This is a question I get often, and I’ve decided to finally answer it in full. Everyone wants to know how their favorite financial blogger manages money (hint: that’s Bitter to Richer) after all. I’m sure a lot of you are eager to get to the meat and potatoes, but I think you’ll find that you won’t really be surprised. I don’t have any major curveballs, and how I manage my own finances is pretty close to what I preach in my articles. I’ve found that the best thing for my finances is to get everything as simple and consistent as possible. Consequently, you’ll notice I’ve automated a lot of things too!
Where I’m Starting From
First off, I think it’s important to set the stage. I value my privacy, but I don’t want any of this to be too out of context to fully understand.
So, I’m a senior security engineer at a big company. The pay is upper middle class for my area, and it has great benefits (that I use to my advantage all the time). I’m happily married, and we have our own house. I’ve managed my finances well since starting out, but I’m really only a few years into my career. Consequently, my net worth is quite substantial, but it’s also not a shocking amount given my income (but it may be shocking given my age).
All that is important to understand the gist of how I do everything else. If you are in a stable job, but starting out or still early in your career, a lot of this may be particularly helpful for you. If you want to know more about me and my situation, you can always read the About Me page.
Sources Of Income
Currently our sources of income are pretty straightforward. I have my job, my wife’s job, Bitter to Richer, and some extra money from consulting. Overall, it’s not hard to manage our income since it is pretty consistent. It comes in, and then most of our savings and investments are automated – which I’ll get into in a moment. I had businesses in the past, but at this point they’re disbanded or sold. If you currently run your own business, I’m sure you can appreciate how complicated it can get to keep everything straight on your own. Not having to deal with that is a breath of fresh air for now.
Using Secondary Sources Properly
There is one more thing to discuss when it comes to sources of income. Having multiple sources helps – a lot. You can certainly live on just one source of income – and many do. However, ideally the goal should be to have multiple, but only use one to live off of. That way you can just invest everything else. That’s currently the system I follow too. We live off of just the income from my 9-5 and pretend like the rest doesn’t exist. Because of that, our savings and investments grow rapidly each year – almost every month there is a nice and steady increase!
Budgeting
If you need help with budgeting, check out my complete guide. The ideas in it aren’t terribly far from what I actually do. I use the budgeting template in that guide, which you can get in the welcome email when you sign up for the Bitter to Richer newsletter. That version is a bit more generalized for more people to be able to use it, but my own is quite similar.
I don’t use a 50/30/20 tactic or anything like that. However, my thought process is still straightforward. Our needs are our needs, and that is that. I don’t skimp on food, particularly so that we can be healthy. Other things like fuel, maintenance fees, toiletries, and utilities are mandatory and are the way they are mostly because of where we live. All-in-all, I’m happy with the “needs” expenses. Our needs are met, and enough is put towards them so that we’re comfortable, but it certainly isn’t luxurious either.
As for our wants, we each get a little bit of money we can spend on whatever we desire each month. It isn’t much, but it’s more than enough in my opinion. Everything else is invested or saved. Again, we live as if we’re living on one income, so our spending doesn’t exceed the pay I get just from my day job.
I do have minimums on my investment goals, but we blow those out of the park. It took some time, but I think I found a nice balance between comfort and spending, and being able to invest and catapult my finances.
Best Ways To Save
There are several methods I’ve found that help me cut my expenses by a significant amount:
- Once you’ve set a budget, and tweaked it accordingly over a few months, don’t make any serious changes without an excellent reason. Generally your budget should only increase with major life events. This will prevent lifestyle creep as much as possible.
- Once per month, go over your finances. Track your spending, monitor your overall health, and pay any bills you haven’t yet. In other words, set aside some time every single month to do a bit of a check-up on your finances.
- If some of your spending doesn’t line up with your goals, recognize that it may be time for a change.
Credit Cards
Another thing I like to use is credit cards. However, I never carry a balance – I pay it off in full every single month. Some people might be puzzled at that, but there are many reasons to use a credit card, and going into debt isn’t one of them.
