What does your cash flow process look like?
What does your cash flow process look like?
I'm talking about types of accounts, automatic transfers, etc. Feel free to mention specifics, but I'm more interested in higher level information like does your paycheck go to savings or checking, do you use automatic transfers, do you use a traditional bank account or something different, etc.
Basically, what happens to your paycheck? Do you like your process, or are you considering making changes?
Here's mine:
I have five main accounts:
- Fidelity Bloom Save and Spend for savings and spending respectively; each is a brokerage account
- Fidelity Cash Management Account - mostly fit the fantastic debit card
- Ally Checking and Savings
And here's the general flow of cash:
- Biweekly paycheck -> Fidelity Save
- Automatic transfer 2x/month from Fidelity Save -> Fidelity Spend
- Automatic transfers from Fidelity Spend -> Ally savings and personal spending accounts
- Automatic transfers from Ally savings to Ally checking; Ally checking is used for Target debit and automatic transfers to wife's IRA
- Manual transfers as needed to Fidelity Cash Management - I try to keep this near $0, and only transfer for travel or if I need to withdraw from an ATM
I have credit cards and other bills set to autopay in full from my Fidelity Spend account 2x/month (roughly even between the two halves of the month). I changed my credit card due dates to line everything up years ago, so now everything is pretty much automated.
I like this setup because:
- brokerage has higher yielding money market funds
- pretty much everything is automated
- can have investments living next to spending money (e.g. my efund is Treasury bills, which live in my "savings")
- I keep more sketchy account linkages at a separate institution from my main savings
- I need a brokerage anyway for my HSA, and I'm considering moving my other retirement savings to Fidelity as well to further reduce institutions
- Fidelity has better 2FA options than pretty much any other bank
I used to use Ally as my main account, but I switched to Fidelity late last year and I really like it so far. Some changes I'm planning to make:
- get my hardware security token set up with Fidelity - I've been sitting on it for months, just need to make the call
- move wife's autopay to pull from Fidelity directly; she's not on the account yet, so I need to fill out some forms
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Without getting too into the weeds with retirement accounts and such, my paycheck gets split and direct deposited into three accounts:
- Bills. This is based on any regular recurring payments that were made last year including insurance, utilities, car payments, housing payments, property tax, services, etc. I add all that up for last year, add 10% padding and divide it by my 24 bimonthly pay periods.
- Living expenses. I don’t have a finely detailed budget. I’m a responsible spender so I can trust myself. This is irregular spending. Gas, groceries, clothing, household goods, car/ house repairs and improvements and general discretionary spending.
- Emergency fund. Everything else gets put into replenishing the emergency fund. If the emergency fund is fully funded I will manually make a payment towards my mortgage principal (or somtimes buy myself a new toy 😬)
+1 for this system. I do the same and it makes day-to-day spending guilt free and simple. A few times I have run #2 dry and had to eat beans for a few days, but I've gotten better.