When I was younger, I marveled at my dad's tools. He kept nearly all of them organized on a pegboard in the garage.
Everything in its place. Neatly lined rows of wrenches, hammers, wire cutters, hand planes, you name it. My favorite was the ball peen hammer, though I didn't know the name at the time. It just looked like a funny hammer.
My dad told me that a five minute job would take five hours if you didn't have the right tools. That's why he had so many.
Ahhh, the life lessons that are, at the time, wasted on a 15 year old but take root just enough to be valuable when he's 35. 🙂
I've taken that mantra to many parts of my life, including my finances. I rely on a variety of tools to help me manage my finances and ensure that five minute jobs take just five minutes.
Having the right tools to manage your money is essential. They can take something simple and make it extremely complicated, or they can take something complicated and make it really simple.
I like things as simple as possible. Simple is elegant.
Today, I'll share the tools in my Money Toolbox that help me manage my finances in just an hour a month.
The toolbox is a collection of tools I use to manage my money. The goal of the toolbox is simple. I want to be able to get an accurate picture of my current financial situation, in just a few minutes, plus an idea of where I'm going. I want to be able to manage it with as little headache as possible.
- Tracking Net Worth
- Money Field Manual
- Emergency Plan
- Financial Dashboard
- Budgeting Tool
- Savings Account
- Credit Cards
- Online Brokerage
- Debt Payoff
Tracking New Worth
My Net Worth tracker is a spreadsheet in Microsoft Excel. Read more about it here.
If I were starting today, I wouldn't use a spreadsheet. Unfortunately, my historical data is in that spreadsheet so I continue using it. These days, I use Personal Capital to aggregate the data from all my financial institutions and save myself an hour or logging in. I'm able to do everything I used to do like review statements and check transactions, I just don't need to log into a dozen institutions.
If you just want to track brokerage accounts, I've used SigFig in the past but abandoned it in favor of Personal Capital. You can always just link up brokerage accounts in Personal Capital and get a big picture shot of everything.
Money Field Manual
My Money Field Manual is a Microsoft Word document. Read more about it here.
There are no applications for a Money Field Manual because it's just a document. If I were to move it online, I'd use Evernote. As it stands, it's a simple Word document.
We often talk about an emergency fund, but we also need an Emergency Plan. Read more about it here.
In short, an emergency plan is a list of checklists that explain what we do in the event of an emergency. Just as many schools and offices run fire drills and have evacuation plans, you need to run your own financial emergency drills so you aren't making decisions under duress for the very first time.
Personal Capital is a powerful financial dashboard that pulls data from all your financial institutions into one screen. I use it to update my “antiquated” Microsoft Excel Spreadsheet.
A Financial Dashboard gives you a snapshot of your finances at any moment you need it, including your sources of income, expenses, and a rudimentary budget. Personal Capital's focus is on growth, as in retirement and investing, and less about savings, which is the domain of a traditional budgeting tool.
I like my tools to be good at one or two things and avoid being a Leatherman.
The best budgeting tool fits the way you budget. We currently do not budget, we just monitor our spending because we've maintained a similar budget for the last five years. We adjust it based on changes in our life situation and then monitor for aberrations.
If you are starting with no budget and want to start one, I recommend two. The first requires no tools, the second does.
- Pay Yourself First: The goal of budgeting is to spend within your means and to save money. Paying yourself first means you save before you spend, so you take care of the primary goal of budgeting. As long as you don't spend more than what's left, you're in the clear. No tracking, no headaches, but you get all the benefits.
- Budget With Last Month's Income: Budgeting with last month's income simply means you take last month's income and apply it to budget categories for this month. A fantastic tool that facilitates this is You Need a Budget. Search for reviews, nearly all are glowing and there's a good reason for it.
I use several bank accounts but my core are a Bank of America account for the physical presence and Ally Bank and CapitalOne360.
I like Bank of America for it's physical location. On the off chance I need a Medallion Guarantee, which is one step up from a notary for notarizing financial documents, I can go to Bank of America to get it.
For everything else, I use Ally Bank and CapitalOne360. I prefer online banks because they offer higher interest rates and many have big ATM networks, like Allpoint (43k+ ATMs), where I can make free withdrawals. Ally Bank also offers to reimburse up to $10 in fees at the end of each statement cycle.
Credit cards can be a delicate subject because they're very powerful tools. Use them wisely and you can be rewarded handsomely. Use them recklessly and you can trap yourself in a very bad cycle of high interest debt that is very hard to escape. If you're currently in debt, check out our Epic Debt Guide, a story about how a professional fireman paid off $52,055.15 in high interest credit card debt in 7 months.
I use my credit cards each month to earn valuable cash back, a small discount on all the purchases I make. I use a Chase Southwest Rapid Rewards Card that helps me accrue enough points to earn a Southwest Companion Pass, which lets my wife (or anyone I designate) fly for free with me on Southwest Airlines. It's easily worth a thousand dollars and is on top of the rewards!
TradeKing is a great brokerage because they offer $4.95 trades, which is cheaper than most every other brokerage I can think of by a wide margin. If you trade options, it's 65 cents per contract plus a $4.95 base, again cheaper than most anywhere else (there are a few exceptions but the difference is marginal). TradeKing's reporting and tools are top notch too and I've been a customer of theirs for over five years.
TradeKing offers a transfer fee refund of up to $150, so they'll pay you back for any fees you pay to your current broker to move over to TradeKing. Lastly, they recently started a TradeKing Advisors service with managed portfolios but I haven't used it yet.
Vanguard is a mutual fund company most folks are familiar with. I've had an account since I was a teenager and my Dad opened one up to put my Roth IRA. I use it to invest in Vanguard mutual funds and ETFs. I have shares in that account that pre-date the existence of ETFs!
I add this tool in here for completeness and not based on need. I've been fortunate in that I've never accumulated credit card debt and my student loans were all Stafford loans, so I consolidated them through the normal channels over 15 years ago.
However, I've kept my eye on the current services out there that help folks get a handle on both and there are two services I feel confident recommending.
For credit card debt, give Payoff a look.
For student loan consolidation, take a look at Sofi.
Is there a tool or category you think I'm missing? Let me know.