Where did we leave this?
Get Yourself a Good Bank to Start Your Bucket System
If you’re reading this I’ll go out on a limb and figure you have a bank account and maybe two or three if you’re a couple. There’s also a decent chance you are getting a raw deal from your local bank. I’ll give you some real-life example of bad banking relationships. When we got hitched up in 2004 and I landed this j.o.b. on the swing shift and Mrs. Smidlap was managing an independent record label, we opened two joint accounts with HSBC, which had a branch around the corner. This place was outstanding and our mortgage was held there and basically nothing ever went wrong. We even opened our first online savings account with them and were getting 5% interest on that by around 2006. We sailed along like this for years and then they closed all their local branches and sold them to Shitty Lousy Local Bank (SLLB). We decided to give them a tryout and SLLB failed largely and immediately. Understand this: we kept a lot of money in these accounts, sometimes upwards of 30k and were never needy customers. When they changed all of our account over they sent my wife a credit card and this was where any oops’s like overdraft would land. Well, they sent a card with an annual fee which we never had before and all was kind of sneaky. Remember this: any time you enter into a business relationship ask yourself how the other party makes their money. With banks they often count on fees like credit card fees, late fee, and ATM fees and crap like that to take your hard earned steam away from its rightful owner, you. So after making them reverse a bunch of this nonsense over a year or two we just couldn’t take it any more and I went shopping around for a new bank. All we needed was basic checking and savings with a decent rate and our credit was excellent so it was simple.
This is when I found Ally Bank. They should pay me an affiliate fee I’m going to say so many good things about this relationship. Ally is an online bank so there is no corner branch or anything like that. At the time the best savings interest rates in the country were around 1% and they were within 0.05 of the highest at the time. (I’ll mention this now in case I forget. When you open these financial accounts and your’re getting your information together it’s good to know who your beneficiaries will be and add them in the opening step. You’ll thank me later for not having to go back when you get your will and beneficiary shit together and you already have these in place, because it can be a pain in the ass.) Have I mentioned I love Ally Bank? Everything was free and easy and I have not paid them a dime in fees in the three years we’ve had these account. We have a checking and savings account with them. We keep a lot less in checking as the interest rate is lower and just transfer from the high rate savings to checking with a few key strokes for large purchases. They refund all ATM fees (up to 15 bucks) once a month and even when I needed more checks they just send ’em on over for free. This is the final point I like about them: when US Fed raises interest rates Ally just raises the rate on your savings account accordingly, without you having to threaten to change banks or even request it. They are the polar opposite of the Filthy Telecom Companies like Verizon and DirectTV/ AT&T, who will chisel you every chance they get in a sneaky fashion hoping you won’t notice. Did you get a sense I loathe the FTC’s?
I’ll mention a couple of quirky things about online banking. Because the only way you’re getting your cash is via ATM I recommend keeping a slug of cash in your house in a safe place where you keep your important papers. You never know when there could be an emergency like a flood or power outage and you will be glad you have some green money in case you can’t get some from an ATM. Don’t spend it either, ding-dong. It’s there for emergencies ONLY. The last thing is that if you need something like a safe deposit box for valuables you might consider a local credit union who won’t try and shake you down for a lot of fees.
You Have a Sweet Bank Set-up, Now Set Up Your Buckets
Are you thinking “what the hell is this jagoff talking about with a the buckets?” Let me explain. The bucket system worked for us as follows: The buckets are just known quantities of money we spend each and every year and I keep them on a paper ledger in a binder but feel free to use an online program or spreadsheet if you want, nerd. You fill them up partially with each paycheck so the money is available when you want to go and visit Aunt Flo for a vacation at her place in Pismo Beach or when the tax bill comes or you want to get Christmas gifts for the ingrates in your life. Does the Christmas Season surprise you every year where you end up with a credit card bill you can’t pay off 100% when it’s due? It’s OK if that was the case in the past, but you gotta do better.
- The most important bucket by far is your Emergency Fund. We could live comfortably for 4-5 months off of ours and likely stretch it for 6 months in a pinch. If you don’t have the money now the general recommendation is to get that in place and don’t touch it. Even if it takes some time and some spending cuts or overtime worked get it filled up and leave it alone.
- We have other buckets on the ledger for Vacation/Gifts/Repairs, Property Tax, Roth IRA funding, Funds from Mrs. Smidlap’s Art Sales (her play money), and my Overtime Blood Money. You should know the approximate amounts because you tracked your spending in Part I. Your buckets might have different categories for your bigger ticket items but whatever they are you will be glad you have them in place when you’re no longer financing you life with revolving credit card debt (more on this later).
- They’re not all going to be full immediately, but when they are it will change your life by being on the right side of the ledger where your money can start working for you instead of paying for years on the good time you had last week. I think I had a Frisco Burger at Denny’s in 1988 that ended up costing me about 236 bucks by the time I paid interest and late fees on that credit card.
- Notice the Vacation/Gift/Repair are in the same category? Your gifts can be birthday or holiday or charitable giving but the idea of putting them together is that when you go nuts and buy that diamond necklace for that special somebody and pay from this fund you are reminded that your vacations for the year might need to be a little more of the budget variety or you put in those granite counter tops you didn’t need so the holidays are a little tight. In other words, it reminds you that if you already spent it in one place it takes from the other and can keep you in a balance approach. It has worked for us; something different might work for you.
That’s the basic lowdown of the Bucket System. In Part III we’ll cover paying down debt and maybe beginning to invest if the debt part doesn’t take too much room. Thanks for looking in. Feel free to attack me with any special commentary. I can take it!