- It helps you build your credit score up, and fairly fast. In fact, a credit card may be the earliest opportunity you have to start building your credit score. For those who are young enough to take advantage, consider opening one and just use if for something like gas, and watch as your credit score goes up.
- It limits liability. If someone stole your debit card and spent a bunch of money, you may be in a heap of trouble. However, if someone uses your credit card information, it is much easier to get that removed from your statement and get a brand new one shipped.
- Credit cards often have rewards. They usually aren’t massive, but they can add up to a surprising amount. I like cashback rewards. They let me get around 1-3% back on every purchase I make with my credit cards. Again, it isn’t a lot, but it adds up over time and is a nice perk.
Betterment
A service I absolutely love is Betterment. There is a lot to it, but I’ll keep it simple. Betterment lets you set up funds for different things you might be saving up for. They could be for a vacation, a new car, a down payment on a new house, or anything else you can think of. The process is simple, and you can set up automatic deposits into these different funds. The funds can be what is essentially a savings account, or you can put it in investments managed by a roboadvisor.
Betterment makes my life a lot easier. I use it for all of my “short-term” savings – things that I’m saving up for over a few months or a year (maybe two). As I said earlier, I like to keep my finances simple and this helps me do that.
Banks
I’ve written about different banks and solutions at length before. A lot of people get hung up on this topic, but it isn’t one that should be a huge debate. Consider the options available to you and pick whatever best suits your needs. Personally, I have two main banks. One is primarily used for my emergency fund, because it has a much higher interest rate. The other is a brick and mortar bank. It has some nice quality of life perks that come with it, including easy access to withdraw my cash as needed.
Checking Accounts
Checking accounts are usually an easy decision. Focus on something that won’t have fees, has great accessibility, and then consider any other perks it may have. Many online banks have good checking accounts, but I find it hard to beat the accessibility of brick and mortar banks (or credit unions) that have local branches I can use.
Savings Accounts
For this, I highly recommend using an online bank like Axos. Currently, they have a top notch interest rate that is pretty hard to beat, and no brick and mortar bank will come anywhere close. It won’t make the value of my money keep up with inflation, but it still helps.
Emergency Funds
My emergency fund is one of my savings accounts (through an online bank). I have over 6 months worth of expenses saved up. If you’re just starting out, I suggest saving at least one month worth of expenses. Try building up to 6 months worth of expenses as you can. After that, evaluate your situation and see if you need to save up more. For me, the sweet spot is 6-12 months, but I have no need for more than that currently.
Investments
My investments are fairly simple. I do have accounts open with multiple brokerages, but there are just a few key things to discuss.
M1 Finance
M1 Finance is currently my favorite brokerage. I love the customization they have and how easy it is to automate my investments. I currently have a large sum with them, and it’s in a highly diversified portfolio. They have a lot of index funds and ETFs at their disposal, and I appreciate how great the platform is for investors of all skill levels.
Retirement Accounts
I do have investments in accounts that aren’t tax-advantaged, but my first priority is investing in the ones with tax-related perks. You can read about them in my article on retirement planning, but there are only a few takeaways. I always meet my employer’s match, and I think it’s best to max out a Roth IRA too (assuming you haven’t hit the income limit).
Working Based On Goals
It’s important to set solid, strong financial goals for you to work towards. I always have some of mine in the back of my mind as I make financial decisions. If you want to get a free financial goals worksheet, sign up for the Bitter to Richer newsletter. We send it out in the welcome email, in addition to the budgeting template.
Tracking Net Worth
I think tracking your net worth is worthwhile. It can really help with setting your financial goals, and it can give you a nice snapshot of the current state of your finances. Personal Capital has a free net worth calculator for you to use as well as a multitude of other free tools. If you don’t use Personal Capital, I couldn’t recommend it more. It has a plethora of tools for you – and again, they’re free.
Conclusion
That’s how I manage my finances. It’s a long breakdown, but it’s not complicated or particularly crazy. Simple and straightforward is best in my opinion. To see more of my opinion on managing my finances, be sure to read more of my articles! If you have any thoughts of your own, feel free to leave a comment – I’m always interested in what the Bitter to Richer community has to say.
