Anti-Budgeting Tools – Foundations of Financial Freedom Part III

Last week for the Foundations of Financial Freedom, we discussed budgeting, anti-budgeting, and the mindset of abundance versus scarcity. This is because the week prior we discussed savings rate. As you now had money and needed to figure out what to do with the extra savings. This week, we will take a look at some anti-budgeting tools to help you save money. Or rather, how and where to direct the money and store its value.

Tool 1 – Checking Account & Direct Deposit

You most likely already have this. If you don’t, it’s a good idea to get one. You can choose whatever bank would work best for you, whether it’s online or in person. I personally kind of like being able to access my bank in person for checking account issues. Since I live in the Northeast, I’ve been using TD Bank since I was a kid.

But, if you carry a bunch of cash on you or get paid in cash, I’d wager it’s not the best idea to keep it on you. Or to stuff it into your mattress. So, if you do get paid in cash – take a chunk of it, go directly to a local bank, and stuff it into your checking account. If you need to pull it out for whatever reason, you can with your debit card that is provided to you upon getting the checking account. But this will likely create a lot of friction and desire to not spend that money as it’s squirreled away elsewhere, thus forcing you to save some money right off the top up-front.

Alternatively, if it’s possible to get paid through direct deposit – please do that. I genuinely don’t know why anyone would not. It usually even becomes available on the day of payment instead of receiving a check and then running to the bank to cash it. I must acknowledge, though, that it is entirely possible to deposit a check digitally nowadays. It does seem easier, however, to have someone else do it for you. And the friction of not really seeing the money and only seeing it be put away can also create enough friction for you to save money right off the top and then disregard it and go on with your life.

Tool 2 – High-Yield Savings Account

Sure, you can just get a savings account at that local bank you got your checking account at. It will likely be quite easy to transfer money. However, you may notice that the savings account has a pitiful interest rate, usually a hundredth of a percent!

This was the account, I used to have. That’s not even a full percent per year! That’s just about nothing! In all the years I held money in this account, I barely received a cent. Now, I know that savings accounts are not designed to make you incredible amounts of money, they’re mostly for storage. But – they can at least do better. And they do.

Enter the high-yield savings account. Called so because its percentage rate is genuinely 100 times larger than this pitiful 0.02%. For example, I use Ally Bank as I was very comfortable with it and heard nothing but great things from personal finance experts who most often used it themselves. It also currently gets a crispy 2.10%

Since 2018 when I first learned of a High Yield Savings Account, plenty of other banks have caught on to the demand. It’s also not very hard at all to connect your checking account at another bank to the other bank, though they often are at banks that do not have physical locations. So if you want a physical bank for a savings account, look around for that, otherwise, try an online one. And once you are set up, just shovel some amount of money you want to save into the savings account and just do not look at it.

Tool 3 – Retirement Accounts (401ks, IRAs)

If you are at a cushy job that provides a 401k – great! You may have been saving money this whole time without realizing it. You also get some tax benefits from doing so too, and generally never even “see” the money. So you do not take it into account once it gets pulled out. Additionally, employers often provide a percentage on top of what is pulled out and saved, though I have some gripes on that.

Where we are right now, toiling around with a 401k or IRA is too advanced. And you should know that you can’t efficiently pull the money out once it’s in there, unlike a checking or savings account. It gets shredded up by taxes and a fee. But if you have one, and don’t know what to do with some money you have left over after stuffing a happy amount into your savings account and/or checking account, feel free to throw as much into the 401ks and IRAs as you feel comfortable with. We will explore more later with these.

Tool 4 – Brokerage Accounts

Again, where we are right now, I believe Brokerage Accounts to be too advanced to simply tell you to jump into and start buying stocks like it’s your first time in Atlantic City. However, if you have something like a Robinhood, WeBull, or M1 Finance account, it can be a place to store some money so that you do not look at it. Cash also sometimes gets an interest rate on it depending on your brokerage account. But essentially, unlike a savings or checking account which is cold hard cash simply stored away, this account is meant to be used to buy, hold, and sell stocks on the stock market.

You will generally not get shredded by taxes or fees for simply holding money in accounts like these and depositing or transferring it out. You will, however, if you buy stocks and make money. So, if you’re happy with how you are saving money with your checking, savings, and retirement accounts, feel free to look into brokerage accounts as another place to store money for now.

Tool of Tools

So those are some of the general tools to help you anti-budget. As a reminder, that is to throw money you want to save somewhere and simply ignore it. Then use the leftover money you have to spend on expenses and fun. It makes life easier as a way to set and forget money-saving because you do it up front and do not bother with it.

Your checking and savings accounts are the bare basic tools to save money in a separate place so that you do not touch it. It’s in the name of savings accounts, even. But there will come a time when you feel uncomfortable having so much money saved away into savings accounts, which will necessitate the retirement accounts and brokerage accounts even more.

Just know that tools 3 and 4 are things that exist, can be used, and may even be used right now by you. Tools 1 and 2 are what just about everyone ought to be used to store and save money, and they are absolutely what you should use if you are just beginning.

As we have covered saving money and where to put it, next time let’s define what Financial Freedom really is and take a break from settling down a bit with savings.

Godspeed,

Dennis