April

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Here’s the fourth in a series of monthly posts focusing on meeting small, manageable financial objectives in order to create a path to overall financial success. You can find March’s post here.

How are you doing with centralizing your spending for a few months? In May, we’ll begin to use that data for something.

And how did you do with the March challenge - do you feel like you have better insight to your emotional response to spending money? So much of financial planning rests on emotion and behavior, and how we approach money. Understanding those behaviors, and why you do what you do when it comes to money, is an enormous part of making decisions that will make you happy in the long term.

A question: where does your cash live? In previous posts I’ve talked about the importance of emergency savings. A key aspect of that is where that emergency cash is - ideally it should be somewhere accessible, yet still separate from your regular spending money (it should be available quickly if you need it, after all); not be exposed to the swings of the securities markets, and hopefully providing the highest possible return while still meeting the other criteria - note that this won’t be a high return (since it’s not exposed to market or default risk), but you can find ways to get a return that’s higher than you would otherwise earn.

But first, spend some time to understand the characteristics of where the money is now. Is it mostly in checking? A bank savings account? Something else? First, make sure it’s FDIC insured - this covers up to $250,000 per depositor, per bank in case of bank failure. If you’re not sure whether your bank or saving institution is covered, check here. Any cash you have, whether for spending or emergency/goal saving, should be in an account at a covered institution.

Then, determine what you’re earning on that cash. Look at your last statement, where it will probably be listed. Typical rates on regular bank savings accounts these days are around 0.02% (checking accounts pay even less, but have a lot more flexibility). Prevailing rates at online savings accounts are above 1% - while this isn’t terribly high by any stretch of the imagination, it’s higher than most banks. It means about $10 more per year in interest for every $1,000 you have saved, and without putting your money at risk.

To pick a new savings account, make sure you can easily transfer between your savings and checking. Savings accounts have a limit of 6 transactions per month before the bank can charge you a fee, so make sure it’s one where you can do what you need in one step.

This is just one of the little things you can do to ensure mindfulness with your money, every step of the way.