For just under a year we have been saving to fund our emergency fund. During that period our finances have been on auto pilot. Monthly budget meetings were taking five minutes, and there weren’t many decisions that needed to be made. We finally have our emergency fund to $12,000 or about 5 months expenses and now it is time to attack the retirement and college savings. Seems like a perfect time to shake things up and create more simplicity and freedom in our finances.
Before we get there though, I wanted to thank Wachovia for graciously providing the impetus to simplify our financial system. The final straw was when an unexpected $5.95 charge showed up. I later found out this was a new monthly service fee for electronically downloading account information to Microsoft Money. We were ready to change. I decided it would be helpful to map out the flow of money through our current financial system. I decided to use a Web2.0 mind mapping tool, because it is easy to use, free, and provided a nice interface for wordpress. Here is a the map of our current personal finance system using the very cool bubbl.us interactive wordpress plugin. Feel free to drag and zoom the diagram for your viewing pleasure.
Please email or comment, if you are having problems seeing the clickable diagram.
I did this for a couple of reasons : first, it is hard to keep track of all of the money movement in my head. Second, I tend to be a visual learner. Third, it is would be a nice reference for the family. Finally, I thought it would be neat to share in the blog.
Here are some things that I noticed as I thought about each piece of the system and the money flowed between them.
- Complexity. The system worked not because it was a great system, but because we had developed good habits. There is significant time being wasted when shuffling between all of the accounts.
- The NJM account is pointless. As soon as money is transferred in, I transfer it to savings. Even though all of our finances are joint accounts and managed together, there was needless separation of the accounts. The account happened to be left over from a half-hearted switch to the internet friendly NJM Bank years ago.
- Our main checking account was not giving us any interest. A brief check in Microsoft Money revealed that we carried an average balance of $2,500 to $3,000 in our checking account last year. This could earn us an extra $100+ a year in interest.
- The two day settle period to move funds between checking and ING savings is very cumbersome.
- My credit card is really outdated. There are much better options that have come along in the last few years.
- I liked having access to branch services like counter deposit,bond cashing, change cashing, and international money exchange, etc.
In my next post I will share how we are updating the system to create more freedom for the things we truly. value.