The 5-4-3-2-1 Goal Setting Method, Applied to Financial Goals

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I’m a big goal setter.

I find incredible value in having things in all areas of my life that I’m shooting for. Having goals gives me purpose with which to aim my efforts each day so that they build into something far greater than what I can achieve this afternoon or this week or this month. The process of making slow progress in a positive direction and witnessing changes as they’re happening and I’m moving toward things I want in life is invigorating.

I find financial goals, along with health-related goals, to be the most powerful of all, simply because progress on those kinds of goals is almost always progress that you never regret. You never regret having money in the bank, even if your goal changes. You never regret losing weight or getting in better shape, even if it’s not as central to your life any more.

The biggest obstacle I have in terms of making forward progress on goals is deeply understanding the connection between the seemingly small things I do today and the big goals I have for myself.

Take a dietary goal, for example. Let’s say my goal is to achieve my ideal BMI in some length of time – let’s make it a year. I need to lose some significant number of pounds to get there.

It’s easy to see what that big goal is, but that goal is far enough off on the horizon that it doesn’t seem really tangible. Like most people, my mind often defaults to looking ahead at the next few days.

Thus, when I’m making a decision regarding that goal, it’s often hard to directly relate a small choice today to that bigger goal. If I’m feeling a bit hungry and there’s a nice tempting sandwich just waiting for me, it’s really hard to see the connection between this 800 calorie sandwich and my goal of losing 50 pounds (or whatever). It takes consuming 3,500 calories less than I’m burning to lose a pound – that 800 calories is just a fraction of one pound. It feels insignificant next to that big goal, and I’m hungry, so I’ll go for the sandwich.

You can see the same thing in a financial goal. Let’s say your goal is to pay off all of your debts. You have $30,000 in student loans and credit card debts, with some of it having nasty interest rates.

You’re making a few extra payments on your credit cards, but you’re really tempted to buy some new decorations for your drab apartment. The decorations you want are only $35. You’re still going to make an extra payment this month… and the $35 is just a tiny sliver of a part of that overall goal. It won’t make a difference, right?

This is why big goals often don’t work. The goal you’re aiming for is often so big that the little actions you take each day don’t seem to connect to the big goal in any meaningful way. They feel like a drop in the bucket, one that doesn’t really matter.

So, what can you do about it?

One approach that works well for me is to stop worrying about the bucket and instead worry about putting drops in a thimble. Bear with me for a minute.

Let’s say that rather than worrying at all about that bucket, you’re focusing entirely on filling up a thimble with drops. That’s a much easier goal – you can fill up a thimble with just a few drops.

When that thimble is full, you empty it into a small cup. You can see the difference the contents of the thimble made in that cup – it’s making a real difference, and it won’t take too many thimbles to fill up that cup.

When that small cup is full, you pour it into a pot. You can see the difference that the contents of the cup made in the pot – it’s making a real difference, and it won’t take too many cups to fill up that pot.

When that pot is full, you pour it into the bucket. You can see the difference that the contents of the pot made in the bucket – it’s making a real difference, and it won’t take too many cups to fill up that pot.

If you can just fill up the thimble, it feels good. You can see the cup filling up.

When you manage to fill up a cup, that feels even better. You can see the pot filling up.

When you manage to fill up a pot, that feels incredible. You can see the bucket filling up.

And, soon, the bucket is full.

So, if you just focus on that dropper and make sure that the drops are getting into that thimble, you’re going to fill that thimble up real quick. Everything else from there is just a series of progressively larger successes that feel great when they happen, but you don’t really need to worry about them because they’re going to happen if you just fill up that thimble.

In other words, you’re creating a whole bunch of milestones for your big goal and just aiming for the next milestone. It’s like running a marathon and focusing on nothing else but the next quarter mile marker.

I like to call this approach the “breakdown” approach, or the 5-4-3-2-1 approach.

What’s 5-4-3-2-1?

The 5-4-3-2-1 approach is basically this concept of goal setting broken down into a simple meme so you can easily remember it.

Let’s say you have a big 5 year goal. Maybe you want to save up for a 20% down payment on a house. Maybe you want to turn an idea for a side business into something that can employ you full time. Maybe you want to pay off every drop of debt you have.

Whatever it is, it’s a big, aspirational goal.

The first question is… what can you do in the next 4 months to move that goal seriously forward? Maybe you can sell off a big collection you have that you don’t do anything with any more item by item to put money in your pocket. Maybe you can start creating episodes of your podcast and get your name out there in your target community on Twitter and Instagram.

The next question is… what can you do in the next 3 weeks to move that four month initiative seriously forward? Maybe you can build up a standard operating procedure for selling off the pieces of that collection so it’s easy to move them out. Maybe you can write and record the first episode of your podcast.

The next question is… what can you do in the next 2 days to move that three week initiative seriously forward? Maybe you can do an inventory of your collection by pulling out the 50 or 100 most valuable pieces and making a list of them. Maybe you can sign up for social media accounts for your new project, or outline the basic framework of your first podcast episode.

The last question is… what can you do in 1 hour today to move that two day initiative forward? Maybe you can simply figure out where the best place to sell your items is and what the best way to organize them for sale is. Maybe you can just sign up for a Twitter account and an Instagram account and join in a few conversations and follow a few people of interest that are small enough that they’ll engage you in conversation.

That’s it. 5 years. 4 months. 3 weeks. 2 days. 1 hour. 5-4-3-2-1.

Your drop is what you can achieve in an hour. What is literally the next thing you can do to start filling up that thimble? Those are your drops.

Your thimble is what you can achieve in two days. What can you do in two days that really moves your goal forward? You fill up that thimble, a drop at a time, with your immediate efforts.

Your cup is what you can achieve in three weeks.

Your pot is what you can achieve in four months.

Your bucket is what you can achieve in five years.

And when the bucket is full, you win.


A huge part of this strategy is refactoring. Refactoring simply means that each time you fulfill a part of the goal, you consider what the replacement piece is and what needs to be done under it to make it happen.

So, for example, each time you do an hour’s worth of effort toward your goal – filling up the thimble, in other words – you think for a moment about what the next hour needs to be to take you to your two day goal.

When you complete a two day goal, you stop and think for a moment about what your next two day goal is. Will this move me toward my three week goal? What one hour step or steps fit in nicely under this? Furthermore, does my current three week goal still make sense for me, given what I learned about the goal and what I learned about myself while completing it?

When you complete a three week goal, you stop and think for a moment about what your next three week goal is. Will this move me toward my four month goal? What two day steps fit in nicely under this? Furthermore, does my current four month goal still make sense for me, given what I learned about the goal and what I learned about myself while completing this piece of it?

When you complete a four month goal, you stop and think for a moment about what your next four month goal is. Will this move me toward my five year goal? What three week steps fit in nicely under this? Furthermore, does my current five year goal still make sense for me, given what I learned about the goal and what I learned about myself while completing this piece?

The thing is, as you go through those questions, you’ll see that your goal slightly morphs over time, changing with you as you change. This is hugely important, because it means that the big goal you’re aiming for remains relevant in your life even as your life undergoes gradual changes.

What about sudden changes? For the most part, the progress you’ve made toward goals that are focused on your health, your finances, and your transferable skills are ones that are still useful even when your life suddenly changes. Health is always good. Money in the bank always helps. Useful, employable skills always have value. A sudden life change may cause you to abandon a big goal, but you’ll almost always be happy with the progress you made toward a personal improvement goal.

The Dashboard

One of my favorite tools to use with this strategy is what I call “the dashboard.” It’s simply a document (I use a spreadsheet, but any digital document will do) that lists each level of a particular goal together in a meaningful way so that you can see them all at once and see how the little steps flow into the big ones.

For example, you might have a goal of saving for a down payment. Your dashboard might look like this…

Five years: Save $40K for down payment
+ Four months: Save $5K for down payment
++ Three weeks: Sell off contents of guest bedroom closet
+++ Two days: Sort through items in closet for sale
++++ One hour: Completely empty out closet and initially sort items

… or it might look like this at a different stage…

Five years: Save $40K for down payment
+ Four months: Cut housing and transportation costs by 50%
++ Three weeks: Move to less expensive apartment near work
+++ Two days: Visit three possible places to live
++++ One hour: Find ten potential apartments to look at

One detail I like to add is to use the finishing date for each goal. So, the above one might look like this:

December 1, 2022: Save $40K for down payment
+ October 1: Cut housing and transportation costs by 50%
++ July 30: Move to less expensive apartment near work
+++ Tomorrow: Visit three possible places to live
++++ Today: Find ten potential apartments to look at

That way, I have an immediate sense that the goals are really coming up and it’s instantly clear when things are due. Plus, it’s better to have a tangible date for your five year goal when you’re in year three of it rather than just continuing to call it your “five year goal.”

Debt Repayment: A Detailed Example

Let’s roll back to our earlier suggested goal of debt repayment. Let’s say you decide that you want to pay off your $40,000 in student loans and credit card debts by August 1, 2024. You’d start off with that as your five year goal:

August 1, 2024: Pay off all student loans and credit cards

What can you do in four months to start moving in that direction? Start brainstorming ideas. Maybe you could sell off your car and move to using a bike and mass transit? Maybe you could sell off all of the stuff you’ve accumulated that’s stuffed in your closet? Maybe you could move to a cheaper apartment? Maybe you could simply set yourself up for your next career move so that you can get paid more? All of those are great four month goals that lead right into that five year goal, so pick one:

+ November 1: Sell off your car and use mass transit for everything

You’re giving yourself some breathing room because this will require some experimentation and a few changes. What things need to be done? You need to get completely used to doing everything on mass transit. You’ll also have to figure out how to actually sell off the car and then make that happen. Time to pick a three week goal that leads you there… and it makes more sense to get used to mass transit first.

++ August 1: Figure out how to get everything done using a mass transit pass

This leads right into some sensible short term goals. In the next couple of days, you need to figure out the very basics of using mass transit daily:

+++ Tomorrow: Ride mass transit to and from work and also get groceries on mass transit

And the very first step down this path is a simple one:

++++ Today: Get a 30 day mass transit pass so that riding the train is easier

There: you have something on your to-do list for today that’s an actionable item and leads right into your other goals.

Now, let’s say you switch to using mass transit for almost everything when August 1 rolls around. It’s time to come up with another three week goal:

++ August 22: Put my car up for sale locally

What can you do to start getting ready for this?

+++ Tomorrow: Get the car cleaned outside and inside

And that gives you an action to take care of today:

++++ Today: Take the car to a car wash

Each day, you make sure that you have at least one task that takes at least a little time that moves you toward your goal. Maybe tomorrow, you finish cleaning up the inside of the car, so now it’s ready to sell. After that, you look into exactly how to sell a car locally. You figure out the details of your car, write a good listing for Craigslist and Facebook Marketplace, and put a For Sale sign in the window. You get calls, set up appointments, and get that thing sold by August 22… and then you’re onto figuring out how to handle corner cases with mass transit, like moving big items. Or, maybe you do that first and put off selling the car.

The point is that each day has a task to move you forward toward your big goal, one that makes sense as part of a chain of things that leads you there.

Final Thoughts

As I’ve mentioned before, I have a lot of goals going on at once, and I actually use a system very similar to this. Rather than the nice 5-4-3-2-1 mnemonic, I do the same breakdown but with 5 years, 1 year, 3 months, 1 month, 1 week, and 1 day. However, it doesn’t really have a catchy name for it (I call it “the pyramid,” but to each their own) so the 5-4-3-2-1 system is a lot catchier.

