Creating a system to manage all of my personal finances
I’m in my early twenties and currently have a Wells Fargo checking account which is where I receive payment from work as well as a WF savings account where I regularly deposit unused funds. I have a TD Ameritrade account where I deposit 25% of my monthly income and have an active growing portfolio. I also have a coinbase wallet where I regularly purchase small amounts of crypto. I will likely start using more complex crypto trading tools which support more obscure coins in the near future. I have a WF student credit card from college that I don’t use anymore, and I recently acquired a USAA credit card (military, so I use it for gas and on base for various small purchases) and an Amex credit card (groceries and monthly bills which are thankfully few and far between). I’ve been planning to switch from WF as my primary bank for a long time and I’m finally about to do it, although I’m still deciding on which bank to use (this will depend on the answer to the question I’m about to pose as well as the available APYs). My question is how do I fix/organize this extremely convoluted system of perpetual transfers between different accounts so that I can just have one central account that all my income flows out of after I get paid? Do I need to start using a checking account associated with one of my credit cards? Do I need to use a bank account associated with my brokerage account e.g. switch from TD Ameritrade to Schwab or some other institution that provides both competitive banking services and investing? Is there an app or online bank that would best resolve this? I just want to be able to keep track of where all my money is coming and going with relative ease and right now that’s not the case.
Posted Dec 13, 2020, 3:20 PM UTC
My first two notes are gonna be: you missed the crypto hype train by like 5 years, and I hope that investment account at TD Ameritrade is flowing into a Roth or Trad IRA to pick up the tax advantage. If it's not, prioritize tax advantaged accounts first (401k, IRA) over taxable investing.
Here's how I operate my account flow, which might work well for you. I have one checking account, which contains 2 months worth of bills in it at all times and is obviously where my pay check is set to direct deposit. One high yield savings account contains an additional 4 months of expenses, earning some (albeit piddly) interest while it sits there being liquid. I have one primary credit card, a cash back rewards card, that I use for literally everything that doesn't have a fee associated with use of credit cards. My statement balance is always set to auto-pay from my checking account, and so is everything else that would've had a fee for using the credit card (i.e. Rent).
Investments flow out of my checking account automatically to my Roth IRA at $500 a month to max it out annually. 401k matching contributions come straight out of my paycheck, pre-tax.
Literally everything just runs itself and I never have to touch it, beyond periodically checking for fraud alerts.
Thanks for the reply, I really appreciate it. To your first point, I did miss the hype train but over the past year or so all the major coins with the exception of maybe LTC have continued to experience steady growth so I think there are still smaller profits to be made. In any case, I don’t put too much into cryptos but given my age I try to be somewhat aggressive with the smaller sums that I do invest and I plan to continue to do so as I better understand the technology underlying different coins.
Regarding the TD Ameritrade account, I have a Roth TSP to which I contribute 10% of each paycheck. However, the account is setup through my employer, which matches my contribution up to 5% (i.e. I receive 15% of each paycheck in contributions to the account but only actually “pay” 10% of each paycheck) and I’m not sure if it’s even possible to link my brokerage account to it. Should I open a separate Roth IRA on my own and figure out how to link it so that profits from the TD account flow into it?
As for your checking and savings accounts, are they through the same bank or does that not matter. That is, are transfers from a checking account at one institution to a savings/money market account at another problematic? Also, now that you mention it I should probably make sure that I’m not over contributing to my Roth TSP as the max is $19.5k annually.
Fair enough, but it'd be remiss if we didn't warn you about the volatility of crypto. Take BitCoin for example, some people made millions, some people lost it all. I prefer the steady gains of a passively managed, broad market index fund.
Oh good, I'm familiar with TSP since my brother is Air Force. If you like TD Ameritrade, you can definitely also open up and max out an IRA.
Complete misnomer of how the cash flow works. A) You contribute to the TSP and/or IRA. B) The profits grow inside those accounts, creating interest compounding. The money never changes account distribution while it grows, it's all in the same bucket once it's there.
My checking and savings accounts are indeed at different banks, because my savings account offers a better interest rate. I've never had issues with fund transfers.
Okay yeah I completely misunderstood the relationship between a brokerage account and an IRA. So basically my current investment portfolio would remain totally independent from any IRA I set up through TD Ameritrade? Thanks again.
Correct!