Minimalism In Your Financial Accounts

Minimalism In Your Financial Accounts
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#1

Over the years on the old FWF, I posted multiple topics on minimalism only to be shot down by most of the members. I understand that this approach won’t be for everyone, and that’s okay. The purpose of minimalism is to reduce clutter in your life to reduce the amount of time and focus you put on unimportant things.

On one hand, a “min/maxer” (to co-opt the term from video games) is a person who walks around with a dozen different credit cards in their wallet. One for gas. One for groceries. One for hotels. One for rental cars. One for office supply. etc. This person would have a dozen or more bank accounts so that when the interest rate went up 0.1%, he could ACH all his money into that account, constantly getting the best rates. If CD rates increased, he would have a spreadsheet showing all his outstanding CDs, and a running tab of early withdrawal penalties so it could be easily determined on a weekly basis if it makes sense to close a CD and deposit the funds elsewhere. He might do an IRA Horse Race, opening a dozen different IRAs each year, contributing the max of each into a triple leveraged ETF and then withdrawing all but the biggest winner as an excess contribution.

On the absolute other end of the spectrum, a pure minimalist might have a single bank account, single credit card, and that’s it. And to be fair, one could do better than 99% of the average American, if he knew what he was doing. For example, Capital One 360 MMF plus Capital One Quicksilver 1.5% credit card. Not perfect, but very good.

My goal is one of rational minimalism. Here’s some of the bullet points of the philosophy I would someday like to attain:

* Maintain the fewest number of relationships with banks as possible. Each relationship costs you in time and privacy. Every year you get a copy of each bank’s “updated privacy policy” and other nonsense documents. Each relationship is also a possible attack surface that could leak your private data.

  • Maintain redundancy. If you only have one bank account, and it’s frozen or compromised for a short-term duration, it’s nice to have a backup to fall through so you’re not waiting in line at Walmart to buy a MoneyOrder to pay your electric bill.

  • Maintain the fewest number of credit cards that give the highest reward potential across the fewest number of cards. If you don’t do MS or spend a lot of money at office supply stores, you don’t need a 5% office card. While you might get an extra $3 per year by using it, the goal is to reduce effort. Just use a 2% or 1.5% card and be done with it. If you don’t spend a lot on gas, you don’t need a dedicated 5% gas card. Etc.

  • Be rationale about your minimalist approach. Consider average account length when closing some of your credit cards.

  • Consider consolidating your investments into one or two brokerages max. Makes it easy to rebalance into your desired asset allocation because you won’t need to maintain spreadsheets.

  • Consider maintaining at least one bank account that is nationwide like BOA or Chase, so you can show up in person even when traveling.

  • Receive the fewest number of pieces of mail per year. Even though I have electronic statements set up, I still get dozens of snail mail letters each year. Every time one of my 20+ credit cards expires, I get a new one in the mail. I get a privacy policy update from each bank annually. 1099s all get mailed out, even if e-statements are set up. Even with marketing preferences set to 0, I still get some nonsense letters all the time from banks telling me things I don’t care about. I have to sort through all of this mail, scan some in, shred it, activate new CCs, update password aggregator apps with new CC security codes and expiration dates, etc.

  • Make it simpler to trace your money. When you have 20+ credit cards and you need to track down a statement to prove ownership for insurance or tax deduction purposes, it’s a huge hassle. If all of your charges are on one or two CCs, it’s a breeze.

  • Consider maintaining a relationship with a bank/credit union you already have, if you can reduce the mail down to nothing and avoid inactivity fees. For example, NFCU, NASA, PenFed, Alliant, USAA and others all have restricted membership. If you got in during some loophole window, it may be worth keeping open and forgetting about it. As long as they don’t send more than 1 or 2 pieces of junk mail per year and you can automatically set up your primary checking account to ACH in $1 quarterly to keep the account active.

My ultimate goal, which I have still not attained since I’m still in the planning phase, will likely involve 2 checking/savings accounts, 3 to 4 credit cards, and brokerage/retirement accounts at a single institution (Vanguard, Fidelity, Schwab, Etrade, etc).

The hardest part for me is giving things up. The feeling of missing out. I think in the end, I’ll be much happier with the simplicity even if it costs me a few hundred dollars per year in missed rewards.


#2

Presumably complexity should give rise to benefits, extra cash or flexibility, or we wouldn’t do it at all. The questions is whether they are worth the effort to the individual given the time/money tradeoff. One time it definitely doesn’t help to have dozens of accounts is when you move and have to update them all, or tax time when each brokerage or bank sends you a 1099.


#3

It’s not financially optimal, but I’ve come to think that since manufactured spend dwarfs my normal personal spend, that it just isn’t worth it to optimize category bonuses past carrying a few cards. At least for small everyday stuff. Maybe I’d reconsider if I had 5x on restaurants, but otherwise I’m choosing convenience over an additional 1x on lunch. I do try to use the right cards for large purchases. I’ll leave it up to you to decide what large and small are.

I’ve clung to paper statements all these years as a prompt to read it and pay the bill, but I’m thinking about switching over to electronic.

I suspect if we weren’t tempted by signup bonuses and category spend, we’d gravitate towards one or two cards.


#4

The thing that makes me crazy is having cards from the minor issuers. If it’s Amex or Citi or Chase, I’m likely to always have a relationship there and watch those accounts frequently. But I’m likely to forget to micromanage a sole account with US Bank or Barclays unless I use them exclusively.


#5

And you’re an MSer? Wow. That seems like hoarder-level paper stacks. I MS with electronic statements, and I still have piles of paperwork everywhere. Whether it’s new card documentation, a final statement from closing a card (do we keep these?), or what have you.