I usually have at least one goal for each of the nine major areas of my life going at the same time – physical, mental/spiritual, intellectual, marital, parental, social, professional, leisure, and financial. I try to have goals in each of those areas at once so that I always feel like I’m moving forward with my whole life.

These goals all use that same structural breakdown, all leading to things I can work on today to move things forward, and I have a weekly review where I think about each of the broader level goals a bit. I do a larger quarterly review and an even bigger annual review of my life, just so I’m sure I’m still on a page I’m happy with.

This system works well for me. It keeps me feeling like I’m always making progress toward being the complete person I want to be, a little better than I was before (but never even close to perfect).

I encourage you to give the 5-4-3-2-1 system a try. Make a list of the big five year goals you want to achieve in your life, then start breaking them down into smaller goals. You can use the 5 years – 4 months – 3 weeks – 2 days – 1 hour divisions if you’d like, or my own 5 years – 1 year – 3 months – 1 month – 1 week – 1 day divisions, or your own choice that works well for you. At the end of it, you should have a checklist of actions you can take right away, and that’s how you start filling your thimbles.

Good luck!

The post The 5-4-3-2-1 Goal Setting Method, Applied to Financial Goals appeared first on The Simple Dollar.

Personal Debt Is Not a Tool

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Perhaps the single biggest reason that people get themselves into a deep debt hole is that they buy into the idea that personal debt is a tool that allows them to get things they want now rather than having to wait.

Want a house now? Get a mortgage.

Want a car now? Get a car loan.

Want to go back to school now? Get a student loan.

Want that pair of AirPods now? Whip out the credit card.

Want a bedroom set now? Sign up for the payment plan.

In every single one of those situations, a person is getting something they want – not need, want – right now without having to pay for it right now. Instead, the person that has to pay for it is their future self, and that future self is going to have to pay more than the sticker price.

Want a $200,000 house now? Sign up for a 30 year $200,000 mortgage at 4% and you’re putting your future self on the hook for $343,739.

Want a $25,000 car now? Sign up for a 60 month $25,000 car loan at 3.25% and you’re putting your future self on the hook for $27,120.

Want to go back to school for 4 years at $10,000 a year? Sign up for a 10 year $40,000 student loan at 5% and you’re putting your future self on the hook for $50,911.

You’re getting the picture. Get something now, pay more later.

Here’s the catch: it’s almost never something you need right now. Sure, you might be able to make a case for needing a student loan right now and possibly argue for a mortgage, but there’s almost no other debt that constitutes a need (I’m not really convinced those two are needs, either, but at least there’s a debate there).

Rather, those things are all things you want. You want that shiny car. You want that new bedroom set. You want those AirPods. You want that house rather than the apartment.

So, let’s change that picture a little. Let’s not look at debt as a tool to get what you want.

Rather, look at debt as a mousetrap with the thing you want being the delicious cheese baiting the trap. In terms of your finances, that’s a much stronger and more accurate metaphor.

You’re a mouse, and you want that cheese. It’s just sitting there right out in the open. All you have to do is go grab it… but then the trap comes down on you.

You’re a person, and you want that car/AirPods/bedroom set/house. It’s just sitting there right out in the open. All you have to do is go grab it… but then the trap comes down on you.

In both cases, all that’s really needed is a bit of patience.

The mouse can just wait until everyone goes to sleep and then raid the kitchen, free of traps.

You can start putting money aside for the thing that you want and when you’ve saved enough you can just go buy it out of pocket.

Yet, in both cases, when impatience wins out, the pain begins.

Don’t look at that credit card as a tool. Rather, it’s a trap, disguised as a tool. The same goes for that car loan and that payment plan and, often, that mortgage.

What do smart mice do when confronted with a mousetrap? They avoid the trap entirely, or else they figure out some way to get the cheese off of the trap without getting caught.

You should apply the same two tricks in your life.

Avoid the Trap Entirely

This is a better strategy for bigger items, things you might “buy” with a big collateralized loan like a car or a house.

Rather than buying the big item right now, you wait for a while and make monthly “payments” to a savings account or investment account instead.

For example, let’s say you want to buy a late model used car and plan to borrow $15,000 to do so. You have good credit, so you can get a 60 month loan for 3.25%, or $271 a month.

Here’s the thing: rather than spending $271 a month for 60 months on that loan, you can simply put $250 a month into a savings account for 60 months and buy the car with cash. That saves you $21 a month. Alternately, you could put $271 a month into savings and be there in 55 months, eliminating the last five “payments.”

When a mouse avoids the trap entirely and just patiently waits for the nighttime, the mouse almost always winds up with many more food options and a lot more flexibility when it comes time to get food out of the night kitchen.

When you avoid the trap entirely and just save up the money yourself, you almost always wind up with more money in your pocket and a lot more flexibility when it comes time to actually make the purchase.

Get the Cheese Without the Trap

This approach works better for smaller purchases, like the AirPods or perhaps the new bedroom set mentioned earlier.

Here, rather than just using debt to buy what you want, you simply make a few lifestyle choices to come up with the money. You eat very frugally at home all month and suddenly you can afford the AirPods. You sell a bunch of unused and unwanted stuff from your closet and suddenly you can afford the bedroom set.

In other words, if there’s something smaller that you want, it’s likely that the cash you need to buy it is already available in your life and you can free it up by just making some better lifestyle choices.

On the other hand, you could throw those $160 AirPods on a 29.9% APR credit card and pay $5 a month to pay it off… but you’ll be paying for 65 months and you’ll end up paying more in interest alone than the cost of the AirPods (yup, $324 total).

When the mouse finds a way to knock the cheese off the trap without getting caught in the trap, the mouse gets the desired feast right now without being entangled in the grip of the trap.

When you find a way to come up with the money to buy what you want without getting entangled in credit card debt, you wind up (again) with more money in your pocket over the long term and with the item in hand quite quickly.

Final Thoughts

Because credit is so available and loans are usually just a form or two away, debt seems like such a convenient option when we want something. Often, we swipe that card so quickly that we barely even think about it, or we fill out those forms while listening to a salesperson nudge us onward.

Financial success is about avoiding the trap of chasing those temptations.

If you can apply just a little patience and some willingness to save, almost any big expense you want in life will eventually be yours without signing your future over to a bank.

If you can simply cut a few expenses in the next few weeks, almost any smaller expense you want in life will be yours without increasing the balance of a credit card.

Debt sits out there like a well-baited mouse trap, waiting for the foolish mouse to walk onto it and take the bait… and then they’re caught.

Don’t be the mouse. Debt is not a tool that will help you get what you want right now. Debt is a trap that will entangle you and empty your wallet.

Good luck.

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Questions About AirPods, Telecommuting, Military Retirement, Gold Coins, and More!

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What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Telecommuting in the country?
2. Military retirement question
3. Cheap alternatives to AirPods
4. Stuff now, money later?
5. Youtube or Spotify?
6. Bad luck with scholarships
7. Choosing car insurance
8. Son getting into Magic cards
9. Gold coins in bank box?
10. Retirement fluctuations feel abstract
11. Why I love the library
12. My summer reading list

One of the toughest parts of the reader mailbag is editing the questions.

Most of the questions I receive need a little bit of editing, usually because there are elements to the question that could reveal the identity of the person writing the question. They’ll mention a specific employer or give specific dates or timeframes or dollar amounts or name specific people. I’ve learned in the past that it can be very bad for people if their identity is clear or suspected from mailbag questions (for example, if a person is considering a divorce or retirement or something like that and hasn’t discussed it with their partner or employer), even seemingly innocuous ones, so I want to “blur” those elements as much as possible without disrupting the value of the answer to the question. Mostly, I’m trying to keep out their specific identity while retaining as much of their actual question as possible.

Sometimes, that forms a very fine line. How much “blurring” is too much? In the end, if I’m in doubt at all, I err on behalf of keeping identifying details out of the mailbag. Sometimes that verges on changing the nature of the question a little bit, but it still remains useful to the thousands and thousands of people who read the mailbag column each week.

My aim is to help people, and part of that is to never disrupt lives.

On with the questions.

Q1: Telecommuting in the country?

I got a new job in the Boston area that allows people to work remotely as long as you go to a quarterly retreat in the Boston area. I’m burned out living in cities and want to live in a rural area or small town. It’s cheaper and a lot less crowded.

My main concern is quality of internet service. Some rural areas apparently still use dial-up which is a non-starter for my work. Is there a way to screen for rural areas with good internet access?
– Adam

I live on the edge of a pretty small Iowa town and I have internet service that never seems to go lower than about 150 Mbps and is usually around 400 Mbps, which is near the upper limit of 802.11n wireless.

My advice is to look for small towns that are within 20-30 miles of a college town (or perhaps actually a college town) and start filtering from there. Most small towns near college towns tend to be bedroom communities for people who want to live in small town areas, but they also typically demand good internet service, so in many such areas internet cooperatives have emerged or else the providers in the college towns have extended out to the surrounding towns.

If you’re looking to stick in New England, I’d look at the areas around Hanover, NH; New Haven, CT; and Burlington, VT. Those would be an easy drive from the Boston area and would be quite rural.

If you’re wanting to go further away, the country really is your oyster.

Q2: Military retirement question

Next May I will be eligible to retire from the military with 21 years of service, meaning I am eligible for High 36 retirement and will receive 52.5% of my annual salary for life if I retire at that point. My CO is strongly encouraging me to reenlist but I haven’t made up my mind. Reenlistment would keep me in for several more years and bump up my retirement percentage to around 65%, enough that I could probably live off of it if I wanted to. Not sure I’d want to make it off of 52.5%. I enjoy the work and routine and I’m not sure what I would do if I leave but I also don’t want to be one of the old guys hobbling around. I have been very careful with my pay and have about $45K in savings. What would you do in my situation?
– Gary

First of all, thank you for your service. I have had several family members serve and I know it has a lot of challenges, personally and professionally.

In your situation, the one question on my mind would be what exactly I would do if I didn’t reenlist.

I’m estimating from this story that you’re in your very late thirties to mid forties. Your writing makes you appear well spoken, which is a good sign. I don’t know what your service has provided you with in terms of employable skills and experience, so the first thing I’d do is figure out what your skills translate to in civilian life. Are those things you would be happy doing? Are those fields in demand enough that you could get a good job in those fields (I’m sure your service record, if it’s good enough that your CO wants you to reenlist, is a positive)?

At this point, your finances are in great shape, so if I were you, I’d simply choose the path that seems like it would give you the most fulfilling daily life. A military pension is a rock solid one, and with the additional money you have saved, you’ll be in good financial shape no matter which way you choose. So, choose the one that you feel will give you the best life throughout your forties and fifties, until you choose to fully retire.

Q3: Cheap alternatives to AirPods

My daughter wants Air Pods for her birthday but it seems ridiculous to me to spend $160 for ear buds. Is there a less expensive alternative to wireless ear buds that work just as well without the Apple markup?
– Kevin

The cheapest wireless ear buds that I know of that supposedly do a good job are these JBuds for $50. The biggest difference I’ve seen between them and AirPods are the color/design, the distance you can hold them from your phone without losing signal (it’s a little less for these), and there’s a fraction of a second latency that’s barely noticeable when watching videos (it doesn’t matter when just listening to music or podcasts). They’re probably the bargain ones I’d get.

