simple! Example - you can copy/paste routing and account numbers in a few taps on your phone, it’s plainly laid out in the app. Think about the last time you had to pull out a blank check to to find those numbers (who even uses checks anyway...)
Calculating the Buckets
Now before you go switching to Simple, let’s get back to the system here. I use Google sheets to calculate the buckets mentioned above.
These buckets fall in the following categories:
Fixed Expenses: Rent/Mortgage, Car Payment, Insurance etc
Variable Expenses: gas, food, groceries, utilities
Savings: I personally treat savings as a percentage of my income, others use a fixed amount
Goals: Either fixed amounts when I need to save for something specific (a vacation) or a percentage of income allocated toward a bigger picture goal
Investment: a bucket where I collect money I intend to invest
Safe-to-spend: The amount of money I have on hand that I know I can spend without derailing my financial goals or eating into my living expenses.
Here is what my google sheet looks like. It’s pretty much a drastically simplified personal income statement.
Very basic, but it’s just what I need to stay on track and set up my buckets in Simple.
Here is a copy of my sheet that you can fill out for yourself. There are step by step instructions directly below the table which outline how to complete the table)
I find it valuable to see numbers based on weekly, bi-weekly, monthly and yearly period. Keep in mind that there are 4.34 weeks in a month and 52.14 weeks in a year (that formula is already implemented in the sheet).
After filling out the Personal Income Statement, you’ll have a beautiful overview of your finances across the week, month and year.
Wealthfront is where I invest. Now understand this, there are millions of places you can invest a dollar, but every good investor can agree on one thing: to successfully invest over the long term, a diversified portfolio is the only way to go. (If you aren’t super familiar with diversification, here’s a great Investopedia article)
Wealthfront gives you a diversified portfolio in an instant and automatically helps you reduce risk, fees, and taxes.
It’s a fairly new type of service known as a ‘robo-advisor’, which is a company that uses technology to manage your money where an expensive portfolio manager would be required in the past.
There are actually quite a few other robo-advisors out there so before choosing Wealthfront, I’d encourage you to do your own research and decide which is right for you. This Nerdwallet article is a great place to start.
I chose Wealthfront years ago for a few reasons:
I only needed $500 to open an account (some of other services required much more)
The management fee is .25% (this fee is on the low end)
I am a big fan of the brand/blog/website. I even read their massive white paper which explains their Investment Methodology
Wealthfront offers both Personal investment accounts (regular taxable brokerage accounts) and retirement account options (IRAs). I currently have a Roth IRA and personal investment account.
One of my favorite Wealthfront features is recurring deposits. By setting up a recurring deposit, I can tell Wealthfront to pull set dollar amount from my bank account, and invest it across my diversified portfolio on a weekly, bi-weekly or monthly basis. I use a Simple Expense bucket to automatically set aside income for Wealthfront’s recurring deposit.
Here is exactly how that works.
It’s almost as if Simple and Wealthfront were made for each other, financial service soulmates.
If you aren’t currently investing and are looking of a straightforward service that is cost-effective, easy, and transparent - check out Wealthfront or another robo-advisor.
Money Analysis in Mint
Mint is a powerful money management tool with loads of great features. It allows you to link all of your financial accounts to be viewed simultaneously. I primarily use it for budget setting and spending analysis.
I set my budgets in Mint (and not Simple) because most of my spending is done on a credit card that I pay off each month (gotta earn those airline miles).
If I set up my budgets as expenses buckets in Simple, they wouldn't update live, as my credit card swipes wouldn’t subtract from the expense bucket in real time. Mint solves this problem by allowing me to set budgets that work with my credit and debit card, as Mint can take multiple accounts into consideration.
For example, I keep a monthly food budget. If I were to use any of my cards (credit or debit) for buying food the transaction would appear in Mint and automatically subtract the amount from my monthly budget.
