Saturday, 12 August 2017

Where I Keep My Money and Why.





Bank accounts, Superannuation and investments .... phew, there are so many ways to tackle this topic so I just thought I would share what banks and financial institutions I currently use. Of course, if much better deals arise or the conditions on my current choices alter then I will change this list without any sense of loyalty. With financial institutions, it is all about the math and the quality of the product for me.


So here goes:


ING Bank :

Online Savings Account #1 (high interest + bonus interest + occasional conditional bonus interest ):
This holds our self-insurance fund (aim for enough to cover 3-6 months of all living expenses).
This account has no fees.

Online Savings Account #2 (high interest):
This houses our $2000 emergency fund and I just let interest accrue.  This is specifically for immediate emergencies that are not a known part of the budget (e.g.  fridge or washer die ).
This account has zero fees.

Transaction Account:
This holds 1 month's worth of bill money (in advance) and each payday an exact amount gets deposited directly by my pay office into it to cover all our known bills.  All direct debits for bills etc come out of here too and other bills are paid out of here via Bpay, transfer or by debit card. I automate as many bills as possible.
I deposit exactly 60% of my net fortnightly income into this account.
This account has zero fees.



ME Bank

Online Savings Account (high interest + bonus interest)
This is our savings account for big ticket planned purchases (e.g. holidays, lounge suite, Thermomix). I deposit exactly 10% of my net fortnightly income into this account.
This account has zero fees.

Transaction Account:
This is my spending account - no questions asked. This has only been a very recent luxury as every cent has been focused on debt reduction, building an emergency fund and a self-insurance fund . Do not open one of these type of accounts until debt, emergency fund and self-insurance fund are sorted.
I deposit exactly 10% of my net fortnightly income into this account.
This account has zero fees.



Acorns

I use Acorns to deposit small amounts directly into a aggressive share market investment fund (very similar to a managed fund but you can start with as little as $5).  The fee structure is comparable to a managed fund as are the predicted and historical returns.
I invest a fortnightly amount into this fund and withdraw it all every 5 years to purchase a new (or new-to me) car.
The total fee structure for this investment works out at approx 0.5%



HostPlus and ChoicePlus Superannuation:

In Australia, employers are mostly required to contribute 9.5% of our annual salary by law into a superannuation fund. I am astounded at how many Australians show very little interest in their superannuation funds or are even aware at the choices they have or the huge pitfalls of accepting the default options.

50% of my Superannuation sits in HostPlus Indexed Balanced fund and the other 50% sits in the self-investment arm of HostPlus called ChoicePlus (they are linked). I have my own self managed portfolio of stocks, ETF's and LIC's happening within Choiceplus. Both have very different fees structures which are critical to fully understand.



NAB Trader (National Australia Bank):

Online Trading Account:
A slave account used to hold money that I am using to make a stock market trade. Dividends (if not auto reinvested) also get paid into this account. Trading fees are also deducted from this account too. This account is linked to the NAB Trader online saving account.
The banking component of this account if free.

Online Savings Account:
This account is linked to the trading account and pays reasonable interest on monies waiting to be traded on the stock market. It is wise to have your money earning interest awaiting a down turn in the market which is often the best time to buy quality stocks. It is also a good place to build up investment savings ready for a monthly, quarterly or half yearly purchase of stocks if you are using the average cost method.  I use a mix of both methods as each has merit and I simply do not have the time to be staring at the stock market day and night. Once I am ready to make a trade I simply transfer funds to the Trading Account and make my stock purchase.
20% of my net fortnightly income needs to go into this account.
The banking component of this account if free.

My investment plan is VERY boring - LIC's, ETF's, Indexed Funds and a small (but steadily growing) portfolio of high dividend yielding stocks. I am a lover of DRP's (dividend reinvestment plans) too. I never day trade. Buy wisely and hold forever is my ideal investment strategy.

Tax wise, it would be a little better to put all my investments inside Superannuation however the downsides to Superannuation are that the money is locked away and not accessible, the stock trading investment options are often limited and fees are payable on top of normal stock trading activity. Beneficiary payments out of Superannuation can also be tricky too and once into retirement phase the fees Superannuation charges are horrendous. The other risk factor of using Superannuation is that the rules are always changing and I am not comfortable having all my eggs in one basket. Anyway, that is my opinion only so don't count it as qualified advice - do your own research.



Biscuit Tin Buried In Back Yard

Nope.  No talents wrapped up and buried for me thanks very much!



Anyway - so there it is.