If your daughter is an athlete and runs a lot, you may want to also look at these Jabra Elite Sport wireless earbuds. They’re similar to AirPods, but they also function as a heart rate monitor and have other useful functions for runners. The MSRP on these is similar to AirPods, but these pop up on sale pretty frequently.

If you decide to go the AirPods route, you can find them fairly regularly below MSRP on eBay, but pay careful attention to the seller when buying.

Q4: Stuff now, money later?

I’ve been struggling a lot with your suggestion to think about whether you’d rather have stuff now or money later. Almost always I’d rather have the stuff now so your suggestion isn’t helping.
– Chris

It didn’t help me either, at first.

For me, that question is a reminder of the things I want in life beyond that thing I happen to hold in my hand at the moment. I have spent a lot of time thinking carefully about what it is I want from my future, and I recognize that what I want more than anything else is financial freedom. I want to be able to wake up in the morning and have only responsibilities I’ve chosen because they’re important to me, not responsibilities I have to take on because I need to make money. That’s my dream, and it’s a strong one.

When I look at an object in my hand and I ask myself whether it’s worth putting off that dream for a day or a week or whatever, I become quickly hesitant to buy it. After that, I ask myself whether this item is really going to add anything meaningful to my life, and almost always, by that point, the object is back on the shelf.

Both of those realizations took time to actually work. They didn’t work well at first. They both required some reflection on what I want from the future and, frankly, what I want from right now. Temptation is a tricky thing, but once you start to see past it, it loses a lot of strength.

Q5: Youtube or Spotify?

If I can just listen to music all day from Youtube for free, why should I ever pay for Spotify? I don’t get the point.
– Jenna

I’m not trying to sway you one way or another with this; I’m just attempting to clarify what you get with Spotify.

First of all, a paid Spotify account doesn’t have ads in it. Whenever I find myself listening to Youtube and having songs auto-load, there’s almost always an ad between each song.

Second, Spotify works really well on mobile and allows you to download the music so that you don’t have to use data to listen to it when you’re out and about. It works far better than just listening to Youtube videos if you have a limited data plan and aren’t always in LTE range.

Third, Spotify does a really good job with playlists, which helps a lot with discovering new music and listening to batches of music you want to listen to.

I’m not saying people should subscribe to it, but if you listen to music for a large portion of your day, particularly when out and about, Spotify might be a worthwhile expense for you.

Q6: Bad luck with scholarships

My son just graduated high school and is entering college in the fall. He spent a ton of time applying for scholarships all through the school year and managed to get a whopping $500. He would have been better off working at Subway. What a rip.
– Alice

Most scholarships that are well-promoted, particularly ones with a wide range of eligibility, tend to be utterly inundated with responses. They’re offering four scholarships and get a thousand entries. Often, they barely have the staff to even look at all of the entries, so they do a very quick filter on the entries and narrow it down fast, often eliminating good candidates out of expediency.

So, what can a person looking for scholarships do?

My best advice is to look locally for scholarships. Try to find ones that mostly apply to students in your area. My experience has been that if the parents or the family is involved in a community group and that community group offers any sort of scholarship, those kids have a very very strong chance of getting one.

So, my advice for parents with kids that may be angling for scholarships in the near future is to get involved with the community. Find some organizations that you can get involved with in a meaningful way and dive in, but don’t just do it for the scholarship. Do it for the purpose, and for the personal experience and growth. Do that and opportunities are much more likely to reveal themselves.

Q7: Choosing car insurance

Shopping around for car insurance. How do you choose between policies that have similar prices? I mean which one is better? I have four quotes that are basically identical.
– Erin

My advice would be to check out the Consumer Reports car insurance buying guide. They do a really thorough job of comparing insurers. Unfortunately, their full comparison of insurers is behind a paywall.

So, what can you do? If I were you, I’d hit the library and look through their back issues of Consumer Reports – it’s a magazine that most libraries carry. It looks like the most recent issue that had side-by-side comparisons of auto insurance providers was the March 2017 issue. I would expect that another comparison will be forthcoming in the near future, so I’d look at very recent issues, too.

My experience has been that most of the really big car insurance providers were all bunched up together with fairly similar ratings, but I’m not sure which four insurers you have quotes from. In general, if they seem really similar, go with the one that has good customer service scores and has a high satisfaction rating from customers, which you’ll find in that Consumer Reports article.

Q8: Son getting into Magic cards

My 13 year old son and a few of his friends are getting into Magic: the Gathering. A local shop gave them some free decks and a bunch of cards and they seem to be happily building decks to play with each other at lunch. However, it seems to be a really expensive hobby to get into. Do you have any suggestions for keeping it low cost?
– Adam

Magic really only gets expensive if you want to play in tournaments, which almost require you to spend quite a lot to build competitive decks. The nature of the free market is that when certain cards prove themselves to be very strong on the tournament scene, they become expensive to buy as individual cards, and opening packs is very random.

My suggestion would be to encourage your son to avoid the popular constructed tournament formats and instead stick to casual formats. If he really wants to play in an occasional tournament, the least expensive format is draft, which has an entry fee of around $10 to play, requires no cards of your own, and you get cards while playing to keep. Sealed tournaments and prereleases would be largely okay, too.

As for buying packs, let him decide if he wants to spend his own money on them or not. They do make an easy small gift for people who are into the game.

As some readers know, I played Magic when the game was first introduced back in the 1990s and I have a binder full of old cards and a few decks from those days. My son went through a Magic phase recently and I let him play with a few of my old decks, but he was mostly interested in playing with a lot of commons given to him by a local shop, much as your son, and the fad seems to have passed for him.

Q9: Gold coins in bank box?

My father in law has a whole bunch of gold coins stored in his safe deposit box at his bank. He does not trust 401(k) or the stock market so this is his retirement plan of sorts. He is 59 and he buys a gold coin really regularly and puts it in there. He says that he will sell them as needed when he retires. He plans on working until full Social Security and then retiring. My worry is that this won’t actually sustain him and he’s going to wind up being our financial responsibility. What do you think?
– Jane

It depends on how full that safe deposit box is.

However, in general, I think this is a very unstable idea for retirement. For one, gold is an extremely volatile investment. It routinely fluctuates in value as much as 30% within a single year. Recently, it doubled in value from mid-2009 to mid-2011, then lost almost all of those gains by mid-2013. The long term history of gold shows routine wide fluctuations in value like this.

Now, if gold maintains its value or even spikes in value, this will work out fine for him. However, if the price of gold drops rapidly, as it has in the past, he will need a lot of gold to make ends meet.

I would strongly encourage your father-in-law to assess the cash value of his gold coins and make sure that it not only accounts for enough to meet his retirement needs, but has a nice buffer to handle some significant fluctuation in value.

Q10: Retirement fluctuations feel abstract

When I first started reading The Simple Dollar several years ago, one of the things I read that you wrote seemed like crazy talk to me. You said something to the effect that you were able to just not pay any attention to big changes in your retirement accounts. It was after some 5% or 10% market drop and a reader was kind of panicking about losing $50K in retirement and your response was “Well, stop looking at it.” That struck me as weird and nonchalant.

Fast forward to now. I just realized that I now feel exactly this way. I’ve been contributing to my workplace 401(k) a lot over the past seven or eight years and the balance is somewhere between $150K and $200K. The thing is I don’t even look at the balance any more other than a rare check to make sure things are okay. If the stock market drops 5%, I barely even notice it even though that represents a loss of $10K or $15K. I think that I’ll feel this exact same way until I get close to retirement age.

I think it’s because these losses don’t impact my daily life in any way and because I know such losses are temporary. The market will rebound and I won’t need the money for a very long time, so what difference does it make that the market drops 5%? They just feel abstract. Funny how old comments that stick in your head because they didn’t make sense suddenly make sense after a while.
– Dan

This is exactly how I feel about changes in my retirement savings balance due to market fluctuations. There’s really no need for me to look at them because the market is pretty volatile. It’ll go up and it’ll go down and it really doesn’t make one iota of difference to me in terms of my life right now. I’m far enough away from needing to use that money that such fluctuations really don’t matter.

Now, there will come a time when I care, and when that happens, I will start dialing investments back into more secure investments with less day to day volatility, but the truth is that if I’m not touching that stock market money for more than ten years, I honestly do not care what it does on a daily basis. It just does not impact me.

I like the word “abstract.” I mean, I’m aware that the market is going up and down and it does mean the value of my accounts are going up and down along with it, but it really doesn’t impact me at all. It’s my money, sure, but I’m not touching it for a good decade at the very least, so it just has no impact.

Q11: Why I love the library

I just wanted to share that the biggest reason I love the library is the feeling I get of leaving the library with a bag full of books I’m excited to read. I didn’t pay a dime for those books (other than indirectly through library funding and so on) but I still get to take them home with me and get lost in them and hold them in my hands and learn from them. I get to have stacks of books I’m excited to read on my bedside table. It’s just a great feeling and it’s a free feeling!
– Tara

I feel the exact same way! After a library visit, when I go strolling out the door with those new books in my hand, it’s kind of a blissful feeling. It’s almost the same as leaving a bookstore with books in hand, but without that twinge of guilt of having spent a bunch of money on books that I’m not sure I’ll read more than once.

I’ll often end up checking out more books than I’ll probably be able to read before they’re all due to be returned, but the simple joy of having more books to read on my bedside table than I have time for is a real pleasure, and the fact that they’re all free adds to that sensibility.

And if you’re looking to grab some stuff from the library…

Q12: My summer reading list

So what’s on your summer reading list? You used to mention them in your mailbag every year.
– Amy

Well, now’s as good a time as any! I have five books I intend to get through by the end of summer.

Why Buddhism Is True by Robert Wright is a book about how neuroscience and biochemistry provide scientific evidence for many of the tenets of secular Buddhism that I’m looking forward to rereading with fresh eyes. I wrote in depth about secular Buddhism and its value several months back and I’m eager to dig into the topic again.

Return of a King by William Dalrymple was recommended to me by a friend who said that it brought a period not well known in the West to beautiful, vibrant life. That period is 19th century Afghanistan, where the area was beset by British and Indian influence from the east and south and by Russian influence from the north.

Liberty or Death: The French Revolution by Peter McPhee was recommended to me by a historian as a great one-volume look at the French Revolution, a subject that’s always interested me but I’ve never dove into head-first, always looking at it from adjacent subjects.

Inspired by Rachel Held Evans is a re-read due to the untimely death of the author at age 37 earlier this year. She was a great voice and I (like many others) will miss her.

Atomic Habits by James Clear is actually a re-read of a book I’m likely to talk about soon on The Simple Dollar. The focus of this book is on developing very small habits that are a natural part of your day that gradually nudge your life in the direction you want it to go.

Beyond that, I’ll get some light fun reading in sometimes in the evenings, mostly fantasy and sci-fi novels. I’m currently reading Children of Time by Adrian Tchaikovsky.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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Guardianship for Young Adults with Disabilities: What to Expect and How to Afford It

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As a parent or guardian of a young adult with disabilities, you know full well that your child may or may not need help making important decisions, financial or otherwise. There’s no one-size-fits-all solution to special needs guardianship, but there are there are degrees of need when it comes to guardianship. 

This guide will help you know what to expect financially if you do decide to become a guardian of your child or loved one. It’s sometimes tricky to be sure you’re making the right decision for everyone, but this article will guide you through how parents and other interested parties can become legal guardians of a young adult with disabilities. 

What is guardianship?

