Now, I know that you came to my blog today so that I could reveal all my awesome secrets of how to make money have little moneybabies, but that comes later. Sorry, kids. Instead, I’m going to start with the very basics of financial freedom. Now, before you start commenting with all the vitriol of Youtube trolls, let me ask you this: do you pay fees for your checking account? Do you know how to avoid paying interest on your credit card? Do you have personal checks? Do you have a savings account that is accruing interest?
If you said yes to all these things, email me. Perhaps I’ll have you as a guest poster!
However, if you said no to ANY of them, do not pass go, do NOT collect $200. Ouch.
Those three things I listed at the top of this post? Those are the three things you have to tackle if you want to make your own Plan. Trust me. If you try to make a plan before you’ve gotten a handle on these three things, you’ll backslide back into the habits of ignorance, denial and indulgence. That’s not good. These next few paragraphs are going to contain some tough love. Fair warning.
Ignorance. If you don’t have personal checks, you’re ignorant about personal finance. If you don’t know what the APR on your credit card is (or don’t know what APR stands for) you’re ignorant about personal finance. If you don’t know what how your credit score is calculated, then you’re ignorant about personal finance.
Denial. If you don’t know how much money is in your bank account every day, you’re in denial. If you hand your debit card over for purchases and you’re unable to remember how much you just spent after you walk away, you’re in denial. If you think moving your money from a savings account you’ve had since you were 18 to your daily checking account every week isn’t going to hurt anyone, you’re in denial.
Indulgence. If you pay for the most expensive Netflix choice, you’re indulgent. If you get your nails done every two months, you’re indulgent. If you pick up Starbuck’s every morning on your way to work, you’re indulgent.
Ignorance is robbing you–literally– of your money. Simple as that. Denial? Refusing to check what the weather will be today means you’ll get soaked when it storms. Indulgence is sneaky– it can hinder you from financial success, but it does it with a smile.
I know it seems hard to take on all three of these things at once, so just know: I’m not asking you to do that. Gotta walk before you climb, right? So let’s handle them “bird by bird” as a friend of mine says.
Also, notice I never used the words, “conquer,” “beat,” or “overcome.” That’s because you won’t. No one is perfect. I certainly still give in to the three things because, well, it’s easy. We can’t always be knowledgeable about every single thing about money. There are going to be some days where we didn’t check to see how much money we spent that day. And saying no to every single indulgence would make for a boring, sad life. So if I’m not asking you to conquer the three things all at once, what am I asking you to do? I will control my money, so money doesn’t control me. Control it. The word control comes with the idea of wrestling something difficult into submission. Sometimes the beast wins, sometimes you win. It’s about balance. We don’t want the three things to control you anymore, right?
So, onwards to the first lesson in helping to quelsh your ignorance about money.
Checking accounts: lesson one.
Riddle me this:
Should my checking accounts have monthly maintenance fees? Should it accrue interest? Should I have checks for this account? Do I have to keep a minimum amount in it? What are the penalties for over-drafting?
Ding ding ding! Time’s up! The answers to these questions should be: No. Yes. Yes. No. I control the penalties.
If your answers don’t match up with the correct answers, you need to make some changes.
- Change your existing account to a free checking account (meaning, it costs you nothing to have it; no monthly maintenance fees, few or low-cost service fees for things you might not ever even use, no high minimum deposit, no ADB clauses etc.) and/or open a free checking account that gives you interest (meaning, your money will make money just by chilling out in this account). If you’re a student still, the Big Banks (Chase, Bank of America, Wells Fargo, etc) have free checking accounts for students. If you’re not a student any longer, you can try going in to the nearest location of the bank of your choice and telling them you plan on attending graduate school and that you want the free student checking account. They’ll probably believe you and give it to you (I know this from experience, and I don’t even plan on going to graduate school any time soon, but my Chase account is free until I’m 25). Or, you can get a free interest checking account at Ally.com, an online banking firm which I use and LOVE. The only inconvenient thing about it is that there is not a way to deposit cash. Right now what I do is deposit cash in my Chase account and transfer it (for freeee) to my Ally account. Where it hangs out and gets money. Because divas get money, right Beyoncé? If you don’t have a personal checking account of your own, you need to get one today. Right now. It’s not hard. Sign up online– it will take 10 minutes. You need $1 and your personal info. Usually free checking accounts don’t have a high minimum deposit amount you need in the account to have it open– this is what you want. Speaking of which– if you do have a minimum on your existing account, say of $500, that you’re not allowed to touch (not allowed to touch your own money?! Ridic.), do you know what it’s used for? Check out the glossary.
- Get checks for your existing account or for your new account. Why? You’re going to find out that there are some things you can’t pay for in cash or with your card, and you’ll be tempted to get a money order because you don’t have checks to pay for things. But money orders charge a user-fee of about $2. That’s $24 a year you’re wasting on ignorance. Also, if you’re paying rent or utilities to someone in your house and you “round-up” your $39 electricity bill to $40 because the ATM only gives even bills, you’re losing money if you don’t get your change back. It may not seem like much, and “you don’t care, it’s just a dollar,” but in a year, it’ll be $12-24 you’ve WASTED. If you had a check, you could write the exact amount owed and not lose any money ever. I don’t care if your bank sucks and charges you for a book of checks. Put on your big girl panties or big boy undies and get one book of checks. Hopefully some of you already have good accounts that give you free or discounted checkbooks. And if you open a new free checking account they usually come for free as long as you choose the option to have them. Which you should.
- Find out what happens to you if you overdraft. Chase gives you until midnight of the day you overdrafted before they charge you the $34 overdraft fee. Ally charges you $3 per overdraft. ING’s Electric Orange banking gives you the option to borrow money from them instead of overdrafting and charges you pennies on the dollar for interest, for up to 30 days. Almost every bank will give you the option of linking your checking with your savings so that any amount you overdraft is moved from savings to cover the expense. You can also choose to do this with your credit card, if your checking and credit card are from the same institution. Or you can do the smart, cautious thing– you can opt-out of overdraft. If you swipe your card for a $15 purchase at Central Market and you only have $14.99 in your checking account, your card is denied. (Which can be embarrassing, but if you weren’t in denial about how much is in your checking each day, you wouldn’t have been buying $15 worth of stuff you couldn’t pay for.) Bottom line: overdrafting is EXPENSIVE. The fees stack up daily, making the $1.99 purchase you overdrafted cost you -$1.99 for the overdraft, -$34 for the overdraft fee and -$15 for each day your account is overdrafted. Make sure you protect yourself from these insanely costly fees, even if you’ve never overdrafted before and never plan to, by knowing how to avoid the fees and choosing which way works best for you.
All right. So those are your assignments for the week: a checking account check up. We’re going to stop being ignorant about our money! Next week, we’ll continue with conquering ignorance in other areas of your financial life, like savings or credit.
One last thing:
It may seem hard, or boring, or annoying, or tedious, or whatever negative connotation you have… to do these things– you can comment, email me, FB chat me, tweet me at @kgraves23 to get help along the way. I want each of my readers to start setting up their financial accounts in a way they can control and in a smart way. If you need help, let me know! And if it seems like a silly way to spend an evening, just do what I do–
Do it with wine and Beyoncé.