If you’re like me, you lead a really busy life and may be struggling to keep your money management under control.
Sometimes failing to do a few basic things can prevent you from staying organized, saving time, and improving your personal finances.
In this episode, I’ll answer three questions to help you simplify your approach to money management so you stay on track with your financial goals.
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Money Management Question #1: Patricia says, “Do you use a money management software or app that keeps you organized?”
Answer:
I’ve been using and recommending Intuit products, such as QuickBooks and Quicken, for as long as I can remember. As far as I’m concerned, they’re the gold standard in book keeping because they’re loaded with easy-to-use features. They’re available for Windows or Mac, have endless reporting options, and offer mobile apps.
QuickBooks is for small to medium-sized businesses. The desktop version ranges in price from $199 to $350 and there’s also an online version that starts at $10 per month. I use the desktop version for Mac to keep track of multiple business accounts.
Quicken is designed for personal or home and business use, and it starts at $39. I also use Quicken for Mac for managing both home finances and another business account.
There isn’t an online version of Quicken; however, Intuit owns the free web-based service called Mint. It’s a terrific option for personal use, if you don’t mind being served ads that support the free platform. However, it’s missing some advanced functionality that you'll find in Quicken, like reports, tools for tax planning, and being able to upload receipts.
All of these desktop and online products allow you to import your bank and credit card transactions securely so you have up-to-the-minute balances for all your financial accounts in one place. As your transactions come in, the program assigns them categories, like "restaurant," "clothing," or "loan payment."
You can change the categories or create new ones that are more descriptive. This is what really makes QuickBooks and Quicken so valuable—especially at tax time. Being able to quickly run reports showing totals for my rental property income, home office expenses, business expenses, and charitable donations is fantastic!
Having accurate category totals also makes it easy to set and monitor a budget. For instance, let’s say I go out to eat at one of my favorite restaurants and pay with a credit card. The next time I open Quicken, my dining expense gets pulled in.
If I’ve been to that restaurant before, Quicken remembers the merchant name and assigns it the same category as before, like “restaurant.” But if it’s a new place, Quicken may call it something slightly different at first, like “fast food.”
If I want to keep tabs on all my dining out as one category called “restaurant,” it’s easy to manually change the category from “fast food” to “restaurant.” Now I can easily see how much I’ve spent dining out by the day, week, month, or quarter. I can view it in a budgeting tool or even print out a report.
Using a financial program also makes it easy to catch fraudulent transactions right away. Recently, I was reviewing my data in Quicken and noticed a large credit card charge that wasn’t mine. I reported it the next day and my credit card company reversed the charge and reissued me a new card. Problem solved.
So if you’re not centralizing all your financial information yet into a program like Mint or Quicken, I strongly recommend that you give it a try. It’s safe, free or costs very little, and saves a huge amount of time once you have it connected to your financial accounts.
See also: A Checklist to Measure Your Personal Finance Success
Money Management Question #2: Stephanie says, “In a recent podcast you talked about the risk of using debit cards for certain types of purchases. Most of my transactions fall into the risky categories, especially shopping online.
I’d like to use my credit card instead, but I also have a high-yield rewards checking account where I must meet a minimum number of debit transactions per month, among other qualifications. What’s the best way to balance the risk of using a debit card with the rewards I get from the account?”
Answer:
The podcast Stephanie mentioned is episode number 403, 6 Risky Situations When You Should Avoid Using a Debit Card. In that show, I discuss some of the worst places to use a debit card and recommend that you use a credit card instead. And as she mentions, shopping online is one of them.
The reason you should limit the use of a debit card is because it offers much less legal and financial protection compared to a credit card. To learn more, be sure to read or listen to the previous show. But the bottom line is that debit transactions can make you more vulnerable to getting ripped off.
To entice you to switch banks, rewards accounts offer interest rates that may range from 2% to 5%, putting regular accounts to shame.
Before I answer Stephanie’s question, I want to make sure you know what a high-yield rewards checking account is, so you understand her dilemma.
Right now, the average checking and savings account pays very little annual interest, like less than one half of a percent. There are even savings accounts that offer one tenth of a percent—a pittance!
