I just ran across a nice article from Consumer Reports that lists ten easy steps that you can take to simplify your financial life… It’s a great topic, so I thought I’d run through it and include my thoughts on each point as we go along. Today I’ll take on the first three steps.
(1) Put your savings on autopilot. Have your employer deposit your paycheck directly into your checking account and then instruct the fund company of your choosing to move a specified amount from checking into a money-market or other fund once a month. Direct deposit might even save you money because many banks waive fees if you use it.
(2) Pay bills online. The process is speedy, cuts down on paper clutter in your home, and spares you from scrounging for stamps. All major banks and credit unions now let you pay bills online, and an increasing number allow you to receive your bills at their web sites as well. Most banks provide the service at no charge. If youâ€™re worried about online identity theft, relax. Paying bills online is actually safer than sending checks through the mail.
(3) Consolidate investment accounts at one company. Youâ€™ll receive three rewards. First, you wonâ€™t have to open, read, and file as many statements. Second, keeping an eye on your portfolioâ€™s performance will be easier. Finally, youâ€™ll save some money because, generally, the more you keep at a single company, the less youâ€™ll pay in custodial fees and other expenses.
My thoughts on these:
(1) Done and done. My checks are direct deposited, and our investments are largely automated. My base retirement plan gets pulled straight out of my check, as does my optional 403(b). On top of this we have a chunk of cash auto-debited out of our checking account every month and sent to Vanguard. The only thing we don’t do automatically is our Roth IRAs, mainly because I like to knock that out in bigger chunks, as opposed to putting in a little each month all year long.
(2) I love online billpay! We pay everything that we can through our bank’s website, and have even automated things like preschool tuition payments (the bank prints and mails a check for those payee that can’t accept an electronic payment).
(3) Great idea in principle, but not always possible. We’ve done this for the majority of our investments by consolidating everything at Vanguard. This includes my 403(b), my SEP-IRA, and both of our Roth IRAs — we love their Target Retirement Funds! But Vanguard isn’t available for my base retirement plan, so we’ve had to settle for Fidelity. The fund selections are fine, I’m just not happy about having yet another login to keep track of.