This article originally appeared in our monthly newsletter, Fiscal Therapy.
Please subscribe if you'd like to receive similar articles on a monthly basis.
WHAT I’M THINKING ABOUT:
TOOLS FOR FINANCIAL HEALTH
In honor of Batman’s 80th anniversary, today we’re going to take a look at the essential and everyday tools that should fill your financial utility belt. Below are my top recommendations on everything from bank and investment accounts to apps and online platforms to track your finances.
Savings and Checking Accounts
Capital One 360 and Barclays. For new high-yield savings accounts, Capital One 360 and Barclays are two options that currently pay around 2% annually. They also allow you to open multiple accounts so you can keep your cash organized according to goal (like emergency savings, down payment savings, retirement, baby savings, vacation fund), which I highly recommend doing. Both banks have convenient online tools for easy transfers, and neither bank has monthly fees or account minimums for their savings accounts. Capital One is also great for checking accounts.
Newcomers to consider: Betterment and Wealthfront have recently launched high-yield savings accounts which are also worth a look, especially if you’re already using either robo-advisor for investing. As an added bonus, Betterment offers a two-way sweep feature between your Betterment savings and your linked checking account to help earn you more on your excess cash.
Banks are highly competitive for your cash in the current environment of falling interest rates, so the best rate around will vary. For most up to date comparisons you can check out NerdWallet.
Investment Accounts
I’m a big fan of robo-advisors, and my recommended pick is Betterment. For a modest fee (0.25% annually), Betterment automatically invests your money in low-cost index funds and rebalances your portfolio, all according to criteria you define — a time-efficient and cost-efficient solution for investing. The platform even does some tax-loss harvesting for you each year, potentially saving you some money on taxes. All in all, Betterment is a solid solution for pre-retirement investors.
Expense Tracking and Spending Awareness
Having control over your money begins with spending awareness, and my favorite expense-tracking tool remains Mint. I’ve used it with clients and personally for years. It takes some effort to get all your accounts linked and your categories set up, but once you do, the ability to accurately see your spending by category is powerful.
For tips on getting the most out of Mint, check out my articles on best practices for using Mint as well as how to stick to your budget using Mint.
As far as tracking your investments and net worth, I don’t recommend using an app that encourages you to check in daily. If you’re investing for the long term — which I do recommend — checking your portfolio performance daily (or even weekly) is an unnecessary and unhelpful attention sink. Log into your investment accounts no more than a few times a year and keep the long view in mind.
Budgeting and Planning Your Finances
Tech tools in the personal finance space have exploded in recent years, but they still haven’t supplanted a good old spreadsheet. For budgeting and tracking net worth and financial goals, the simplicity, flexibility, and customizability of a spreadsheet can’t be beat. I recommend Google Sheets because it’s free and provides easy collaboration. (Google already has all your data, anyway.)
And don’t worry, you don’t have to start from a blank spreadsheet. There are plenty of templates out there for all your personal finance needs, including my templates for a cash flow plan (AKA a budget), financial goals, and net worth. (You can upload the Excel spreadsheets to Google Drive and then convert to a Google Sheet.)
Credit Cards
When it comes to credit cards, the absolutely most important thing is to pay them off every month. Monthly interest on your credit card balance will quickly dwarf any perks you’re getting from the card.
Once you’ve got that down, you can think through the card benefits. Everyone’s preferences and circumstances are different, and there’s a card out there for just about everyone, but here are some solid options:
Amazon Prime Rewards Visa Signature. If you regularly order from Amazon, then it’s a no-brainer to sign up for Prime ($119 annually), enjoy the free shipping, and sign up for the credit card and its 5% back on all Amazon orders. Just be careful you don’t start ordering more stuff you don’t need.
Chase Ultimate Rewards. To rack up points you can convert to airline miles, a good option for most people is a combination of Chase cards that can earn Chase Ultimate Reward points. Others have helpfully written at length about these combinations — such as here and here — but a solid two-card combination I recommend is the Chase Sapphire Reserve and the Chase Freedom Unlimited.
Citi Double Cash. There’s a lot to say for simplicity. If you’re not interested in spending hours deciphering the rules of your rewards points and frequent flier miles, transferring to airline partners, and sitting on hold with customer service representatives, then a simple, no-fee, cash-back card may be for you. Currently, the best flat-rate cash back card is the Citi Double Cash Card (though check in with the Points Guy for any updates).
Life Insurance
It's becoming easier to get life insurance online, and my two picks are Haven Life and PolicyGenius. If you're in good health currently and have a clean medical history, you can get term life insurance quickly through these two platforms. (PolicyGenius also offers other types of insurance policies as well.) For those who prefer having the guidance and personal touch of an insurance professional, seek out an independent agent. (I do recommend going this route for more complex policies, like long-term disability or if your medical history has complications.)
Renters Insurance
For renters insurance (which I absolutely recommend), check out PolicyGenius as well as Lemonade. Both platforms also offer homeowners policies. For more complex needs I recommend finding an independent agent to help you find the right policy. Ask friends or trusted advisors for a recommendation or check out this agent search tool through Chubb.
What I’m Reading
How Paying for College Is Changing Middle-Class Life
By Caitlin Zaloom, The New York Times
For middle-class parents, having to save up for college is now an accepted part of life — even a “moral obligation,” as this author puts it. With the average total annual cost of a private university around $43k (and steadily rising), the financial toll is substantial. But what deeper effects is this having, on family relationships and the landscape of middle class life?
The result for middle-class families is a perpetual conflict between moral duty and financial reality. Again and again, the families I interviewed spoke of how hard it was to follow the steps that the federal government, financial industry players and financial experts advise, such as starting to save for college when the children are young….
Parents must wager money today that their children’s education will secure them a place in the middle class tomorrow. Unfortunately, there is no guarantee that this bet will pay off — for the parents or the children. And too often, I found, it doesn’t. Some parents’ saving plans were waylaid by crises — health emergencies, job losses, family breakups — that were common enough but impossible to foresee. Likewise, many children failed to land well-paying jobs out of college, forcing them to bear the weight of paying off debt during the most vulnerable decade of their adult lives.
But don’t worry, it’s not all doom and gloom for middle class parents. With financial discipline, it’s still very possible to fund college through a combination of options — for example, tax-efficient 529 contributions, a manageable amount of student loans, income earned after college starts, your student’s part-time job, and potentially financial aid. And if private college is just not economically feasible, there are many fantastic public colleges that provide excellent value.
Your Parents’ Financial Advice Is (Kind Of) Wrong
By Julia Carpenter, The Wall Street Journal
With the rising cost of college and housing alongside suppressed real wage growth, the traditional path to middle class wealth — graduate from college, get a good job, and save for a down payment — just isn’t viable for most millennials.
Given the savings rates of the millennial generation born between 1981 and 1996, rental-listing company Apartment List estimates that two-thirds of millennial renters would require at least two decades to save enough for a 20% down payment on a median-priced condo in their market. Just 11% would be able to amass a 20% down payment within the next five years.
Fortunately, homeownership isn’t the only path to wealth (or even necessarily the best). And some financial advice — like living below your means and exercising awareness over your spending — will never go out of style.
If you’re ready for financial guidance, accountability, and an action plan, check out our one-on-one services or online courses.