So this is the first step and easiest to implement, the bank account structure. By it’s nature too this step also helps with budgeting and ensuring your rate of saving which I will cover in the next article is at an appropriate level to meet future goals. Alot of this is similar to advice many commentators in this area give and that’s because it’s good advice in general. This will be Australian centric and that is the point, but the core of it could be applied anywhere in the world.
I structure this up so that I have two or if needed when we discuss debt three banks involved. I set these up in a transaction set, savings set and if needed debt set. essentially what you want to do is the following;
For this I’ll have one savings account and a credit card on a low rate, low limit and with no rewards, rewards add expenses and alot of people will never get back what they pay in interest and fees in rewards over a low rate card. Controversial I know huh? Now most articles like this will steer towards either that debt is the devil or load you up on more debt that Trump owes Russian oligarchs, I prefer a middle ground. Both sides have good arguments but cash flow is crippling if the cash dries up as is debt managed poorly, especially consumer debt.
You want the savings account to handle incoming cash and to distribute it and the credit card to have ease of cash flow and to insulate against fraud ect as most cards will offer fraud protection and best of luck managing that kind of issue if it’s straight cash coming from a debit card. The trick here is to have an auto payment of the full balance on the due date, in doing so you should pay no or little fees.
Now in Australia I’d totally agree with most of the recommendations out there and that is to set this up with ING. ING gets recommended by many as there are no fees and as long as you meet their minimum deposit and transaction amount per month. Fees from ATM’s or foreign fees are also refunded. I also recommend their Orange One card as well as it offers low interest, no annual fees and if linked to the savings account you can fully automate paying the balance each month so no interest payments. If you want a bit of a deal click here and enter the code FTU813.
From the savings account you’d also divide up your cash elsewhere automatically on payday so it’s sorted before it can be touched.
Savings accounts should be fairly simple in nature and they are. What you want for savings is a HISA or high interest savings account, while not nearly as useful as they once were they do offer some small return with maximum liquidity which is just as important a consideration.
Now I really only have two recommendations outside ING and you definitely want to do this outside your transaction accounts if possible. Ideally, you’ll automate a transfer to one of these options on pay day to make this as simple as possible. Once done, you shouldn’t need to look at this.
If you need flexibility setup with Ubank and setup a combination of a Usaver Ultra (and burn the card if you need to) and a USaver account. Using these in combination and as long as you meet minimum deposit amounts per month you can get a 2.87% rate at this time with no penalties for withdrawing cash which can be important if you’re using this as an emergency account or as a holding facility for investment funds or as a fund for other purposes. I keep a dollar in my Usaver Ultra and then have an auto transfer into the Usaver from the Usaver Ultra the day after I know the money should be in my account which came from the transaction accounts to keep the maximum rate ticking over.
If you don’t need the cash immediately then look at the RAMS Saver it offers a 3% rate, slightly better than Ubank, however, to get that bonus rate you cannot withdraw funds. If you do, the rate drops to 1.35%. For that reason I recommend Ubank most of the time as 0.13% interest isn’t as valuable as liquidity to me for the purposes of this account.
The nasty part of this discussion, debt. Ideally, you don’t need to have this setup but alot of people do to get out of bad situations in the past. That’s ok, everyone must start from somewhere. Ideally, what you want to do is to consolidate your debt into one credit card on a no interest balance transfer. Do be careful of percentage fees first but as some of these can be as large as several months interest in one go. This, as long as you destroy the card once you get it so you can’t just rollover and continue bad habits is the only genuine way of getting one up on the banks with consumer debt issues and extortionate interest payments.
The advice here is short and sweet, shop around as deals constantly change here, setup an auto payment from your transaction account and do it with another bank separate to the others you’re using.