Putting Your Money to Work
Do you ever think you could be better at managing your cash? Do you see articles go by on the internet about how you should be doing more with your cash but have no idea where to start? Do you wish there was an article out there that wouldn’t give you advice that “depends on your situation” but simply tells you exactly what to do? Keep reading.
Below is a Google Sheet I use to manage the majority of my finances. It includes a section for where all your cash and cash targets, a section for current credit card spending, a section for short to mid-term spending plan, as well as a section for income and expenses that underlies the entire sheet.
Previously, I posted a few articles about how I managed to Pay $55k in Loans in < 4 years as well as the Google Sheet I used to keep track of everything. While this new article addresses ways you can plan out income and spending AFTER you’ve paid off your loans, you can easily adapt it for your needs while still paying off loans.
New Google Sheet Here — Monthly Cash Analysis
SECTION D — Bottom Right (Quadrant IV for you Geometry fans)
Please turn your attention to cells H14:K20. Why’s he starting with the bottom right? Let along section D? This section gets us started, but I ended up putting it in the bottom right because it doesn’t change that often, and it’s not all that interesting to look at. It does, however, set up some of the foundations of the other sections. We’ll be going counter-clockwise from here.
Cell I15 is your total income (after taxes, withholdings, etc.) — read: the amount of money you deposit into your account. Cell J16 is your rent (negative). Cell J17 is your monthly spending; I use credit cards for 99.8% of my money outside of rent (paying off the balance each month in FULL). Cell K18 is the amount of money you’re trying to save/invest each month. Cell K19 is for larger purchases saving. The totals column exists if you want to vary these details between different accounts.
Make sure you get Section D correct as it impacts many parts of the other sections.
SECTION C — Bottom Left (Quadrant III)
Moving counter-clockwise from Section D… Section C is all about keeping track of your credit cards. I use Mint for a whole number of things like budgeting and tracking, but I never was able to use it in a way where I felt like I was actually on top of the dollars going in and the dollars going out until it was too late. Thus, I created this small little section, I was able to extrapolate from trends I found in Mint to come up with my desired spending targets and track them in section C.
To start, you may need to modify this section based on the number of credit cards you use each month. If it’s more than 3 though, I highly recommend trimming it down unless you’re the type of person that really loves managing credit cards (in which case you probably don’t need to read about section C).
Column A is the name of the cards. I use 3 Chase cards. One is Amazon because it’s 5% back on Amazon purchases which I use ALL the time — I actually just got hit up for the annual fee and decided to cancel my membership so perhaps a future article about life without Amazon for however many months, or weeks, I make it. One is the Chase Sapphire Reserve — 3% cash back on dining and travel (my top 2 spending categories). The last is the Chase Freedom Unlimited — 1.5% cash back on everything else. For more information on credit cards, I highly recommend The Points Guy. Whatever you do, do NOT cancel old credit cards. A longer credit history positively impacts your credit score so if you have too many, just stop using them. Then just use those once in a while for tiny purchases and pay it off immediately.
Column B and C are for posted and pending transactions on each card. I found breaking these out was easier than having to do the math all the time — let the computer do the maths. Column D is for Paid/Reimbursed amounts. Have a payment that hasn’t reflected in pending on your card? Expecting a reimbursement for a work expense coming up? Put those in column D.
The final part of Section C is the bimonthly/monthly analysis. The targets are pre-populated from your spending in Section D. You’ll then see your variance to target cells C21 and C22. Depending on where you’re at between pay cycles, you’ll want to keep those variances positive. Positive variances equate to extra dollars at the end of the month (or pay period) which you can allocate however you want — debt, saving, investments, new toys, etc.
SECTION A — Top Left (Quadrant II) — Where’s my money at?
I have three separate institutions I leverage for everyday cash, saving, investing (not counting 401k), credit cards, and expenses. These institutions are Chase, Charles Schwab, and Wealthfront, each of which is listed in section A.
Starting with the easy one, Chase. I use Chase because they’ve got good credit cards, and they have all the features you’d want in a traditional bank — direct deposit, bill pay, chase QuickPay is really nice (way more secure than Venmo), and more. I keep $1000 in my checking and $1000 in my savings — both for cash flow. I tend not to have expenses exceeding $1000 often unless you count rent so that’s a good number for me. I’ve had both in the low hundreds in the past, but you have to be really careful when your cash on hand is that close to the edge.
Why separate checking from savings? There are a few instances where my checking goes below $1000 (e.g. when I have to QuickPay someone, my monthly ComEd bill, etc.). However, separating money into a Savings account plays a trick on my brain. If my checking dips below $1000, I don’t really care. But if I need to dip into my savings account, suddenly my brain has a minor anxiety attack and pushes me to reevaluate my entire life; thus, I never touch this money.
I’ve had a Charles Schwab brokerage and checking account since college. The accounts charge no fees (I can’t remember what the requirements are to keep it free but they’re very minimal, if any). The checking account will automatically pull liquid cash from your brokerage account to avoid overdrawn fees. Finally, the best part is that there are NO ATM FEES EVER!*
With most banks, when you use an ATM that’s not theirs, you pay the ATM’s fee AND a fee from your bank. There are many banks that promise no ATM fees but many of them simply don’t charge their own fees, BUT you still have to pay the ATM fee. Schwab on the other hand reimburses you for the fees you incur from the ATMs you use. So yes, technically not no atm fees ever; you pay them at the time you withdraw from the ATM, but each month Schwab tallies up all those fees and deposits a full reimbursement into your account.