As soon as a young adult turns 18, parental authority no longer exists. You must then decide whether to seek guardianship, or decision-making authority for the child. The person given the authority to make decisions is called a guardian. Financial decisions can be some of the most challenging for a disabled young adult. Managing bank accounts, investments, small and major purchases and more are some of the most valuable ways in which a guardian can help an incapacitated person.

There are good reasons why you may want to be the legal guardian of your disabled young adult if you’re a parent (or even if you’re not a disabled young adult’s parent). Specifically, a guardian is appointed by the courts, and the laws are different in every state. Once a disabled young adult has a guardian appointed to him, he’s then called a “ward” or “respondent.”

There are two types of guardianship: guardianship of the person and guardianship of financial matters, says says Margaret “Pegi” S. Price, J.D., a family lawyer and is the author of the book, “The Special Needs Child and Divorce: A Practical Guide to Evaluating and Handling Cases.”

Guardianship of the person

Guardianship of the person involves making decisions about and managing the person’s care. Guardians (who can also be called conservators) must act in the ward’s best interests. The powers and duties of a guardian or those which the court may grant to a conservator include, but are not limited to:

  1. Deciding where the ward will live. 
  2. Administering to a ward’s comfort and maintenance needs, including food, clothing, social and recreational requirements and other day-to-day matters for the ward’s comfort and well-being.
  3. Taking care of a ward’s personal effects, such as clothing, vehicles and more. 
  4. Making day-to-day decisions about medical or other professional care, treatment or service.

Guardianship of financial matters

Guardianship of the financial matters is also called a conservatorship. This guardian will use the ward’s assets or income to pay the ward’s bills and apply for government assistance like Social Security disability benefits (SSDI) Supplemental Security Income (SSI), Medicaid or Medicare, as well as other programs. This guardian will handle insurance issues and all other financial matters on behalf of the ward, including the power to approve or withhold approval of any contract involving finances.

Don’t wait until age 18

Many families think they don’t need to worry about these factors until a disabled child turns 18, but that’s not true. 

“What happens if something happens to the parents before the child turns 18? We also make the mistake of assuming that because the child has a disability, the child needs a guardian,” Price says. 

Not every child who has disabilities needs to have a guardian. If the child is able to make good decisions, then he or she may not need full guardianship. Price cautions those considering guardianship not to assume that because there’s a disability “label” or diagnosis, that there should be a cookie-cutter approach to everyone with special needs.

“Just because a person has a disability doesn’t mean they can’t think for themselves or make a decision. They might actually be a genius at financial matters but not be able to figure out how to keep groceries in the house. Some need help with daily things, everyday living things,” Price said. 

Anyone considering guardianship must understand the full ramifications of changing a disabled person’s status to incapacitated. Once the judge finds a person incapacitated, the disabled person loses his right to enter into contracts, sign a lease, make significant purchases like a house, make a will or living trust or get a loan or mortgage.

Who can be a guardian? 

A guardian must be 18 years old, a resident of the United States, not of unsound mind, not disabled and not be convicted of a felony, according to Protected Tomorrows. Public agency or not-for-profit corporations found capable by the court of providing care required and a corporation willing to accept and execute trusts may also serve as guardian of the estate.

Most states have an ordered preference of who serves as guardians of an adult child with disabilities. The preference is usually for the parents. If parents are not available, an adult sibling or other adult family member is the next best choice. If no family members are able to serve as guardian, the task may go to a close friend. If no friends are available, then the court can appoint a professional guardian.

Steps to take to obtain guardianship

A guardian might be necessary when the child is unable to make decisions in his or her own best interest or provide for his or her own welfare.

Here are the steps to getting legal guardianship: 

  1. Fill out forms at probate court and ask for a hearing.
  2. The court will determine when you’ll need to be present for a hearing to determine guardianship.
  3. The adult child will be evaluated by a doctor or other mental health professional to determine how well you make decisions.
  4. At the hearing, the doctor or mental health professional will present his or her findings about the adult child’s level of competence.
  5. The judge will determine what level of guardianship an individual may need. Here are a few options: 
Type  Description
Power of Attorney Power of Attorney (POA) is not a type of guardianship. An incapacitated young adult who is incompetent because of a severe disability does not have the legal capacity to grant anyone the authority to act on her behalf through a POA.
Full Guardianship A guardian with all powers allowed by law is called a plenary guardian, or a full guardian.
Partial Guardianship A guardian with only some powers is called a partial guardian or limited guardian.
Conservatorship A conservatorship grants those who are court-appointed the power to make estate planning decisions for someone who is incapacitated and unable to manage his or her affairs.

Cost of legal fees

Top of mind for many families are the legal fees they’ll incur. The full costs will depend on many factors, such as how complicated your particular case is, the number of hearings the lawyer has to attend, the amount of investigation and documentation the court requires and whether the proposed guardian and family is easy to work with. 

“If the family is easy to work with, provides all the information the lawyer needs, aren’t squabbling among themselves and shows up at all the hearings — if people just act like civilized, intelligent professionals throughout, then the costs really don’t have to be that much,” says Price. 

Here is a list of legal fees and their general cost, though it can vary widely by location: 

Person representing the alleged disabled person: Will look at medical records, meet with the disabled person, find out that person’s wishes, meet the proposed guardian(s) and write a report: Around $3,000 and approximately $250 per hour

  • Attorney fees: A few hundred dollars per hour
  • Service fees (for the sheriff to personally serve the papers): About $100-200 
  • Court fees: $200-300 range
  • Medical, psychiatric, vocational expert or some other expert on disabilities: $500-600 an hour (you can spend up to $10,000 on an expert, and when people do not agree on a guardianship, that the costs can be prohibitive).

After the guardianship has been established, court costs, attorneys’ fees for both the petitioner and the proposed ward/protected person and any ongoing guardian fees are all paid from the protected person’s estate. Guardians are also allowed to charge a fee for their services. The county court or social services department may have a policy regarding paying for some of these costs if the ward has no money to pay for guardianship services. Review your financial situation regularly to determine how you can best afford to take care of your loved one. 

Affording the costs

In the vast majority of cases, the family members (usually the parents of the ward) pay the legal fees and court costs for guardianship, though some charitable organizations cover or help with the costs of guardianship. 

Social Security Disability Disability Insurance (SSDI) and Supplemental Security Income (SSI) 

Social Security Disability Insurance (SSDI) offers benefits to those who are disabled or blind and are “insured” by workers’ contributions to the Social Security trust fund. These contributions are based on the disabled person’s earnings as required by the Federal Insurance Contributions Act (FICA). The amount of your monthly disability benefit is based on your lifetime average earnings covered by Social Security.

Supplemental Security Income (SSI), on the other hand, is a federal income supplement program funded by general tax revenue. SSI is designed to help aged, blind and disabled individuals who have little to no income and provides cash to meet basic needs for food, clothing and shelter. 

Health care

The low-income aspect of Medicaid requirements can make it the best and most affordable option for health care for disabled young adults. Medicaid provides basic medical care to low-income individuals. Most states also have Medicaid programs covering residential, day care, career and other services. 

Personal loans

A personal loan is one way you can pay the costs of guardianship. You’ll need to prove that you’re a good candidate to pay back a personal loan through a credit check. Personal loan is an unsecured loan, which means you don’t have to put up collateral (like a car or house) to get one. Fixed interest rates, good credit scores and fixed monthly payments are some of the main characteristics of a personal loan and can cover some of the costs for guardianship or other needs for the disabled young adult’s care.

Consult legal aid organizations

Legal aid organization funding can help with fees or handle them completely. Legal Services Corporation (LSC) provides financial support for civil legal aid to low-income Americans. Find a legal aid organization near you. 

Consider a special needs trust

You could also consider a special needs trust, which enables assets to be held on behalf of someone with disabilities without affecting their eligibility for government aid like Medicaid or SSI. For example, if a well-intentioned aunt decides to leave money to the disabled person upon the aunt’s death, the disabled person may make too much to be able to receive disability. Price recommends getting a lawyer to set up a special needs trust. “Do not use an online form. It’ll vary so much by state,” she says.

Ultimately, when you’re considering guardianship, remember to balance your child’s financial needs with your own. It’s a good idea to consult with a financial expert if necessary and talk to an estate planning attorney to consider your life insurance policy, particularly if you’re the parent of a disabled young adult.

“Always keep in mind how a guardianship or conservatorship will affect the person’s rights to act on her own behalf,” Price says. “Try to achieve what is best for the person by using the least-restrictive means possible. Do everything you can to honor the disabled person’s pride and dignity.”


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Books with Impact: You Need a Budget

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The “Books with Impact” series takes a deeper look at specific books that have had a profound impact on my financial, professional, and personal growth by extracting specific points of advice from those books and looking at how I’ve applied them in my life with successful results. The previous entry in this series covered Triggers by Marshall Goldsmith.

You Need a Budget was the first personal finance software package I really fell in love with. I dabbled with Microsoft Money (RIP) and Quicken when I was first turning my finances around, but it was You Need a Budget that really clicked with me when I started using a spreadsheet-based version of the software many years ago, and I still use You Need a Budget 4 (the last standalone version of the software) on occasion when trying to get a clear picture of my finances because I simply love how it handles and displays my financial information.

What drew me to the software more than anything, however, was the philosophy behind it. YNAB wasn’t just a piece of software for tracking your finances; it was designed to help you follow a rather in depth philosophy and program for improving your financial state, something that other major personal finance software packages never really had (and still don’t, for the most part). That philosophy, encapsulated in four simple rules, was the really valuable part of the whole system.

That brings me around to this book. You Need a Budget by Jesse Mecham (the founder of YNAB) is basically the philosophy behind YNAB expanded with details into a short but quite powerful book, a book that I want to dig deep into because of the all-around solid personal finance philosophy and system it contains.

Let’s dive right in.

A New Way to Look at Your Money

The book starts off with an insightful criticism of the traditional form of budgeting, budgeting in which you merely list a lot of categories, come up with spending targets for each category, and then aim for those targets in those categories.

What’s wrong with it? It’s inflexible. You can’t prioritize one budget category over another. It’s inherently predictive, meaning you’re trying to guess what the future holds every time you make a spending target.

The big shift that the YNAB philosophy makes is that it focuses on spending what you have right now, rather than what you project you’ll have going forward, with a particular emphasis on how that money can get you to your goals. In other words, it chops the concept of projecting future income out of budgeting entirely.

The interesting part of this method as opposed to traditional budgeting is that it highlights the scarcity of money, as is nicely described on page 20:

[T]his feeling of scarcity is a good thing. It means you’re seeing your money for what it truly is: a finite resource – and this is a huge part of that mindset shift I talked about. It doesn’t actually matter how much money we have or don’t have. Scarcity is simply that feeling of wishing their were more. This is an important moment. The feeling of scarcity might tempt us to quit, but when we step back and embrace scarcity, we make good decisions.

I found this really interesting because it seems to fly in the face of the idea of an abundance mindset. In many aspects of life, it’s much better to have an “abundance” mindset, meaning that you perceive that the pie is infinite in size so it’s not a big deal to share with others because you’ll still have more than enough for yourself. YNAB centers around the opposite idea, at least for your finances: all you have is this little pool of money.

The argument is that, in terms of your money, the future is abundant and thus very difficult to reasonably budget. The present of your financial situation, however, is scarce – there’s only a limited amount of money and you have to make the most of it that you can.

