With the abundance of online savings accounts that are typically offering over 4%, too many people are essentially leaving money on the table by keeping all of their cash at their local bank. There are benefits to using a local bank, but it doesn’t mean that you shouldn’t look at other options.

A local bank allows you to make in person deposits and withdrawals and gives you access to their ATMs which are most likely very convenient. Having someone to talk to when you have questions or concerns can’t be understated, but you can take advantage of these things without having to keep all of your money there.

Most online high yield savings accounts can be directly linked to your existing checking account so you can transfer money back and forth quite easily. If your main concern is that you need the availability of your cash, you can have it transferred within about 2 to 3 days. When you don’t need your money, it’ll be earning a nice rate for you that’s well above the usual 0.5%.

Your traditional bank is probably now best used as a way station to direct your money to better places. You’ll still be able to use your usual checking account and ATMs, but you’ll also be able to have the benefit of the best prevailing interest rates. So, do yourself a favor and look into an online high yield savings account.

July isn’t a month full of caroling, snow, presents, stockings or gingerbread cookies. It can, however, be a great time to start planning for these things.

I’ve seen the Christmas scenario time and time again and for some reason it happens to people over and over. Christmas time rolls around and “all of a sudden” as if by surprise you realize that you need to go out and buy everyone gifts. The Christmas parties and family activities/meals are “shockingly” accompanied by larger than usual grocery bills. You also might want to take the family bowling, ice skating, or (if you’re adventurous) to the latest Tim Allen Christmas movie.

However the holidays play out, too many people spend the first part of the next year trying to catch up on bills that they incurred back in December. If one is fortunate enough to have an emergency fund, all too many see this yearly occurrence as a qualified “emergency”.

So, why am I bringing this up in July during barbecue season? Christmas (or any other holiday you celebrate) is an event that occurs every year and is something that can be planned for. It’s not all too different than bi-yearly car insurance premiums or your yearly car registration. Money can (possibly should) be set aside during the year to pay for these types of expenses.

A great way to tackle this problem is to label an envelope with the specified purpose and to treat it as a bill every month. If you put away $60 every month, you’ll end up with $720 at the end of the year to spend on Christmas in any way you’d like. People who have implemented this type of thing have also found that they usually don’t even need everything they’ve saved.

If you’re like most people and have those lingering memories of “Christmas debt”, now is a great time to start preparing for what you already know is coming. Trust me, your holidays will be a much happier time if you do.

I was actually kind of surprised when my husband asked me to write a couple of posts while he’s away. Before we got married, my personal finances consisted of buying whatever I felt like and hoping whatever was left covered rent and my other basic needs. When we got engaged, limeade started laying down the rules, which was good. I was open to changes in my finances because I knew that I hadn’t been managing them very well. I wasn’t even keeping my checkbook balanced! The last year has been quite an adjustment for me as far as my spending habits are concerned. I’ve made some major changes in the way I view and spend my money.

My parents didn’t really teach me too much about personal finance, which is why I was in such shape when we got married. They are pretty well off and our family has never really been in want, fortunately. They tried to show me how to save money, but they weren’t very strict enforcers. They taught me credit cards are bad, so I didn’t have one until half way through college. I knew nothing about my credit score, how to build credit, or why in the world I would even need it in the future. And when I spent too much and couldn’t cover my rent, they bailed me out and just added the amount to my quickly increasing tab. When my husband and I got engaged, I owed my parents a couple thousand dollars and I had a few too many credit cards carrying balances.

Now, I’m not complaining - heaven knows I wouldn’t be where I am now without my parents and their financial assistance - but I just wish they would have educated me better early on. Everything I know about personal finance I’ve learned from my husband. Needless to say, he takes care of the finances now. I have gotten much better, though. I no longer buy things on a whim and I have learned the value and importance of saving.

We don’t have children yet, but when we do, you can be sure that they will know what I didn’t and so much more. If you have kids, or if you have friends with kids, or if you have nieces and nephews, make an effort to see that they are taught the basic principles of personal finance early. It will make a huge difference in their lives if they are taught the practices that will help them become wealthy and successful.

Many financial gurus promote the idea of paying yourself first; however, as with many of their ideas they fail to give a step by step practical implementation plan. Should you pretend it’s a bill that’s due every month? Isn’t your 401k deduction taking care of this?

I’m not going to say that there is only one right way to “pay yourself first”, but I will explain how I handle things.

First of all, I don’t count any contributions made to a 401k. These amounts are already being deducted before the money hits my account along with any other deductions such as health insurance, taxes, or flexible spending accounts. What I am concerned with is the money that is actually deposited into my account.

Now, I have set up 3 accounts with my financial institution or bank. There is one checking account and two savings accounts. Yes, it is possible to have more than one checking and savings accounts at your bank. Most banks now have online banking and you can even label your accounts with a nickname to help you remember what they’re for.

I make all deposits into the checking account. One of the savings accounts is a dedicated emergency fund. The other savings account is set aside for investments. Each time a deposit is made or I get paid, I transfer a certain percentage into the emergency fund and another percentage into the investment fund.

The important factor in this is that it happens every time. Once these transfers have been made, what is left over is used for bills and other discretionary spending.

