Friends! Oh, my dear friends. I’ve been quiet on the blog, this year, while working on my book proposal – and I’ve missed you and this space so much. I’d often sit down to write something, but feel this pressure to always produce 2,000+ words and not publish anything unless it made a profound statement of some sort (*ahem* like you weren’t born to pay off debt and die). Bloggers are given a lot of mixed messages re: how often we should publish new posts: either stick to a schedule (I try to write every Monday) or write whenever you have something to say (could end up being 1-31 posts per month!). And the general rule, these days, is long posts are always better.
I agree that all the “rules” have worked – whatever “worked” means. But, my goodness, I’m sick of sticking to them! Sometimes I have an idea for a post that could be summed up in 1,000 words or less, or something happens in my life that I want to share with you… and those freaking rules (that I only put on myself, by the way) hold me back from writing. Fortunately, Sarah Von Bargen came to the rescue, last week, when she reminded me: if you’re the one making the rules and setting the deadlines, you can change them. Lightbulb moment! I’m the boss of this blog – and this week, I’m going to try to write something every day – simply because I can.
When I started this blog, my finances were a mess. I had nearly $30,000 of debt and the only kind of “budgeting” I did involved checking my credit card statements to see what the minimum payments were (because I always paid at least that amount, so I didn’t damage my credit score). Fast forward a few years and I was setting budgets at the beginning of each month, checking in on them at the end and doing ok – although I was still spending the majority of what I had earned and not saving much.
Thanks to the shopping ban, I found ways to cut back and save more, and eventually got to the point where I realized I was spending a similar amount of money every month; that realization is what helped me decide to stop setting budgets at the beginning of the month, and instead just track my spending and tally up the numbers at the end. It’s been a year since I’ve written a formal budget on the 1st of the month, but my budgeting strategy changed yet again when I became a full-time freelancer.
I thought about waiting until I reached my 1-year anniversary of being self-employed to talk about my new budgeting strategies, but I don’t think anything will change between now and June 27th. It took some time for me to get used to budgeting with irregular income (which we are talking about on the podcast tomorrow!), but I’m pretty happy with my little system.
How I Manage My Money Today
One of the things I love most about swapping money management strategies with friends is figuring out how many accounts people have. I don’t care about balances, I just think it’s fascinating to know how many accounts people have and how they use them. For example, I know Carrie has something like 12+ savings accounts. And another friend of mine has closer to 20. That’s so many! But each one serves a purpose, so it also makes sense. I’ve just always taken a more minimalist approach to my finances, and like to have as few accounts as possible. Here’s what I’m working with:
*Note: There are no affiliate links in this post. I’m just sharing information on all the products I actually use.
I have 1 Canadian chequing account.
I’ve been doing all my daily banking with Tangerine since October 2012. I deposit everything I earn into my chequing account, and use it to perform a few transactions, such as pay rent, pay bills and transfer money into savings/investments. The account is free to use and pays a tiny bit of interest, which I only notice because I keep a fairly large cash buffer ($2,500-$5,000) in it at all times.
The cash buffer is new for me; that’s something I only started doing after I quit my job, because it removed any anxiety I might’ve had about having enough money to survive for a few months. I used to keep $9-10,000 in there, but have since gotten more comfortable with having less in my chequing account and more in savings. Cash, in general, helps me sleep at night!
I have 2 Canadian savings accounts.
Since I started working for myself, my #1 savings goal has been to set aside 30% of my income for taxes. How exciting, eh? But, in a weird way, being forced to save (or pay myself first) has made me an even better saver than before. Whenever I get paid, I immediately calculate 30% and move it into one of my savings accounts. (The current balance is $19,430, which I don’t include in my net worth.)
My second savings account is meant for personal savings – and holds money for a number of different purposes. It’s my emergency fund money, my old shopping ban account money is now in there too, and I also add extra money (when I have some) for future travel. Whereas multiple savings accounts work best for some people, I prefer to just have one big pool of cash (currently: $15,000).
If you do the math, you’ll see I’m currently sitting on nearly $40,000 cash – and that might sound crazy – but remember that half of that will (potentially) be owed at tax time. I never, ever look at my tax money and think “sweet, I have $20,000!” Instead, I see a big bill due in the next couple months – and I’m so glad I saved for it, or else I’d be taking that on as debt!