The advantage of applying a scarcity mindset to your financial state is that it shows you that each dollar is important and everything in your life is vying for each and every dollar because there’s only so much to go around. Much of the justification for splurging comes from an abundance mindset about money – there will always be more money, so why not just spend it now on something unimportant? When you walk away from that mindset and adopt a scarcity mindset for your money, splurging becomes just another competitor alongside things that are likely more important to you.

Because you’re treating every expense and financial goal as a hungry mouth wanting to devour part of that relatively small pool of money you have right now, you have to prioritize. Which of these expenses is the most important right now? If I give $200 to this, what other possible expense has to go without money for now? You begin to feel those little frivolous nickel and dime expenses actually ripping money away from things you know are more important, and that forces you to start thinking about every dollar with seriousness.

Another interesting aspect to this perspective is that it forces you to start taking responsibility for your future now. If you want to have things in the future, you have to put money aside for them now. Taking money away from future savings goals and giving it to something else is effectively saying no to your future goals. If you want that future goal, you have to put your money where your mouth is now. There is no “someday” that will take care of it.

This leads directly into the first “rule” of the YNAB philosophy.

Rule One – Give Every Dollar a Job

It’s simple. From page 33:

Just check your bank account balance and assign a job to every dollar you own. You’re officially budgeting the moment you start doing this, and with every “job” you assign, you’re answering the question: What do I want my money to do for me?

Of course, this starts with figuring out what needs to get done with your money along with what your big goals are. What are the urgent things that have to be covered soon, like your current bills, the rent, your food needs in the next week or so, and so on? What long term things do you want to happen in your life? What fun things do you want to do in the near future – or even a little way down the road? What big bills are coming up?

You want to start with survival. What do you need to make it through the next few weeks with your basic well being intact? You need food, water, shelter, hygiene, and clothes on your back, basically. After that, move onto obligations – electricity, debt payments, garbage removal, and so on. Those are the basics. Those are the needs. Those are the things that, if you don’t handle them, your short term life gets bad quickly. It is vital to separate these things from non-essential habits that you’re treating as necessities. Coffee isn’t a necessity – it’s a non-essential habit. Non-basic foods aren’t a necessity – they’re just something you want because it’s tasty or healthy or whatever. Alcohol? Not a necessity. Filter those things out for now.

You’ll also need to consider longer-term obligations, like upcoming expenses that you know are coming. It’s time to cover a fraction of those things – and cover another fraction each time you get an influx of cash.

After that, it really comes down to your personal priorities, and that’s where you need to start thinking. What is actually a real priority in my life? The nice part about this philosophy is that it’s literally about putting your money where your mouth is. Once you’ve covered survival and obligations, the things you do with your money are up to your personal priorities, and there’s no hiding them here. What you do with your money is your true priority, regardless of what you tell yourself.

The use of each and every dollar you have is an expression of either the basic needs of your life or what your life’s priorities are. Each and every dollar has a “job,” in other words. It’s doing something for you.

My experience has been that the more in line your personal priorities are with the “job” you assign to every dollar in your life, the more peaceful you feel. It’s when you’re not taking care of something that you’re theoretically prioritizing so that you can spend money on something that has a lower priority for you that you run into financial trouble, every time. It’s all about carefully considering what your priorities are.

This does not mean having no fun. However, what it does mean is that things that you spend money that have a comparatively low return in terms of the pleasure they give you should be pretty low on the priority list, below a lot of your long term goals. It’s okay to prioritize a few pleasures that bring you a lot of joy in the short term, but you have to be discerning about it. Some things simply aren’t as big of a deal as others, and those lesser things need to fall rapidly down the priority list.

This becomes very real when you’re looking at the money sitting in your checking account right now and assigning each and every dollar in there a job. Where does each of those dollars go? Doing it well requires some real thought and introspection, and that’s the real value of this system.

Rule Two – Embrace Your True Expenses

The “true expenses” that this chapter is talking about is alluded to a little bit in the previous chapter, but this chapter brings it into focus. It’s not just about making sure the bills are covered each month, but making sure that you’re also taking care of the irregular expenses in your life.

For example, let’s say you know you have an insurance bill for $700 coming due in 7 months, and you get paid twice a month. That means you should probably put $50 out of your current pile of cash aside toward that insurance bill and then do it again every time you have a cash influx so that the insurance bill is easily paid when it comes due.

Those are your true expenses – not just the daily ones or the monthly ones, but the irregular ones that come around once every six months or once a year or whatever. In the YNAB system, those required but infrequent expenses should always be directly gobbling up a little piece of the pool of money you have right now, as well as a piece of every influx of money that comes in (like a paycheck).

There are also things that are unexpected and inevitable, like needing to replace parts on your car or having to repair appliances in your home. It can be very hard to estimate these kinds of things, but following routine maintenance on a 15,000 mile per year car is about $50 per month, and a good annual budget for unexpected home costs is about 1% of your home’s value, so you can break that down, too. Those are pieces that need to come out of the pool of cash you have.

Beyond that, this is how you plan ahead for your big life goals. What slice of the current cash you have available is going to retirement? What about college savings for your kids? Your house down payment?

This obviously requires some planning, and that’s where software can help. The YNAB software is designed to do this very naturally, and it’s why I fell in love with it years ago. You can actually do all of this on a spreadsheet, too, if you’re familiar with Excel or Google Sheets.

Rule Three – Roll with the Punches

Just as it’s impossible to micromanage every second of your time because unexpected events always happen, it’s impossible to micromanage your money because of the unexpected events life deals us. We can have the best money plan in the world, but when something like a job loss or an unexpected family illness or a hailstorm occurs, the best laid plans are torn to shreds.

Unexpected expenses can often mean changing your budget, and changing your budget can feel like failure. It can feel like you didn’t plan for everything and now all of your planning is worthless.

It’s not.

Part of the value of this type of financial planning is that, once it gets going, it becomes very possible to roll with the punches. If a sudden high priority event comes along, you simply take cash designated for lower priority events to handle it. In other words, once you’ve been doing this for a while, your budget becomes something of a living thing, capable of changing and morphing around the unexpected moments of your life.

How does this work? Let’s say you decided you wanted to buy a new television for your family for Christmas and budgeted $1,000 for it. Using the YNAB system, you decide to put aside $50 per paycheck for it starting in February. September rolls around and suddenly the unexpected happens – you have a sudden $500 expense. Guess what? You can handle it. You have the cash set aside to do so.

But what happens to that television plan? Once the urgent thing is paid for, you reprioritize. Do you want to put aside $100 per paycheck until Christmas to cover it, or are there other priorities that you should deal with first? You get to make that choice because of the freedom that YNAB offers you.

The system really centers around prioritizing your expenses, and when an urgent expense comes in with a higher priority, then you can take away money put aside for lower priority expenses (like a $1,000 television for the holidays) to handle it. The key is understanding that you’re really only worried about the pool of money that you actually have in hand and how to use every dollar most effectively. You don’t worry about the next influx of cash until it arrives.

Rule Four – Age Your Money

The real power of this system is that, over time, it moves you to a situation where you don’t need your next paycheck, and given a long enough timeframe, it moves you to a situation where you don’t need any paycheck.

It’s actually quite simple. All you really have to do is over prepare a little for each of those expenses you know are coming so that eventually you’re covering next month’s rent out of this month’s pool of cash because the next rent payment is already covered. Then you’re covering two months in advance, then three.

Let’s say that you’re paid twice a month and your rent is $1,000 a month. If you say that out of every incoming pool of cash, you set aside $600 for rent, you will have next month’s rent covered at the end of the month with $200 left over. Do that again next month and there’s $400 left over. Three months later and you actually have a full month of rent already in the can in advance and you can start preparing for subsequent months.

Mecham refers to this as “aging your money.” You’re effectively using money you brought in two or three months ago to pay your rent now.

If you do that for every bill, a lot of good things start to happen.

For one, you can survive for a while without any influxes of cash. You roll right through a job change without skipping a beat. You get fired? No problem, as long as you can find a job in the next month or two. You have a sudden life emergency? No problem – you can just nibble a bit from the money you have put aside for rent two months from now.

For another, you can start feeling confident investing for really long term stuff. If you have two months of rent checks already covered, you can tone down your $600 twice a month put aside for rent down to $550 or $525, then apply that $50 or $75 twice a month to, say, retirement savings or an extra payment toward paying off a student loan. Think of it this way: you have the money set aside to cover all of your survival needs and obligations for the next two months, so you can start working on covering a month’s worth of survival needs and obligations for yourself when you’re old by contributing to retirement savings. It’s the same thing, just very long term.

For yet another, your money starts to earn money for itself as it is aging. When you only age it for a month or two in savings, it only earns a little bit of interest, but when you age money for 30 years in a retirement account, it earns a ton of return on your money.

For yet another, the more you age your money, the larger your pool of money that you have available to make decisions with. Remember, the YNAB philosophy orients itself around making decisions regarding only the money you have in hand. Thus, the more money you have on hand, the richer your decision making palette and the easier it seems to make room for big long term goals.

So, how do you get there? The book suggests setting a simple goal (page 110):

Set a goal to save what you spend in a typical month. When you hit your goal, budget out the new month with that money. Now your next paycheck can go to the following month. Your money is officially thirty days old.

And how do you get there?

Embrace the sprint. Go on a no-spending spree for as long as you can. Also hustle to bring in extra cash in creative (and legal) ways. Anything you save or earn goes straight to your savings for the next month.

The more you age your money, the better. It not only gives you breathing room, but it also grows your money.

The rest of the book consists of a series of short chapters talking about specific applications of these four rules to specific life situations.

Budgeting as a Couple

Here, Mecham essentially reiterates the core advice that almost everyone gives for couples dealing with money issues, because it’s hands-down the best advice and the one thing that works: communicate. You’ve got to talk about your money situation together, openly, with minimal emotion, and with a genuine intent to put you both in the best life possible.

The main focus of the chapter is on the idea of a monthly “money date,” where you sit down with your partner and fully go through your finances and budget, setting priorities together for the next month. Together is important here; there’s almost no better way for this to fall apart than for one partner to just dictate the financial rules to the other one.

One important part of “couples budgeting” is to recognize that you both need a bit of personal fun money. There has to be some breathing room in the budget for each of you to pursue your own interests or else there will be backlash against the whole idea, especially from the person less committed to the concept, so this should be a fairly high priority item. Now, if that person decides to use that personal fun money of theirs buying soft drinks at the convenience store, that’s their call.

Slaying Debt, Whatever Your Situation

How does debt repayment work into all of this?

First of all, accruing more debt should be pretty much entirely off the table if you’re using this philosophy. That includes credit card debt. The only time you might consider debt once you get this whole strategy rolling is something like a home loan or possibly a student loan, but consumer debt should be almost entirely avoided because you’re planning ahead for expenses now and sticking with just the pool of money you actually have in hand for your spending.

As for repayment of the debt you already have, the best strategy is to treat your basic payment as an obligation and treat an extra payment as a fairly high priority but non-essential item that you want to throw some money to each time money comes into your accounts. So, you make sure your minimum is covered, and then you put some significant priority to allotting some cash for an extra payment on that debt.

Teaching Your Kids to Budget

Mecham advocates giving children an allowance and using that as a basis for teaching basic money management skills when they reach middle and upper elementary and middle school. He advocates giving them one or two required commitments for portions of their allowance and then complete freedom in terms of the rest of it.

The one or two required commitments for a portion of their allowance – things like saving for college or giving to charity – are basically a microcosm of YNAB. If you talk about the philosophy behind this a little and then talk about how they can use the idea to take a portion of their weekly allowance and put it aside for bigger goals (like, say, a new game for their Nintendo Switch or a bunch of new canvases for painting), they’ll often come around to it on their own.