Why $3,000 you ask? Well, because there is $2,000 between my chase accounts, and the monthly expenses in this example spreadsheet are $5,000 — $60,000 a year /12; for simplicity, we’re ignoring taxes (if only, amiright?). Having a month’s worth of expenses in cash flow really helps put my mind at ease. Further, I’ve seen way too many movies where a decent chunk of available cash really comes in handy. In the highly unlikely event I need to go on the run, I’m hoping $3000 is enough to at least get me started.
Now to the FUN STUFF. I first invested in Wealthfront almost 4 years ago. I highly recommend it as a product for investment (shameless referral link). When talking to people my parents’ age, they talked about investing either actively or passively. Actively usually meant having to pay attention to the market every day and paying fees on individual trades. Passively meant suiting up for a fancy meeting with a broker and paying them what Wealthfront does with software (for free initially, and cheaper after that_) so they could afford a more expensive suit than you. In fairness to brokers and financial advisors, they play a pivotal role in society. However, they’re not suited for the first time investor with a small amount of money, no kids, no house, and 40+ years from retirement. Save those finance folks for when you’re forty.
However, the purpose of Wealthfront as it sits in Section A is all about their new CASH account. I used to have most of my emergency savings in a dismally appreciating savings account (like the Chase one above). However, many banks are now offering higher interest rates on savings accounts. I like Wealthfront for a myriad of reasons, but the best one — it’s the HIGHEST interest rate on the market at the time of this writing.
Why $10,000 though? And what are the numbers also labeled as Wealthfront? In this example, there’s a total of $12,500 in the Wealthfront Cash account, but some money is earmarked for different things. The $10,000 amount is an emergency fund. There’s $5,000 in cash flow (from Chase and Schwab above) plus $10,000 in savings for a total of $15,000 — divide by $5,000 of monthly expenses and you get 3 months of emergency savings.
The other two amounts are for saving for big purchases. Want to buy new furniture? Take a vacation? You wouldn’t want to bother with the hassle of investing in the stock market to budget for these expenses, but you also don’t want those savings getting you NOTHING. The Wealthfront cash account is perfect for this situation. These two rows are referenced again further down in row 11 so you can get an idea of what your total cash is (cell B10) as well as the total cash you’ve saved that you haven’t already earmarked for other purposes (cell B12).
Now you’ll notice there are target numbers in column D as well as a variance on column E. Your goal is to get the variance column to as many zeros as possible — hopefully without setting your targets lower. In this example, the cash flow targets are met; I personally prioritize month to month cash flow for possible short-term problems over mid-term emergency situations.
The emergency savings goal still has a variance though. You’ll eventually want to get to 6 months worth of emergency savings. I cheated this goal a bit since doubling your emergency savings can be overwhelming. As you’ll see later, $1,750 of the $5,000/month is for saving/investing. In an emergency where you’d need to tap your emergency fund, you likely will stop saving/investing. Thus, $3,250*6=$19,500, or just under $20,000 ($15,000+$5,000 cash flow).
SECTION B — Top Right (Quadrant 1)
Section B is all about mid to long term planning. You can certainly extend this section for as many months as you like. Starting with cell I2, this cell is a formula combining your Saving and Purchases line items from section D. Cell I2 is your top line. The cell right below is for adding one-off bonuses should you be expecting any. Tend to make out like a bandit at Christmas time? Having a graduation party soon? Or simply have an annual bonus at work? Use the shaded gray cells on row 3.
Quick note about bonuses. I’m talking about big time bonuses on the order of hundreds or thousands of dollars. Rule #1 — never depend on bonuses. Depending on money you don’t yet have is a path towards misery. Further, don’t spend your entire bonus. Once you get the hang of managing your finances, there should be no reason you need to spend 100% of your bonus. Reserve AT LEAST half to go towards saving/investments for long term financial goals. I try to aim for 60–70%.
The next two rows (4 and 5) are for where the majority of my money is going — either Wealthfront cash or Wealthfront Invest. I currently have mine set up (and replicated in the example) for all 1500 of my savings (from section D) to go to Invest as that’s where I’m putting money for the long term goal of buying a house. Previously, the majority was going to Cash until I built up my emergency fund.
Now the REALLY fun stuff. Corresponding shaded gray cells in columns H and P are for budgeting out larger expenses. I’ve got $250/month slated for big things like these purchases, and as you can see the next few months are all about making sure I can afford that new Pixel 4 this fall. I’ve also got American Giant up next since I really like their stuff, but I haven’t gotten around to planning that out just yet. Just enter a description in one of the cells in column H along with its corresponding price in column P.
$250/month sound like a lot? That’s okay. This number was at $0 for me for a number of years while I was paying off my loans. I was always on the lookout for great deals on things I needed/wanted — Kohls and Target both have really cheap clothes and accessories, Amazon prime day has loads of deals on electronics you might want, lagging your smartphone upgrades 2 years behind new releases will save you hundreds; just plan in advance.
$250/month sound like not much? Sounds like you may make more money than I do, or you have different financial goals than me. To each their own. My personal opinion is that few people in their 20s need more than $250/month to save for big purchase wants. However, I also rent so I could see how homeowners may have much larger expenses. In that case, I’d recommend dipping into the $1500/month slated for investment for home improvements. Remodeling, new appliances, etc. can be considered investments in the value of your home.
That’s it! Please share your comments, feedback, own personal experience. I’d love to hear more from others and how they manage their cash. Also, don’t hesitate to reach out if you have any questions.
DISCLOSURE: The author is self-described as “Merely a Dude on the Internet.” He does not possess any legal or financial qualifications that incur liability for the advice contained herein (he’s merely seen enough television to use “herein”). Any idea, advice, or otherwise that is portrayed in this article is limited to the direct experience of the author and is shared under the heading of “possibly helpful to others” and is not intended as specific legal or financial advice (or any other advice for that matter).