But Stephanie has discovered rewards checking. These are typically free, no-fee accounts offered by smaller institutions that want to attract more deposits and revenue. To entice you to switch banks, rewards accounts offer interest rates that may range from 2% to 5%, putting regular accounts to shame.
As you can probably guess, these sweet rates come with strings attached. Unlike many regular savings and money market accounts that impose a minimum balance, rewards accounts generally come with a maximum. For instance, they might only pay a high interest rate up to a certain balance, such as $5,000 or $15,000, with no minimum balance requirement.
Amounts in a rewards account that exceed the maximum typically still earn interest, but at a lower, competitive rate, such as 1%. However, some rewards accounts pay no interest on your entire balance if you go over the cap.
Additionally, most rewards checking accounts require you to sign up for e-statements, receive at least one direct deposit per month, use online bill pay, and make 10 to 15 debit card transactions each month. When you conform to the rewards requirements, you help the bank cut costs and earn more income. In return, they pay you the highest rate offered.
But if you don’t play by the rules, you only get the default rate, which could be something like that pitiful one tenth of a percent that I previously mentioned.
Stephanie is wondering how to make enough debit transactions each month in order to qualify for the highest interest rate without jeopardizing her security. The safest way to use your debit card is with local merchants, such as a grocery, pharmacy, office supply, or clothing store, where the card never leaves your sight during the transaction. (Note that I didn’t include restaurants, because they typically do take your card out of sight, which is where fraud frequently happens.)
Here’s a tip to hack your rewards account: Get double duty out of each trip to a local store. Ask the clerk to charge you for one or two items first, and then to ring up the remaining items in a second transaction. Clerks will probably just assume that you need a separate receipt for certain items because you’re buying them for someone else or for a business.
If you go to the grocery store once a week and get 2 debit transactions from each trip, you’ve racked up 8 for the month. You might only need a few more transactions to make the monthly quota.
To prevent you from making many tiny transactions, some rewards accounts may also require you to reach a total dollar theshold each month, such as $500. To make sure you have enough debit charges each month, keep a sticky note on your debit card and jot down the date and amount of each transaction.
And while you’re getting those impressive interest rates from a rewards checking, consider also using it like a savings account. Keep as much of your extra cash in the account as possible, so you maximize earnings.
And while you’re getting those impressive interest rates from a rewards checking, consider also using it like a savings account.
Using local merchants, instead of online vendors, certainly doesn’t eliminate the risk of using a debit card. However, if you also watch your bank transactions carefully, you’d catch any fraudulent charges quickly.
You can keep an eye on your finances using one of the programs like Mint or Quicken that I previously mentioned. Or you could sign up for email or text alerts through your rewards account that notify you every time a purchase is made. That way you’d know if someone is using your debit card number without your permission.
See also: 3 Top Online Banks and 8 Banking Security Tips
Money Management Question #3: Brad asked, “I’ve heard about depositing a check by taking a picture of it with your phone. Is it safe, and what should you do with your paper checks after making an electronic deposit?”
Answer:
I’ve been using my smartphone to deposit paper checks for many years and am still surprised by how many tech-savvy people I know who aren’t doing the same. I love this feature and can’t tell you how much time and energy it saves me.
Most banking apps include functionality called remote deposit capture. The app takes you step-by-step through the process. First, you endorse the back of your paper check with your signature, bank name, and account number.
Then you snap photos of the front and back of the check. You enter the amount of the check and verify the account where you want it deposited. And boom—your money is in the bank and the app shows your confirmation!
Depending on your bank, the money may be available immediately or it could be pending for a short time before you can spend it. In my experience, mobile deposits actually give you faster access to your funds than taking a paper check to the bank. After you receive the app’s deposit confirmation, you can either write “void” on the check and file it for future reference or simply shred it.
Mobile deposits are very safe and I’ve never had a situation where my paper money didn’t make it into my account. You can view your online account right after making a remote deposit and see the funds for yourself.
If you haven’t used this feature yet, you really won’t believe how easy it is. So, the next time you’re about to get in the car and drive to the bank to deposit a paper check, stop and let your mobile app do the work for you.
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