Even better, if you establish this kind of pattern early on in their life, they’re more likely to draw on that type of thinking later in life to build their own path to financial independence from you and financial success on their own.

When You Feel Like Quitting

This last section discusses a lot of reasons why people quit budgeting: they don’t leave themselves any breathing room, they set unrealistically low spending targets for things like household supplies or food, they assume that they can rapidly and permanently change a lot of their routines and habits, they demand too much too soon, and so on.

The key to sticking with a financial change, no matter what it is, is to accept that things won’t always go perfectly and it’s okay to be imperfect. What you’re looking for more than anything is to be a little better today than you were yesterday and to gradually move towards where you want to be while recognizing that steps backward are normal and aren’t a terrible sign of failure.

If you feel like quitting or feel like a failure, look at the progress you’ve made so far and feel good about it, then refactor your plans. What parts work well? Keep those. Which parts don’t work well? Ditch them or try new versions of them. No one has a perfect plan the first time they try.

A Brief Note About the Software

Although my focus here was writing about the book You Need a Budget, I felt it appropriate to make some references to the software package You Need a Budget a few times, and rather than reiterating my thoughts on the software package, I thought I’d summarize my thoughts in one place near the end.

Several years ago, YNAB version 4 was hands down my favorite piece of personal finance software. In fact, I still use that exact version at home because of how well it embodies the philosophy spelled out in this book, a philosophy I strongly agree with in most ways.

However, several years ago, YNAB chose to discontinue their standalone version 4 software and instead moved to a subscription-based software package. While I have no objection to the concept of software as service, I didn’t migrate to the subscription based version because, well, I still use my old version 4 software. I did do a trial of the subscription-based version, but I was pretty happy with my old software for a number of reasons (it does what I want, for one, and it also keeps all of my data local rather than in the cloud) and I’ll stick with it as long as it still runs.

So, if it seemed like I often stopped short of a full-throated endorsement of the software in its current form, that’s why. I don’t actually use the current form. Having said that, the current form of the software is a really well executed embodiment of the principles described in that book and cloud software is mature enough that I would feel safe putting information into the software that didn’t directly reveal my identity. It is the best budgeting software around today.

Final Thoughts

This book is a great readable explanation of the You Need a Budget philosophy and how to apply it to one’s own finances. This philosophy – and the accompanying software – was a vital part of my own financial turnaround, particularly during the period when we were finishing up paying off our consumer debt and considering buying a home and then figuring out how to handle expenses with multiple children. I still use the principles of the system, and I still occasionally use the software, though much of our financial organization is automated at this point. (In fact, the automation itself is a lot like You Need a Budget, as the automation just moves a lot of our income off to various pools and accounts for specific purposes.)

If you know of someone just trying to get a grip on managing their own money and getting a little ahead of the paycheck to paycheck life while building a foundation of money principles that can really grow with them as they get more and more ahead financially, this is a great book for them. The material might seem overly straightforward for someone who is already in a great financial place, but roughly 80% of Americans live paycheck to paycheck and quite a few of them want a path out of that life, and this book’s a great starting point for them.

The post Books with Impact: You Need a Budget appeared first on The Simple Dollar.

Depression and me

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For much of the past two weeks, I’ve been wrestling with my mental health. I could sense a crisis coming, so I scheduled some time away. I didn’t want to have to be worrying about blog posts while I was worrying about everything else. Thus, my “summer vacation”.

Long-time readers are aware that I’ve struggled with depression for most of my life.

In sixth grade, I missed five weeks of school with what my father called “parrot fever”. (We had parrots, and he attributed my issues to a parrot allergy.) After our family physician could find nothing wrong with me, Dad took me to his therapist. Hushed conversations followed the appointment. The verdict: I was dealing with depression.

In junior high, I was briefly suicidal but made a deliberate decision to turn things around. In high school and college, the depression was always there, looming in the shadows. As a young adult, it mostly went away…but then it came back as I got older.

In 1999, when I was thirty, I experienced something new: anxiety. At one point, I thought I was having a heart attack. Nope. It was a panic attack. When the second panic attack came a few weeks later, I knew it wasn’t my heart. It was me stressing about life.

Interesting note: It was after the second panic attack that my doctor strongly encouraged me to start drinking red wine. For real. Before that, I was a teetotaler.

During my divorce in 2011-12, Kris asked me a favor. “Please see a counselor,” she said. I did, and it helped. My therapist gave me advice for coping with depression and anxiety, plus she diagnosed me with ADD. For a few years, I was able to manage my symptoms.

Last year, though, things got bad. March and April and May were a struggle. In June, I published an article here about my ongoing battle with depression. During the summer, my mental health improved, however, and I forgot about how hard the spring had been.

Tweet about Anthony Bourdain's suicide

A Sneaky Little, Sticky Bitch

In February of this year, my anxiety returned. The depression followed soon after. When my heart-attack scare in mid-March turned up no physical issues (other than high blood pressure), my doctor suggested that the problem was anxiety. She asked me to start seeing a therapist again. So, I did.

Since early May, I’ve been attending talk therapy once a week. We’re exploring why I feel so anxious, and how using alcohol to cope with anxiety is a “maladaptive behavior”. We’re exploring other ways to make things work.

The trouble? When I don’t drink in the afternoon, I get more anxious.

The frustrating thing is that the depression and anxiety lead me to act like a completely different person.

For instance, I love people. I love spending time with people. Social interaction energizes me. Right now, though? I hate it. I don’t want to deal with anyone in any capacity. I don’t want to spend time with friends. I don’t want to be in crowds. (I make an exception for Portland Timbers games.) I don’t even want to go to the grocery store.

Here are some ways this manifests itself:

  • Today, I had a lunch appointment with a colleague and friend. Karl is a great guy and I enjoy spending time with him. Normally. Today, though, all I could think about were the reasons I might be able to cancel.
  • Yesterday, I taped a TV interview with a local station. I wanted to cancel that too. Afterward, I ought to have driven out to the family box factory. But I didn’t. I didn’t want to spend time with my brother and cousin.
  • This Sunday evening, there’s another Portland Timbers game. Kim can’t go with me, so I need to find somebody else to join me. I have zero desire to do so. I may end up selling the tickets and skipping the game because of my anxiety.

My medical doctor has prescribed propranolol to simultaneously deal with my high blood pressure and my anxiety. While it seems to be helping the former, it’s not helping the latter. (According to wikipedia, it’s really only useful for performance anxiety.)

Meanwhile, the depression is even worse. If you look at the symptoms of depression, I’m exhibiting every single one. Some of my symptoms are severe.

  • Fatigue? Have it.
  • Insomnia? You bet.
  • Feelings of guilt and worthlessness? Oh boy.
  • Irritability? Yes, and it’s so not me. I’m not an irritable guy — but I am lately.
  • Loss of interest in things once pleasurable? Absolutely, and it’s SO FRUSTRATING. Nothing appeals to me. I’m numb.
  • Trouble concentrating, remembering details, and making decisions? You have no idea. Everything is a chore.

The latter is especially difficult to deal with. When Karl asked where to meet for lunch today, I couldn’t decide. Why not? That’s so simple! Last night, Kim wanted me to make dinner. But I didn’t because I couldn’t decide what to fix. That’s ridiculous!

A Horrible, Terrible, No Good, Very Bad Day

In fact, yesterday was miserable. It might have been the worst day of my entire life.

My head was a mess of negative thoughts and emotions, all of them swirling and swirling and swirling in a never-ending dark cloud of despair. I couldn’t focus on anything. I did tape the TV interview (the first segment went very well, but the second bordered on incoherent) but that’s the only productive thing I did all day.

On the drive home, I bought — and then consumed — a big bowl of clam chowder, a big bag of potato chips, and an entire package of chocolate chip cookies. Then I sat in the hot tub and played a videogame for five hours. (At least I didn’t drink alcohol!)

When Kim came home, she asked, “What’s for dinner?” I admitted that I hadn’t made dinner — but I didn’t tell her how messed up my head had been all day. (She knows I’m struggling but she doesn’t know how badly.) While she changed out of her scrubs, I fried some frozen potstickers.

Naturally, all of this makes me feel even more guilty and worthless and depressed. It’s a vicious cycle.

I’m sure you can see how this would translate in an inability to get work done, both here at Get Rich Slowly and in my real life.

It’s a problem.

What’s the solution to the problem? I’m not sure. There must be one. But I don’t know what it is. Drink every afternoon? That’s what I’ve been doing, and it works. But, as my therapist says, it’s a maladaptive behavior. I think we all know where that road leads.

My therapist is patient. She keeps giving me homework assignments…and I keep avoiding them. Exercise! Meditate! Set goals! These all sound awesome. They’re all things I know I like to do. But they also sound like tremendous effort, so I don’t do them.

Bringing Gratitude

Instead of canceling my lunch appointment with Karl today, I went. I’m glad I did.

I’ve known Karl for almost a decade. He’s one of the most uplifting, supportive people I’ve ever met. I love that his work is centered on positivity. He runs a site called Bring Gratitude and he published a book by the same name. (Six months ago, he shared a guest article here at Get Rich Slowly about practicing gratitude with a daily journal.)

As we sat down for lunch, I told Karl point blank about the issues I’m going through.

“I can totally relate,” he said, and he shared some of his own past struggles.

“You know,” I said, “my therapist has been urging me to try meditation. But I don’t know how to start.”

Karl nodded. “I meditate. I meditated just this morning. But it can be tough to get going. You have so many thoughts racing through your head. Here’s one thing that might work, though. Give yourself one minute. Only a minute. For that minute, meditate on all of the things that you’re thankful for.”

“I like that idea,” I said. “I like it a lot. Normally, I’m a grateful guy. I’m a lucky man, and I know it. Usually. Lately, though, I’ve forgotten how awesome life is. Meditating on the things I’m grateful for would be a great way to remind me of what I’ve got.”

Thank You

On my drive home, I put Karl’s idea into practice. I took back roads. As I drove slowly through the countryside, I thought about all of the things that I’m thankful for.

  • I’m thankful for Kim. She’s a not just a wonderful partner in life, but she’s a wonderful person. She’s a good soul.
  • I’m thankful for my dog. Tahlequah is a handful (a pawful?), and I do get frustrated with her. But I’m also grateful to have such an enthusiastic hound dog in my life.
  • I’m thankful for my health. I haven’t taken care of myself much lately, but that’s on me. Generally speaking, my body is in fine shape. And with a little work, it could be in great shape once again.
  • I’m grateful for music. I don’t mention it much, but music brings great joy to my life. I love music of all sorts. Taylor Swift, yes, but also U2 and Mozart and Styx and ABBA and Public Enemy.
  • I’m thankful for Portland. I love the green of it. I love its quirky die-hard (sometimes absurd) liberalism. I love the food scene and the Timbers and the passion for books. Speaking of which…
  • I’m grateful for words. Books bring me joy. So does writing. I’ve managed to make a living from my words, and I hope to continue doing so in the future.
  • I’m grateful for life.

Here at home, I had a call with my business partner, Tom. We spent two hours talking about behind-the-scenes details here at Get Rich Slowly. We made plans for the future. But we also took a lot of time to talk about nothing.

It was awesome. It was just what I needed.