The emergency fund is left alone and not touched unless an “actual” emergency occurs. The money in the investment account is then used for various investments.

Following such a process ensures that I’m committing my money first to my highest priorities. I’m not waiting till the end of the month or what have you to see if I have any money left over to save. Like I said before, this isn’t the only way and maybe not the best way, but it’s a practical plan for “paying yourself first”.

Budgeting is an activity that some people actually enjoy. Most people, however, detest budgeting or are at most indifferent towards it. Whatever your feelings about the subject are, it’s important to at least understand the objective and the general principles.

Whether you’re in business or just managing your own personal finances, the goal of working to a budget is to increase wealth through careful planning. This is an important concept to grasp because there is a large misconception among many that budgeting is there just to make sure that we don’t spend more than what we earn. This is very important, but budgeting is much more than that. The goal of any business is to increase shareholder wealth. This can also be true for your own finances.

I’m not going to tell you how you should budget because it’s different for everyone, but I will explain what some people do and then how I approach the subject. Let’s first talk about traditional budgeting. This is the more tedious form of budgeting where you scrutinize different categories of your spending and budget certain amounts for each of these categories. For example, you might decide that you’ll allocate $300 per month for food and another $200 for entertainment and so on down the line. You then make sure that the total of all expenses are less than your income. Also, don’t forget to budget in savings and investing. If this is your style, then more power to you.

Now let me explain how I “budget”. I’m not a big fan of getting so detailed into planning exactly how much I’m going to spend in certain categories. Instead, I take a certain percentage of all income and put it towards charitable giving and into savings. I then take another percentage and allocate it for investing. After this, whatever is left is free to spend on everything else including living expenses and entertainment. Doing things this way simplifies the process and it ensures that my top priorities are always being met.

However you choose to budget, it needs to be something that you’re comfortable with and that you will stick with. It does no good to start, only to later give up on it because it’s too complicated or time consuming. So have a go at it…

Just about two years ago I got a summer internship and moved to St. Louis for the summer. After I graduated a year later, I took a full time position with the same company and relocated here. While I was doing this internship, the real world finally hit me. It finally dawned on me that the academic world wasn’t all there was and that I could actually be financially sound.

During those couple of months, I was being paid more than I had ever gotten before (partly because never really worked a full 40 hours consistently during school), and I took an increasingly greater interest in my personal finances. I’ve always been pretty independent, but I was now applying it to my financial situation.

I went to the library quite often and checked out many different books on personal finance and investing. I began reading Yahoo! Finance, MSN Money and CNN Money. By the end of the summer I knew all about 401k plans, Traditional and Roth IRAs, the basics of stocks, bonds, and mutual funds.

What I’m getting at is that I made a concerted effort to learn all I could about how money finances work. I wanted to find out the best ways to put my money to work. I’m still learning more and more everyday, but I encourage you (if you haven’t already) to also make it a priority to learn how to save and invest. Make a trip to your local library. I didn’t read everything in every book; if a chapter wasn’t interesting, I’d move on and read the sections that I wanted. The point is the make the effort. You may surprise yourself at how you can change your financial outlook just by educating yourself with the basics of money and personal finance.

This is a question that many people struggle with. As with many other things, we all want to get the best value or most bang for our buck. The problem is that there are multiple good things to do when you have a little extra cash. I think everyone would agree that all of these options would be beneficial.

Pay Down Debt

You’ve probably heard that paying down a debt at some interest rate is like earning an investment return of the same rate. For example, your car loan is at 8% and you pay off $100 of the balance. You have now saved yourself from paying $8 in interest over the next year. This is the same as investing that same $100 and earning an 8% rate of return, except the return is gauranteed.

This is all well and good except that not all debt is the same. Credit card debt is usually accompanied by very high interest rates, but that’s not always the case. Some have credit card debt held at 0% percent interest as part of a promotion. Some forms of debt are also tax deductible such as mortgages and student loan debt. Depending on the situation it may not always make sense to pay off debt first.

Save

Putting money into savings doesn’t usually earn a high rate of return, but there are other important factors to consider besides this. It’s always nice to some money stashed away in case of an emergency or other abrupt financial situation. Without anything in savings, you may be forced to take on even more debt, and even then, not everything can be paid for with a credit card (cash advances carry such high interest rates I don’t even care to consider them).

There is also a peace of mind that comes with money held in savings. This peace is worth different amounts to different people, but it is a factor worth considering.

Invest

Investing has the potential to yield great returns, but it remains just that, potential. Only you can determine your specific risk/reward scenario. Just as with savings though, there is a mental aspect of the equation. Having some form of investments will help take some of the weight off your shoulders that debt can load on you. It’s can be very hard emotionally to be in debt, and investments can help to counteract those negative feelings.

Also, tax advantaged retirement accounts have set limits of how much one may contribute in any given year. If you wait to invest until after you’ve paid off all your debts, you won’t be able to make extra contributions in later years for years past.

As with most decisions, there is no real clear answer because every situation is very different. You may choose to do all of these things in tandem. I would recommend that you keep at least a small reserve in savings at all times, but you have to ultimately decide what you feel most comfortable with. If you’ve got any questions regarding your specific situation, feel free to email me at fiscalmusings@gmail.com