@TripleB I have to say, your strategy sounds nice. HOWEVER. Like you, I have many open and even more closed credit card accounts. I think your credit profile needs to have some weight here. Obviously it all depends on your objectives, but I found it much easier to get auto-approved for AoRs or just a card here and there with many lines open, with good age, and low/no balances. I did recently get declined for having too much available credit though, so perhaps I’m hitting that income:credit available magic ratio where I need to start consolidating. I do agree that the overall “headache” of managing such a number of accounts is quite real. Also, the point about exposure to identity theft, hacking, etc. is much more real with 20-30-40-50+ accounts.


#6

I don’t keep them unless they’re pertinent for taxes. They’re really just payment reminders.


#7

So you shred them? Or just rip them a few times and toss them in the garbage? I have a pile of paperwork occupying my office garbage can that needs to be shreded. Because I am too lazy to do that, I end up filling CVS bags with garbage (good, because I “empty the garbage daily now”) like random papers, receipts, granola bar wrappers, etc. Easy since I have a plentiful resupply of CVS bags these days.


#8

I get very little paper these days, but what I get, I shred at home and recycle. If I get behind, I just bring it in to Staples and spend $5-10 and have them shred it. They also regularly have a 5 lbs free shredding deal.


#9

I have been going through a simplification phase over the past few years. After the easy MS money went away, I limited the CCs I was applying for to only the really big sign up bonuses, closed/consolidated lines with the same bank, got rid of my reward checking accounts, and consolidated my investment accounts from 5->2.

I have become much more of a satisficer than optimizer and I’m glad that’s the case.


#10

Great topic!

I’ve not gotten into MS or sign-up bonuses, probably to my detriment financially. This bit with the credit cards is something I’ve considered time and again. At one point I had a 3% gas card, but we don’t spend much on gas. The time it took to accumulate a reward to cash out wasn’t worth it vs. just using a 2% card. (Same philosophy with maintaining multiple cashback shopping portals.)

I did consolidate my credit cards, but maybe a little too much. I’m expanding out credit card inventory again, but more selectively, in areas where I know we’ll benefit regularly by a significant margin.

It is impossible to get rid of all the paper. I’ve been paperless for years. Most important stuff comes electronically. Despite being on the DMA do-not-market-to-me list, companies don’t check it and still send stuff.

I’d be cautious about making things too simple. Reason being, if/when an account gets compromised, it’s better to have another credit card or 2 to fall back on. Same with financial accounts.


#11

I agree with some aspects of what you have said which is why I haven’t gone for cards like CSR or Citi DC, but I will say in the past year, aside from AmEx (Offers), my most incentivized cards have come from small issuers (Barclaycard US and Synchrony). These are bonus programs where they are fighting for your spend against the big guys.

So, I think there is some benefit to have smaller issuer cards. Maybe as you get closer to retirement, you can simplify, but in the younger years, diversity helps.

If we all go for just the big brands, then we will get what we see happening in airlines, almost across the board blandness. I feel hotels are going that direction too, but the disrupter I think has been the airbnb and related (who are now appearing in places like kayak).

But let’s take a different approach. Isn’t the digital wallet the better answer? Or is acceptance too much of a problem for you? There are a few cards in my digital wallet than I just don’t carry otherwise.

Rasheed


#12

Between DH and I, it’s me who takes responsibility in knowing what CC to use for a certain purchase to get the best reward. I only assign two CCs for him one is the Alliant 3% card he can use on anything EXCEPT if there’s 5% quarterly bonus on other cards for restaurants since he goes to fastfood every now and then. I have all slots for CCs in my wallet and in other compartments; aside from a different bag that carries all other CCs that get to be ocassionally based on deals I find.

I also use the Alliant 3% on everything and the 2% CitiDC if Alliant is nearing cut off date.

When there are quarterly bonuses, I make it a point to complete it on all cards we have so I can put them in park mode again. The only time I don’t fulfill all spend is for restaurants so I let DH do most of the spend on that.


#13

Oh don’t do it, please. I don’t want to be the last person on the planet still getting paper statements. I’ve still got one fund at Vanguard that I pay $20 annually because it’s not over their threshold for free paper statements. :grimacing:


#14

How do you remember to pay the bill without a paper reminder sitting out on your desk? Or do you just pay everything the instant you get the email saying your statement is ready?


#15

that’s what i do. actually i usually pay more so i have a balance wih them.


#16

I use gmail, so if I see a statement notification come in (that I know is not on autopay, like a new card for example), I star it and it sits at the top of my inbox until I take care of it. That’s my pile of paper on my desk–my starred emails.


#17

For what purpose? This seems mildly like a paranoid move, or something? Why would you give your cash to a creditor for no real reason?


#18

just to be ahead. sometimes when i travel, and then it kinda just became a habit.


#19

I schedule the payment through online banking when I get the email. I’ll have the electronic payments scheduled to be paid a few days ahead of the due date. For the extremely rare payment that needs to be sent by check, I’ll schedule the check to be cut 10 days ahead of the due date.


#20

For CCs, I PIF on or before statement cut date. For utility bills which I also enrolled in paperless statements, soon as I get the email, I pay via B/P of one of my CU accounts so I don’t forget them. We don’t have mortgage nor vehicle notes.

For phone and cable bills, I’ve gotten AXP sync offers of 10% off on a few cards so I availed of that to pre pay our cellphone and cable internet bills. Even if I forgo the 5% on Ink, I am still ahead when I did the computation. I put in my calendar the date I start paying again.