4 Critical Tools to Build and Manage Wealth

In this Blog post we want share the types of resources and tools that we use to manage our finances, to include everyday banking, cash flow management, budgeting and investment research.

Let’s start with our philosophy for money management, which is “You can’t manage what you don’t measure”.  So, anyone who plans to take ownership of their financial future, needs a foundation to build on.  So, whether you use the back of an envelope, the cash envelope system, a checkbook register, or software, the key is to manage your money rather than your money managing you.  As Dave Ramsey puts it, you must be intentional with your money, meaning you must have a plan and implement a process and system to decide what you will do with each dollar, as they come and go. 

Tracking Budgets and Expenditures

Mrs. FiredUp and I have always used some sort of software and we recommend anyone considering a FIRE future to do the same.  We used Microsoft Money for many years until the time that Microsoft discontinued it.  We’ve always used some variation of category budgeting, allocating a certain portion of our spending to significant categories, and a small portion to a catch all.  When Microsoft discontinued Money, we switched to Quicken. Quicken has served our needs well over the years and offers various versions based on your individual need.  Recently Quicken integrated Zillow so we can now track our real estate values, as well.  One thing I wish Quicken would improve is categorizing investment mixes.  The possibility exists to do this within Quicken, but it’s a pain. When we need to determine our mix of investment types for rebalancing, I do this in a spreadsheet.  Since I only do this a few times a year, it’s not a huge effort, but annoying none the less.  I’m the type that likes to “keep score”, so the ability to see our net worth over a number of years is very powerful and gratifying. 

More Software Tools

Intuit also offers a couple of other tools, Mint and Quickbooks.  I have extensive experience using Quickbooks, having used it when I was running my consulting business.  It is an extremely intuitive tool and the learning curve to use it is short, as long as you understand basic accounting.  It is very much business focused, so managing your personal finances in Quickbooks is likely overkill, so I do not recommend it.  Intuit also offers Mint, a free tool for managing your personal finances.  I’ve never used it, but the fact that it is “Cloud” based rather than on my personal computer, I’m highly concerned about security.  Rarely a day goes by when we don’t hear about another security breach where our personal information is getting stolen.  All of our online accounts are connected to Quicken, so we download the daily updates to all our banking, brokerage and investment accounts.  Philosophically, Mrs. FiredUp and I collaborate on all major decisions regarding money and budgeting.  When it comes to planning and monitoring our finances, its an open book.  Maintaining these finances on the PC makes it easy for either of us to monitor status, cash flow, and projections as needed.  Another tool I’ve come to know is Dave Ramsey’s Everydollar. With all these tools you can manage your budgeting and tracking either manually, or by connecting to your accounts via secure connections. 

Credit and Credit Cards

We maintain two credit cards, which we pay off monthly or semi-monthly. All our daily expenses and recurring bills are paid with one of these credit cards.  Nearly all of our monthly bills such as the electricity, natural gas, water/sewer, and cable are set up to pay automatically.  These expenses are pulled into Quicken as the transactions occur.  This makes our life so much easier as we don’t have to “remember” or more accurately “be bothered” to pay those bills.  We do not pay bills directly from Quicken, although this option is available.  Additionally, credit cards normally come with a certain level of protection against incorrect or bogus charges.  The credit cards also have extensive security monitoring along with a number of other benefits, including rewards/rebates.  In the 26 or so years that we’ve used credits cards, we’ve never paid an annual fee or paid interest.  The credit card is a valuable tool in our financial tool chest.  

Why two credit cards you ask?  When you are Financially Independent, and debt free, you don’t have other ways to maintain a credit score, such as mortgages or auto loans or other consumer debt.  We’ve always been conscious of the benefits to a good credit score.  Therefore, we each are listed as primary or secondary users of these cards, which helps to maintain scores around 800.  As an example, when you purchase homeowners or auto insurance, the insurance company will check your credit score and you’ll get a lower rate for having a high credit score, as the insurance industry views you as a lower risk customer.   

Credit Reporting and Credit Freezes

Credit freezes are a powerful tool in our financial tool kit.  It is sad, but stolen identities are a common crime.  We’ve had our credit card numbers stolen a number of times, each occurrence caught by the credit card company.  So, we have credit freezes on our credit accounts at Transunion, Equifax and Experion.  The service is free or low cost, but the peace of mind is invaluable.  If you need to temporarily unfreeze your credit, such as a screening by a potential employer or an insurance company needs access, you can simply have the account unfrozen temporarily, then the freeze gets reactivated automatically when the temporary period ends.  We highly recommend this.  Additionally, we recommend checking your credit report annually to ensure there’s no surprises.  You can order your annual reports for each of the three agencies online at https://www.annualcreditreport.com/index.action or by phone at 877-322-8228. You can also request your credit file by mail. 

Banking

Over the years we have banked with several banks. It seems like every year or so these banks increase various fees or change types of accounts. So a few years ago we started doing our everyday banking at Charles Schwab.  We find the benefits far outweigh the few inconveniences.  Charles Schwab is almost exclusively a virtual online bank.  They do have some branches in major cities, but they definitely are not bank branches.  The branches exist, almost exclusively to cater to the Schwab Brokerage clients.  You can take a check to these branches to process a check deposit but it has to go to a brokerage account and the checks are mailed to a processing center.  We were introduced to Schwab by our Financial Planner when we were assessing our readiness to retire.  We’ve found the customer service to be excellent.  Since the Schwab network is largely virtual, they reimburse us for the fees associated with using their ATM card.  In the rare event that we need cash, we can use any ATM in any network and get reimbursed for all associated fees at the end of each month.  One of the biggest benefits is that any check we deposit via their mobile app is posted and the funds are immediately available. There’s no waiting for a check to clear/post.  We even use Schwab Bank accounts to process tenant and Property Management processed rent payments, many of them processed via ACH directly to our Schwab accounts.  For bills that don’t get paid via credit cards, we use the Schwab Bill Pay feature.  Some recipients charge a fee to process credit card or debit card transactions, so we avoid these fees by using this Schwab service.  All Schwab accounts are listed in the Schwab portal, for both Schwab Bank and Schwab Brokerage. 

Investing

We do nearly all our investment research, trading and management through Schwab Brokerage accounts.  We can do all this personally, without relying on an investment advisor.  In the event that we do need support, Schwab has excellent advisors available, as needed.  Recently, I wanted to move some investments to conservative options, and the Schwab Fixed Asset advisor helped me make these trades.  There’s no fee for this support and since they are experts in their area, the advice is second to none.

Self Directed IRA’s

We were introduced to Self-Directed IRA investing in 2006.  I attended training on how to invest in bank foreclosures and the instructor highly recommended the use of self-directed IRA’s and specifically the custodial services of Equity Trust Company, who we’ve used ever since.  The self-directed IRA is a powerful took for those seeking investments not offered by custodians of traditional IRA accounts.  I have processed dozens of buy/sell/hold real estate transactions through my self-directed IRA.  Equity Trust is fully focused on ensuring clients are in compliance with the IRS rules governing self-directed IRA’s.  Having a custodian oversee every transaction of your real estate business can take some getting used to, but I can attest to the wealth building power of combining real estate investing with the self- directed IRA as part of building and managing a diversified portfolio. 

Tools we recommend for managing your finances:

www.Quicken.com

www.daveramsey.com/everydollar/

www.Schwab.com

www.trustetc.com

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