When I got off the call, the dog wanted to play. She looked up with puppy-dog eyes and made her little whine that means, “Dad, throw the ball for me.” We went outside into the sunshine and I threw the ball for her. Then, I got down on my knees and wrestled with her. She loves when I wrestle with her.

“I really do have a good life,” I thought after the dog and I were done chomping on each other. I went into the kitchen to put away the clean dishes. “I’m thankful for all of it.”

You know what? I’m thankful for Get Rich Slowly too. And for you, the readers. This site has been a huge blessing in my life — and I’m not one to talk much about blessings. I’ve put a lot into GRS, it’s true, but I’ve gotten so much more out of it. I’ve gotten so much from you folks.

So, thank you. I mean it. Thank you for reading. Thank you for contributing. Thank you for everything.

Few and Far Between

As Karl and I chatted at lunch today, I caught a Natalie Merchant song playing on the restaurant’s radio. At first I thought it was “Wonder”, but then I recognized it as “Few and Far Between”.

“How fitting,” I thought. Some of the lyrics:

“‘Til you make your peace with yesterday, you’ll never build a future. I swear by what I say: Whatever penance you do, decide what it’s worth to you, and then respect it. However long it will take to weather your mistakes? Why not accept it?”

So, that’s what has been going on in my life lately. It’s been a struggle. But I can see a light at the end of the tunnel. And I can see some money articles at the end of the keyboard. (Thank goodness, right?)

What’s been going on with you?

The post Depression and me appeared first on Get Rich Slowly.

The best checking accounts of 2019

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My checking account pays me $83 per year for using it.


First, I have an APY that gives me $5 per year. That’s pretty small, but it’s a start.

Then I have an ATM fee reimbursement. All my ATM fees get refunded at the end of the month. If I use the ATM once per month with an average fee of $4, that’s $48 per year.

And finally, my checking account has no foreign transaction fees. I travel internationally twice per year and usually withdraw $500 each time from international ATMs. Some banks have foreign transaction fees as high as 3%. That would cost me $30 for the year. Instead, I pay $0.

Not to mention that I have no minimums and no maintenance fees.

That’s a pretty sweet deal for a checking account.

Our financial lives revolve around our checking account. The majority of our cash and earnings pass through it and we access it all the time. Instead of having a checking account that dings you with fees and limits, get one with the perks that help you live your rich life.

The best checking account for you is largely going to depend on just a few things:

  1. Start with the best default: Charles Schwab checking. This is what I use.
  2. Do you want extra help with saving and budgeting? If so, get Simple.
  3. Do you deal with large amounts of cash or foreign currency regularly? If so, get a bank with a local branch.
  4. Is convenience a priority for you? If so, get a checking account at a bank that you already use.
  5. Do you want a cash back program on your debit card because you’re against using credit cards? If so, get Axos or Discover checking.

The best banks with the best checking accounts

Based on our criteria for what makes a great checking account, we’ve narrowed the options down to this list:

When building this list, we looked at these factors:

User experience

The user experience on a checking account matters a lot.

Unlike a savings account that we might check a few times per year, we’re in our checking accounts all the time. The online and mobile apps need to be decent. Thankfully, most banks have invested in their apps over the past few years, so the overall quality is much higher than it used to be.

We’ve only included checking accounts that have great online and mobile apps.


I see no reason to ever get a checking account with a minimum balance or maintenance fee. Every bank used to have them. And the big banks were the worst offenders. Then some upstart banks released no-fee checking accounts, which forced most banks to remove their fees.

Nearly all the banks in our list have no minimum balance or maintenance fees. And if they do, we’ve made sure to call them out.

In our opinion, there are too many amazing checking accounts without regular fees to settle for an account that does have them.


As you consider the different checking account options, keep convenience in mind. Over time, simplifying your accounts and prioritizing a single bank will become a higher priority.

In the beginning, perks tend to matter more than convenience. Then it tends to flip at a certain point in your financial journey.

Take ATM reimbursements for example. Saving $3-5 every month makes a big difference early on. Then when you reach a certain level, skipping the ATM reimbursement to simplify your life starts to sound pretty appealing.

There’s no right answer here, it comes down to your preference. If you’re not sure, use these guidelines:

  • If you don’t care about having another bank login or you’re setting up your accounts for the first time, maximize your perks. Find the account with the best set of perks.
  • If the thought of managing another account feels like a headache, feel free to sacrifice a few perks in order to get a checking account at a bank that you’re already using.

We looked for checking accounts that either had great perks or other popular offerings that could be bundled together.


Right off the bat, we excluded several checking accounts from our list. Mostly from major banks like Bank of America and Wells Fargo.

While not every major bank is horrible, a few of them definitely are. Wells Fargo committed one of the largest banking scandals of all time. And the list of horror stories from Bank of America is seemingly endless.

Some big banks are decent (like Chase), but we didn’t even consider offers from Wells Fargo or Bank of America. These are terrible banks. No matter how good their accounts, we recommend staying away.

Why APY doesn’t matter for your checking account

Lots of checking accounts promote their annual percentage yield (APY). Get another 0.40% return on your cash, sounds pretty amazing right?

Having an APY is completely worthless on a checking account. It’s effectively zero.

I’ve personally used the Charles Schwab checking account for years, which has a 0.40% APY, one of the highest out there.

And yet it earns me only $5 per year.

Why so little? There’s no reason to sit on a bunch of cash in a checking account. Even if you have a relatively high cash reserve (for whatever reason), you’re much better off putting that cash into a savings account, which gets you an even higher APY.

Sacrificing the $5 that you might make from a checking account APY in order to get another perk that’s more valuable is well worth the cost. When you’re looking through checking accounts, don’t even consider the APY. It sounds good in theory but has no real impact on your finances.

Best checking account reviews

Here’s how our top checking accounts all break down.


Axos has three primary checking accounts, and each has a different set of perks:






Up to 1.25%


Monthly fee




Minimum balance



$1,500 average daily balance to get 1% cash back up to $2,000 per month

Mobile deposit




ATM reimbursement

Unlimited for U.S. ATMs

Unlimited for U.S. ATMs

Unlimited for U.S. ATMs

Foreign transaction fees




Physical branches




The Rewards and CashBack accounts need a bit more explanation.

First, you can’t get an APY and cash back on the same account. You have to pick one or the other by choosing from one of the accounts.

For the APY on the Rewards account, it’s up to 1.25%. You’ll get 0.4166% each time you meet one of these conditions (do all three for a total APY of 1.25%):

  • Get monthly direct deposits of $1,000 or more.
  • Use your debit card for a total of 10 transactions per month (min $3 per transaction).
  • Use your debit 5 more times for a total of 15 transactions per month (min $3 per transaction).

On the CashBack account, you have to maintain an average daily balance of $1,500 over the month. The 1% cash back will also only apply to “signature-based transactions.” This means that the debit card has to be run as credit. Confusing right? Here’s another way to think of it: if your debit card is run as a debit card and you enter your pin, you don’t get cash back. You have to pick the credit option each time you use the card. And the cash back is limited to a maximum of $2,000 per month.

At first, the cash back sounds amazing. Cash back on a checking account seems like an incredible perk.

The problem is that the cash back will only apply when you’re using your debit card. With the minimum balance and the “signature-based” restriction, it’s not nearly as attractive as it could be. That’s an awful lot of restrictions when you could simply use a cash back credit card instead. By using a credit card, the cash back rewards will be much higher and with fewer restrictions.

I’d only consider Axos if you’re completely against using credit cards and want a checking card that has a debit card with some rewards. In that case, this is one way to get a cash back program without a credit card.

Even the APY Rewards account isn’t that interesting. In order to get the full 1.25% APY, you have to be using your debit card regularly. And if you’re using your debit card, you’re not using your credit card. The extra APY isn’t worth forgoing a credit card rewards program.

Charles Schwab


  • APY: 0.40%
  • Monthly fee: None
  • Minimum balance: None
  • Mobile deposit: Yes
  • ATM reimbursements: Unlimited
  • Foreign transaction fees: None
  • Physical branches: They do exist but there’s usually only 1-2 per city

For perks, Charles Schwab is the undisputed champion.

There are no monthly maintenance or minimum balance fees, no foreign transaction fees, unlimited ATM reimbursement without any restrictions, and an APY.

If you travel internationally or are looking for the checking account with the best perks, get the Charles Schwab checking account. We can’t recommend it enough.

There is a small catch when opening a Charles Schwab checking account: They require that you also open a brokerage account with them. There are no fees or minimum balance on the brokerage account — it’s completely free. The only requirement is to open the account. You never have to do anything with it. Schwab is hoping that you’ll use them as a brokerage when you’re ready to have one later.

The only real downside to the Charles Schwab checking account is the limited physical branches. If you handle cash or deal with foreign currency frequently, their branches might be extremely inconvenient for you.

As long as you do all of your banking online or get lucky by having a branch near you, get a Charles Schwab checking account.


HSBC has quite a few checking accounts to choose from:

Basic Banking

Choice Checking






0.01% on balances above $5

0.01% on balances above $5

Monthly fee

$3/month regardless of balance

$15/month if minimum balance isn’t met

$25/month if minimum balance isn’t met

$50/month if minimum balance isn’t met

Minimum balance


None with direct deposit or $1,500

$5,000 minimum balance w/ direct deposit or $10,000

$100,000 across accounts

Mobile deposit





ATM reimbursement

None, fee of $2.50 when using out-of-network ATMs

None, fee of $2.50 when using out-of-network ATMs

4 times per statement (U.S. only and doesn’t include NY)

Unlimited (U.S. only)

Foreign transaction fees





Physical branches





Compared to the other accounts in this list, HSBC’s offerings aren’t great. There are monthly fees that are somewhat difficult to get waived, the ATM reimbursement is limited, and the foreign transaction fees are super high. None of the perks get competitive until you’re at the Premier level, which requires a $100,000 balance.

Why include HSBC at all?

One reason: some folks need a truly global bank. If you’re doing business internationally, have homes in multiple countries, or have an international lifestyle, the support of a global bank could be well worth the extra fees and lack of perks.

For most folks, skip HSBC entirely and choose one of the other options in this list.



  • APY: 0.60%
  • Monthly fee: None
  • Minimum balance: None
  • Mobile deposit: Yes
  • ATM reimbursement: Up to $10 per statement
  • Foreign transaction fees: Up to 1% of transaction
  • Physical branches: None

Ally has a pretty solid checking account.

However, it’s not as good as Charles Schwab. First, it has a 1% fee on foreign transactions. That’s a deal-breaker for me when traveling. Second, the ATM reimbursement is limited to $10 per statement. Third, while the APY is higher than the Charles Schwab checking account, the APY doesn’t matter on checking accounts anyway. Lastly, Ally doesn’t have any physical branches at all.

Ally has a good checking account, but you’ll be better off with Charles Schwab.

Capital One 360


  • APY: $0 – $50,000 is 0.20%, $50,000 – $100,000 is 0.75%, and over $100,000 is 1%
  • Monthly fee: None
  • Minimum balance: None
  • Mobile deposit: Yes
  • ATM reimbursement: Up to $15 per statement
  • Foreign transaction fees: None
  • Physical branches: A couple of branches or “cafes” in a few cities

Getting a 1% APY sounds nice but the Capital One 360 Checking tiers make it completely irrelevant.

Why would you have $100,000 in your checking account anyway? Even if you’re sitting on cash deliberately, it should be in a savings account, which will always have a much higher APY. And with the lower APY of 0.20% on lower balances, the value ends up being minor.