No point being frugal unless there is a purpose for the savings.


Frugality needs a purpose and a plan. What to do with all those saved pennies from being frugal? Well now you know how I do it.


Take care folks and stay nice

Mr HM (Phil)


Please note the following carefully:
1. I am not a financial adviser
2. I am not affiliated with any of these products (no $$ have or will come my way!)
3. Information shared here is for encouragement and opinion sharing purposes only and is not financial advice.
4. I live in Australia so this post is from an Australian perspective.  Things may be very different in your country.


18 comments:

  1. Goodness me, that's a lot of accounts to keep track of. Just as well you are good with money :-) Superannuation is such a big issue which I never really understood as it wasn't part of my working life for such a long time. You really have to understand it these days though if pensions are not going to be available in old age,

    ReplyDelete
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    1. Being a recovering consumerist, I just needed to clearly separate my living expenses, spending and investments. I used to have them all efficiently out of one bank but the 'holic side of me would dip into accounts for things I shouldn't. This separation works great for me now. I really only actually have to carry my ME card as that is the only one I can spend with. Nevertheless, my system is just one of many different excellent systems folk use.

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  2. You are very well organised with all your accounts Phil. Interesting that you should mention buried talents. I was just thinking about that today, and that those who use their talents wisely would have more given to them.

    ReplyDelete
    Replies
    1. It is a multi-layered little parable that one for sure. The more one ponders, the more it means.

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  3. Thanks for the information Mr Home Maker there are a few options there that we were thinking of getting into re investments that we will look into further.

    We are still saving like crazy for a good deposit our forever purposely designed and built home here :) and have upped our target to saving 50% including garages, verandas etc on acreage and borrowing the rest.

    Take care Phil.


    Sewingcreations15.

    ReplyDelete
    Replies
    1. 50% is a fabulous target - well done for setting this goal. Do a lot of research on investments before you decide, there are some that will pay a bit better than bank interest and still offer a reasonable risk level too.

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    2. Thanks Phil we will definitely do our homework on options out there, fees etc and particularly necessarily the low risk factor.

      Sewingcreations15

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    3. Where have you been, Sewing Creations? Chookasmum and myself (Amish Heart) have been looking all over for you. We tracked Phil down when he left, but didn't know how to find you.

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  4. The only difference we do, is any large purchases ie holidays, we pay by credit card, and then pay from the account, there is a small charge for doing this, but if there are any issues we can go to the credit card company for refunds.

    ReplyDelete
    Replies
    1. That's a good idea too. I still get the 'wobbles' when I have to use my credit card though....

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  5. that those who use their talents wisely would have more given to them.

    ทางบ้าน

    ReplyDelete
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    1. We will explore this ancient piece of wisdom in posts to come - but yes Roth, it seems that this is very true.

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  6. I too have several bank accounts - two online and one with a regional credit union. Capital One (previously ING) allows to keep upto 10 different accounts, so I have one for house expenses, one for insurance and another for summer expenses. Each month I direct deposit money to these accounts. Having several accounts makes it easier for me to save for specific things.

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    Replies
    1. Hi Nil - That is a good idea on how to use Capital One. ING still offers the same multiple account setup here in Australia. I think you wrote a post on this type of thing and more listing 9 things - it was good to read.

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    2. Thanks Phil.
      After reading your post about living on 50% of the income, I plan to try it in September. The other 50% will go to multiple savings account and after tax retirement account.

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  7. Hi Phil. I've just come across the Barefoot Investor so my head has been spinning with ideas and numbers. It is great to see how you're putting his excellent advise into action to achieve your goals. The hurdle I have come to is this: I have chosen to deal with companies who have an environmental and/or ethical aspect to their business and generally aim to avoid doing business with particular companies on that very basis. Whilst buying into, say, the top 200 Australian companies apparently yields great returns, I would really struggle with owning even a small share of a company that represents so much of what I stand against. I wonder if you have had similar thoughts and, if so, how did you reconcile them?

    ReplyDelete
    Replies
    1. Hi Meg - time for you to do some research based on your particular ethics. I know Australian Ethical Investment Ltd offers managed funds, superannuation, pensions as well as being able to also buy them on the ASX (ticker is AEF). This company avoids a whole list of companies who trade in coal, coal seam gas, oil, weapons, tobacco, logging, exploitation, gambling etc etc - that is just one company to start your research. Their returns since inception claim to be around the 10% mark assuming dividend reinvestment. Not sure of the fee structure....hopefully that is ethical too.

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    2. Nice one! Thanks Phil.

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