I have 2 Canadian credit cards.
Now, for the fun part! I think I’ve mentioned this before, but I pay for 99% of my purchases/expenses with credit cards. I used to maximize my rewards by putting specific purchases on specific cards. Now that I work for myself, however, I’ve realized how important it is to have a personal card and a business card – and sometimes that means I don’t always maximize my rewards.
I use the Scotia Momentum Visa Infinite for all my personal expenses. The best return for me, personally, is 4% on groceries (gas too, but I barely drive anymore) and 2% on recurring bill payments. It also pays 1% on all purchases in other categories. The card has a $99 annual feel, but I earned $340 cash back last year, which means I profited $241. Not bad.
As of right now, I use the WestJet RBC World Elite MasterCard for my business expenses. It paid off BIG TIME last year, when I signed up for it and got a bonus $250 WestJet dollars. Sarah and I put that towards our trip, and also used my $99 round-trip companion flight (which I get every year), so our flights to NYC only cost us $250 each. I’ve since earned another $228 (1.5% on all purchases), which I’ll put towards a flight to San Diego for FinCon in September. I’m still not entirely sure I’m going to keep this card… not because it hasn’t been good to me! But I think my business expenses are going to go wayyy down in 2016, so I don’t know if I want to pay $99 for a card anymore. I just paid the annual fee last month, so I’ll use it all year and make a decision in December. If anything, I might cancel my Scotia card in November, make WestJet my personal card and get something free for business.
I have 2 investment funds (1 TFSA, 1 RRSP).
My investing strategy hasn’t changed much, since I last wrote about it. I only put enough in my RRSP to keep me in my current tax bracket (was right on the edge in 2015), and am focused on maxing out my TFSA. Both funds hold my retirement savings – I have zero plans to spend any of it, until then! I’m investing in my future, but want to max out my TFSA first… and that’s going to take a while still, lol.
Finally, you probably noticed I put “Canadian” before most of the accounts listed above; that’s because, as of a few weeks ago, I have a couple US accounts. And, while you might think that would confuse things, I set them up to make things simpler!
I have 1 US checking account (in the US) and 1 US savings account (in Canada).
I signed on to work with a new client in the US, and figured out the fastest way for me to get paid for the work would be to open a US checking account. No, that’s not the same as a US savings account with a Canadian bank – US banks can’t send money to personal bank accounts in Canada – it’s a genuine checking account with a bank in the United States. Fortunately, I didn’t have to cross the border to do this, as a few Canadian banks also operate in the US.
I ended up opening the Direct Checking Account with RBC Bank (US) and got a free US savings account with RBC Royal Bank (Canada). Once/month, I’ll transfer however much I want from my US account to my Canadian account at RBC, and then I can send myself an email money transfer to deposit it into my Tangerine chequing account – done and done. If that sounds annoying, try to imagine waiting 60 days for a cheque to arrive in the mail and another 15-20 business days for it to clear! Now, I can get paid via direct deposit to my US account, then get it into my Tangerine account with just a few clicks (whenever I need the money or am happy with the exchange rate). It’ll cost me a few dollars each month (and I haven’t paid a banking fee in 10+ years, so I was hesitant to start now) but being paid in USD more than makes up for that…
Another bonus: I can use the Visa Debit card that came with my US checking account when I’m travelling in the US! So long, 2.50% foreign transaction fee.
Writing it all out makes things seem so much more complicated, for some reason, but this setup is really simple for me. I don’t need to check anything on a daily basis. I just use my credit cards to pay for things, make payments on them every week or two and, of course, track all of this in my Mindful Budgeting 2016 Planner! And whenever I get paid, I immediately put 30% aside for taxes, save/invest what I can and make sure my cash buffer is above $2,500 at all times. The US stuff is new for me still (I haven’t even been paid yet, ha!) but it should be pretty seamless. And I’ll use my credit cards as-is, but will probably change things up by the end of the year… which is perhaps the one takeaway from this post: change things up whenever you need to! Your future self will thank you for putting in the little bit of work it takes to setup the best system for you and your finances. :)
Have you changed any of your money management strategies recently?