Top 5 Personal Finance Strategies

It’s been nearly a year since we put our house on the market. In the interim, we’ve completed an international adoption, and, once our corporate relocation subsidy expired, paid several months of rent for our apartment in addition to the mortgage on our home. Needless to say, this hasn’t been the healthiest year for us financially.

But there have been some definite pluses. Aside from the very real non-financial reasons we moved to Texas, we have also taken advantage of some tangible financial benefits in the past year. For instance, all of my income, and part of Karla’s income, is now exempt from state taxes because the states concerned do not have any income tax. And, despite all the expenses, the arrival of our son resulted in some tax benefits as well.

Aside from those definite credits to the income statement, we have really honed our personal finance skills. We’ve always considered ourselves fairly good in this category, paying cash for things like graduate school and basement remodeling. And we were already doing the textbook things when it comes to personal finance: budgeting, tax-advantaged retirement accounts, avoiding consumer debt, etc. However, I’ve found a few simple things very helpful as we have hunkered down to weather the slow housing market:

5. Online Bill Pay

We signed up for bill pay in 2005 after the apartment we were living in mistakenly tried to transfer $90,000 (instead of 1% of that amount) from our checking account as part of our monthly auto-draft program, resulting in a fee that took months to sort out. We’ve never looked back. We’ve found a number of benefits. First, as our apartment experience shows, it is more secure, since nobody has their fingers in your account; all transactions are initiated by your bank, not the payee. The second benefit for me personally is more involvement in our finances. Several bills such as utilities and telecommunications fluctuate from month to month, so it’s not possible to set them to “auto pay” without risking underpaying. This gives me a chance to review the trend each month, but without having to manually fill out the bill. Finally, we have used bill pay for personal debts as well, sending small amounts to friends or family very conveniently (no writing checks, no stamps).

4. Rewards Credit Cards

This is a new one for me, but Karla has been enjoying rebate checks from her card vendor for many years. My historical criterion for selecting a credit card was the interest rate, which is pointless now since we never carry a balance month-to-month and hence pay no interest. Following Karla’s lead, I switched to a rewards card in 2007, and we’ve earned a modest amount of cash back as we’ve put every purchase we can on our reward cards. There are added benefits for shifting the bulk of our purchasing to credit cards. First, it is more secure than using a debit or ATM card since credit cards are protected from identity theft, whereas a thief has fewer obstacles if he obtains your debit card. There is also consumer protection from overcharges or other merchant practices if the product or service is unsatisfactory. Nearly everyplace from fast food places to gas stations accepts credit cards. Now if we can just get Costco on board…

3. Spending Thresholds

This strategy is really a matter of individual family style and approach to handling finances. It works for us, but every family is different. In our case, we have agreed that any discretionary purchase (e.g., aside from routine items like groceries, auto maintenance, etc) in excess of $100 should be discussed in joint session. Perhaps the limit for different families could be $20, or $2000… But we have found that having the threshold helps keep us both in the loop, and also empowered, if we want, to tap our (ever dwindling, it seems) pile of spare change after all the bills are paid.

2. Leftover Lunches

Prior to getting married to one of the world’s great cooks, I routinely ate out—sometimes twice a day. Lunch was an especially glaring example of a poor return on investment; the time around lunch is one of my most productive, and I rarely want to break away for a leisurely meal, which meant lots of fast food (and indigestion). Then there was the sales “steakhouse power lunch” phase of my career, where I had to strive mightily to fend off the threats to my cholesterol, if not my wallet (subsidized as I was by the all-powerful expense account). Now that I am again behind a desk for 45 or more hours a week, I find leftovers of Karla’s meals are wonderful, both to the taste and the pocketbook. By my back-of-the-envelope calculation, leftovers have saved us about $100 each month since June. Not too shabby.

1. Tithes and Offerings

To Latter-day Saints this one should come as no surprise, but I reiterate how we’ve been blessed by paying our tithing and offerings first. If we take them off the top, we don’t miss the money, but we would certainly miss the blessings. Life could always be easier, but it could also be much, much more difficult, and we’re grateful to have been so blessed, and we know in part that is due to our payment of tithes.