This is very handy for keeping an eye on your spending to know where you stand during a particular month. At any moment I can pull up Mint, and see how much money I’ve spent towards my food & dining budget.
Mint generally does a good job of categorizing transactions and automatically applying them towards budgets. On the rare occasion that Mint doesn’t know how to categorize a transaction, you are given the ability to set rules. This is super handy as it allows you to classify a transaction once. Moving forward, Mint will remember how you previously categorized that specific transaction, by recognizing the business it came from, and stick to that logic.
Another area of Mint that I find myself using on web often is Trends. Trends automatically creates charts to help you analyze spending, income, net worth, and net income (income minus expenses). To make these charts without Mint would take hours. It’s silly not to sign up, link all your accounts and get some seriously precise insight into your finances over whatever period you so choose.
Budgets and trends are just scratching the surface of what’s possible with Mint, you may find other features to help you control and visualize your finances with confidence.
Here is one final diagram with step by step instructions on how to implement my suggestions.
I’ve also included a list of links below.
And those same instructions again with links 😃
Make a copy of The Personal Income Statement Google Sheet, change the different sections to include your income, expenses, and goals.
Get a Simple Bank account, create Goals or Expense buckets that mirror what is on your Google sheet.
Consider opening an account on Wealthfront (or another Robo-advisor)
Set up a recurring deposit to pull from an Expense bucket in Simple.
Get signed up on Mint.com, link your accounts, set budgets, and get a great summary of your finances with trends.
Get all of these services’ fantastic phone apps so you can be a mobile money master!
And that’s my system.
If what I described doesn’t satisfy your needs, I’d encourage you to consider your own unique goals and develop your own approach. Please do let me know what you come up with.
Thank you very much for reading my blog post. If you’ve made it this far, it means a lot to me.
I spent around 50 hours writing this article and creating the supporting content. Want to thank me?
If you intend to sign up for Simple or Wealthfront, use my referral links. What'll happen? Simple will send us each $20 when you first swipe your new debit card. Wealthfront will waive fees on an additional $5,000 for us both when you initially add funds to your account.
On using the web: I keep a single bookmarks of each app’s website in a folder in my Chrome Browser Bar. This allows me to [CMD+CLICK] on that folder and simultaneously open the login page of each service. Once they open, LastPass pre-fills each password so all I have to do is click the ‘Login’ button. It’s a thing of beauty.
*I’m using Google Chrome browser on Mac, but I’m sure this is possible in other browsers on other operating systems
On how these apps make money:
Simple: Net Margin Interest (Simple using your money to create loans), Interchange (Stores and merchants paying debit transaction fees)
Wealthfront & other Robo-advisors: monthly management fee (see Nerdwallet Article)
Mint: Ads, revenue based on referrals made to financial institutions, products or credit cards
Caveats: My approach has a few assumptions that I didn’t include above for the sake of simplicity.
Safe-to-spend is really discretionary income portioned off into a “fun money” section. It exists only in my Simple Bank account, which assumes I’ll only make purchases outside of my set expenses/budgets on my Simple debit card. I prefer this spending “fun money” on my debit card anyway but if you plan to use your credit card for fun money/discretionary income purchases, safe-to-spend won’t give you a live, up to date view. For that you’ll need to set up a budget in Mint.
While I do preach that Expense and Goal buckets are “fully automated” I do often check balances and login to my accounts (on my phone) to make sure everything looks correct. I’d encourage you to do the same (plus it’s pretty empowering to see the system at work).
The automation of this system is entirely dependent upon using Simple Bank. I strongly encourage everyone I know to sign up for Simple as I know that it has features available in no other bank app. However, it’s only limitation is the inability to deposit cash. This isn’t a problem for me, but you handle a lot of cash/get tips, I’m sure it’d be a pain. You can however use a Money Order to deposit cash.
Disclaimer: Any decision you make as a result of this reading this article or talking/messaging with me is your own decision. I will take no responsibility for any actions related to how you manage your finances after reading this blog post.