5 Steps Towards Smarter Money Management

Step 1

Open a bank account with a high interest rate on the checking account.  The highest currently available in Clark County is People’s Community Credit Union.  They currently pay 2.75% on their checking account(1).  They also pay 7.5% on their savings account (on first $750).  The more money you keep in this account, the more money will be paid to you each month in the form of a dividend check.  It may seem small at first, but it will gradually build to a significant amount of extra cash.

To maximize your profits on this account:- Maintain a balance of $750 in the savings account.  When you receive your quarterly dividend check, transfer the dividend amount into your checking.
- Be sure you meet all of the requirements each month to get your 2.75%. 

Step 2

Open a credit card with a cash back rewards program.  The key here is cash back, not points, not airline miles, just plain cash (2).  The most user-friendly card I have found is from Capital One.  What I like about this card is there is no minimum reward balance you must attain before you can request a check.  I requested a check for as little as $5.65 and they sent it to me.  This way you can use your rewards money to put back into your savings account and make more money off of it.  This card pays a flat 1% cash back on all purchases as well as 2% back on gas and groceries.

Another option is to open a Chase Freedom card.  This can earn you a higher percentage (up to 5%)but the cash is harder to redeem.  In order to make this card worthwhile you need to open a Chase checking account as well (For being a Chase banking customer you will receive extra reward incentives on your card).  The Chase bank account does not have a competitive interest rate, so you will still want to keep majority of your money in the higher interest savings account.

Reroute all of your monthly bills through this credit card.  This means utilities, natural gas, trash disposal, Netflix, Internet, even your rent if it is allowable.  Any recurring expense you want to route through this credit card (3).   This will simplify your finances as you will only need to pay off your credit card each month instead of each individual expense.  Be sure to pay this off in full every month just as you would pay your bills every month.  Not only will you rack up dollars in rewards points you will also build your credit history.

To maximize your profits on this account: - Get a cash back card with a competitive cash back percentage and easy rewards redemption.
- Route all but three recurring transactions through this card to earn rewards points.
- Pay card in full every month.

Step 3

Begin an emergency savings account.  This is money kept in your normal checking account that you have mentally allocated towards emergency expenses.  This is for those unexpected occasions such as car breakdowns and issues with your residence.   It is as simple as not letting your account balance go below a certain number.  We all have issues come up in our lives that require financial assistance.  By planning for these times in advance we can reduce the negative impact they will have when they happen (4).

Step 4

Reduce any high interest debt.  Pay off any debt where the interest rate is higher than the interest rate that you make in your checking / savings / or investing account.  There is no point making 2.75% in your checking account when you are paying out 12% in credit card debt.  Pay of the debt off to avoid paying these high interest rates.  In the long run you will save yourself a lot of money.

Step 5

Stop spending money on doodads.  There are very few expenses out there that we need to incur.  Food, water, and shelter are our three basic necessities.  By limiting the amount of money you spend you can significantly increase the amount of money you retain in your savings account.  Many times we don’t need to make more money in order to begin putting away savings.  Instead all we need to do is cut back on our spending.

Sub notes from the above text:

(1)In order to get this amount you must make 10 debit transactions per month, 3 bill pay transactions, and have direct deposit, however I can assure you the 30 minutes it takes you to switch over all of your account will add up.

(2)Point cards generally give you gift cards for restaurants and other retailers.  While it is nice to get a gift card for Black Angus for $10, generally we spend more than we had on the gift card.  Therefore the gift card is just an incentive to go spend more money.  Remember the idea is to save.  Airline miles hold to the same principal; trips cost money.  It doesn’t matter if the flight was free, food, hotels, and other miscellaneous expenses are not.  Stay away from these rewards cards.

(3)Most banks will not allow you to do this for your mortgage payment.  Also remember you need to make 3 bill pay transactions each month to qualify for your high interest bracket.  The credit card payment will count as one, if need be keep the 2 other lowest monthly payments you have and pay them through your bank account each month (ex: Netflix $8.99 per month and Garbage $20 per month) would be good choices.  You want higher totals on the card because they will earn you more rewards dollars.

(4)When a car breaks down it can cost several hundred if not thousands of dollars.  If you do not have this money put away you may resort to spending money you don’t have to fix it through any way necessary.  This might mean a high interest loan, credit card, or check cashing facilities.