Don’t factor the APY into your decision to get the Capital One checking account.

That said, all the other perks for this account are pretty good. No maintenance or minimum balance fees, no foreign transaction fees, an ATM reimbursement up to $15 per statement, and a couple of physical branches if you’re in a major city.

While it’s not quite as good as the Charles Schwab account, it’s really close.

I’d strongly consider getting a Capital One 360 checking account if I already had a Capital One credit card. Being able to keep my accounts consolidated would be a huge bonus.



  • APY: None
  • Monthly fee: None
  • Minimum balance: None
  • Mobile deposit: Yes
  • ATM reimbursement: None
  • Foreign transaction fees: None but good luck trying to get a Discover card accepted internationally
  • Physical branches: None
  • Cash back: 1% on up to $3,000 of debit card purchases

The Discover checking account is a bland account. There’s nothing bad about it, but there’s nothing good about it either.

It does have two main perks: no foreign transaction fees and cash back. The foreign transaction fees are irrelevant. I wouldn’t even attempt to use Discover when traveling internationally, I stick to a Visa card. The cash back at 1% is nice, but you’d have to skip a credit card rewards program in order to use the debit card. This is only valuable if you’ve decided to avoid credit cards entirely. It’s also limited to $30 worth of cash back per month. That’s extremely low.

I’d avoid the Discover checking account unless I was already using Discover credit cards and desperately wanted the extra simplicity from having all my accounts in one place. Or if I was avoiding credit cards entirely and wanted a debit card with a cash back program.


Chase actually has three checking accounts:

Chase Total Checking

Chase Premier Plus Checking

Chase Sapphire Checking





Monthly fee

$12, waived if you have $500 of direct deposits, a balance of $1,500 at the beginning of every day, or an average balance of $5,000 across your checking and savings accounts

$25, waived if you have an average balance of $15,000 across your checking and savings accounts or a Chase mortgage with linked payments

$25, waived if you have an average balance of $75,000 across your checking and savings accounts

Minimum balance




Mobile deposit




ATM reimbursement


4 times per statement


Foreign transaction fees




Physical branches




The hurdles that Chase requires in order to get the monthly fee waived is annoying. This is the main downside of the Chase checking accounts.

However, they could still be the best accounts for you. I’d seriously consider a Chase checking account if I was also planning on getting a Chase savings account and knew that I’d easily hit their balance requirements in order to get the monthly fee waived. We have a deep-dive on all the best savings accounts here.

Once we factor out the monthly fee, the Premier Plus and Sapphire Checking are both decent offers. APY doesn’t really matter anyway, both have mobile banking and deposits, no foreign transaction fees, and ATM reimbursements. Plus, we get the added bonus of being able to walk into a physical branch since Chase branches are in most cities.

Basically, the Chase checking accounts are a competitive checking account with all the benefits of a major bank. And if you have the Chase credit cards, you could get all your accounts with one bank, making everything really convenient.



  • APY: 0.01% with $1,000 or more
  • Monthly fee: None
  • Minimum balance: $25 to open the account, then no minimum balance after that
  • Mobile deposit: Yes
  • ATM reimbursement: Up to $15 per statement but there is a $2 fee from USAA on every ATM withdrawal after the first 10 per statement
  • Foreign transaction fees: 1%
  • Physical branches: Branches in Colorado Springs, West Point, Annapolis, and San Antonio
  • Military perks: If you’re part of the military, there’s no initial deposit required, you get a pre-filled 1199A, and you get paid a day early

If you’re in the military, there are a few unique perks that other checking accounts don’t have. But I wouldn’t call them game-changing perks. The 1199A is a direct deposit form. You only have to fill this out once when setting up your new account (unless you switch jobs). This only saves you 15 minutes of time.

Getting paid a day early is kind of nice but only impacts you during the first payment cycle. Then your paychecks will have to last the same number of days as they usually would.

Otherwise, none of the perks are that great. The ATM reimbursement only lasts until $15 and then USAA hits you with a fee after the first 10 per statement. There’s also that 1% foreign transaction fee to watch out for, so you’d want to avoid using this account when traveling internationally.

On the whole, there are better checking accounts to choose from. I’d only consider the USSA checking account if you’re already doing a lot of business with USAA and want to keep your accounts in one place. For example, their car insurance is pretty good.



  • APY: 2.02% on “Protected Goals” with a balance of at least $2,000
  • Monthly fee: None
  • Minimum balance: None
  • Mobile deposit: Yes
  • ATM reimbursement: None
  • Foreign transaction fees: Up to 1%
  • Physical branches: None

Simple does things a bit differently than the other banks. Instead of splitting your balances between checkings and savings, Simple has “Goals” and “Save to Spend” sections.

In other words, Simple is more of a combined checking and savings account with an amazing UI that helps you control your spending.

You’ll set up as many Goals as you want and when you want to hit your savings goals. Like saving $2,000 for a trip to Italy in 6 months. Then Simple automatically figures out how much you need to save and regularly reduces that amount from your Safe to Spend amount.

Your Safe to Spend amount is your total balance, minus your Goals and scheduled bills over the next 30 days. Whenever you’re wondering if you can afford something, simply check the Safe to Spend amount and if there’s enough, go for it. This helps immensely with guilt-free spending.

Simple also has a set of reports to track spending across categories over time.

I highly recommend Simple if you’d like an account that makes it easier to save and budget.



  • APY: None
  • Monthly fee: None
  • Minimum balance: None
  • Mobile deposit: Yes
  • ATM reimbursement: None and Chime has a $2.50 fee for any out-of-network ATM
  • Foreign transaction fees: No fees on foreign transactions but you do get the $2.50 ATM fee since Chime’s in-network ATMs are only in the U.S.
  • Physical branches: None
  • Early direct deposit: Yes
  • Send checks by mail: Yes, Chime will send the check for you
  • Round-up savings: Automatically round up every transaction to the nearest dollar, placing that extra amount into a savings account

Chime is another bank that combines your checking and savings accounts. It’s similar to Simple.

It has a great UI and a nifty way to help you save. It’ll automatically round up your charges to the nearest dollar, putting the difference in a savings account. Saving a few pennies will add up fast. If you’ve had trouble saving in the past, this will help a lot with hitting your savings goals.

You can also transfer up to 10% of your pay into a savings account. While this is a nice touch, it’s possible to set up an automatic transfer between any checking and savings accounts.

On the whole, we recommend Simple over Chime, since Simple has more features to help you with saving and budgeting.

The 5-step process to finding the best checking account for you

  1. Start with the best default: Charles Schwab checking.
  2. Do you want extra help with saving and budgeting? If so, get Simple.
  3. Do you deal with large amounts of cash or foreign currency regularly? If so, get a bank with a local branch.
  4. Is convenience a priority for you? If so, get a checking account at a bank that you already use.
  5. Do you want a cash back program on your debit card because you’re against using credit cards? If so, get Axos or Discover checking.

Step 1: Start with the best default checking account

If we look at the value of perks across different checking accounts, Charles Schwab beats all the other accounts easily. There are no maintenance fees, no foreign exchange fees, unlimited reimbursement on ATMs worldwide, and an APY.

If you’re looking for the most valuable checking account and the following steps don’t apply to you, we recommend getting Charles Schwab.

For the other options that we’re about to walk through, evaluate those accounts against the Charles Schwab checking account.

Step 2: Do you want extra help with saving and budgeting?

Let’s say that you’re earlier in your financial journey and still developing habits around saving and budgeting.

In that case, I strongly recommend giving Simple a try. It’s a combined savings and checking account with an interface built around helping you save. It’ll also figure out all your bills for you, telling you exactly what you can spend at any given moment, completely guilt-free.

Yes, Simple’s APY on its savings account isn’t as high as other savings accounts. And the perks on its checking account aren’t as valuable as Charles Schwab. But the extra support you get with saving and spending is well worth it in my opinion.

Step 3: Do you deal with large amounts of cash or foreign currency regularly?

As much as I love doing everything online, there are two good reasons to choose a checking account that has fewer perks in order to have a bank with a physical branch nearby.

1. Large cash withdrawals or deposits

If, for whatever reason, you deal with large amounts of cash regularly, you really need a physical branch.

Take my friend for example. One of his main hobbies is gambling. He treats it as an expense and always stays within his budget. He’s in the fortunate position of being able to do this.

He heads out to Las Vegas once or twice a year and withdraws a bundle of cash for the trip. Neither of us has personally tried to see how many consecutive withdrawals we can make from a single ATM, but we don’t really want to find out. In situations like this, a local bank completely solves the problem.

If you need to withdraw more cash than a typical ATM can handle even once or twice a year, it’s worth getting a checking account at a local bank.

2. Foreign currency

If you deal with foreign currency regularly, I’ve found it immensely helpful to have a physical branch nearby.

Years ago, I did a workshop for a Canadian startup accelerator and got paid $4,000 in Canadian dollars. They mailed me a check. While it’s possible to do a mobile deposit with normal checks through my Charles Schwab account, that doesn’t work for checks in other currencies. Luckily, Charles Schwab tends to have a branch in most cities. I still had to drive all the way across the city multiple times to get the deposit sorted out. Thankfully, I haven’t had to deal with this again. But if I did, I’d get a checking account at a large, local bank just for depositing checks in foreign currencies.

Another perk of having a local branch: exchanging foreign currency back into U.S. dollars. After any international trip, I always end up with $50-100 worth of leftover foreign currency. I consider the airport currency exchange kiosks a complete rip-off. Not only are the exchange rates terrible, a lot of them don’t accept smaller bills. Having a local branch completely solves my leftover foreign currency problem. I can simply walk in, give them whatever I have left, and they deposit it into my account at a decent exchange rate. Problem solved.

So if you’re dealing with foreign currency or large amounts of cash even a few times a year, it’s worth getting a checking account with a local branch, even if the perks aren’t as good. Hopefully, one of the banks in our list has a local branch near you. If you’re not sure, start with Chase, since they have branches all over the U.S.

Step 4: Is convenience a priority for you?

Before jumping into a new account, ask yourself how much you value convenience.

Do you really want to manage a dozen different financial accounts? I know that seems like a lot, but when you factor in checking, multiple credit cards, a mortgage, student loans, 401Ks, brokerage accounts, savings, joint accounts, and all the accounts for your spouse, it adds up really fast.

The more time goes on, the more you’ll value simplicity across your accounts. I know multiple people who have gladly paid ATM fees again just to get a few of their accounts under the same bank.

Capital One is a great option for simplicity, since they have great credit card offers and they have a really strong checking account. While Chase’s checking accounts aren’t as good, their credit cards tend to be among the best. And if you use Discover cards, definitely consider Discover’s checking account.

Step 5: Do you want a cash back program on your debit card because you’re against using credit cards?

Generally, you want to use credit cards for the majority of your spending. With all the travel rewards and cash back credit card options out there, it’s free money back in your pocket. As long as you pay off your credit cards every month, there’s no downside.

But what if you’re still against credit cards? Some folks have trouble controlling their spending on credit cards and others are philosophically opposed. Or maybe their credit score is too low to get a credit card.

If that’s you, there are a few cash back programs on debit cards for checking accounts. Axos and Discover both have great options.

Again, a cash back program on a debit card will always be inferior to credit card cash back offers. You will get less money back by going this route. That said, it may still be worth it for you if you’re trying to avoid credit cards entirely.

The best checking accounts of 2019 is a post from: I Will Teach You To Be Rich.

How We Go Camping – And Some Suggestions for New (and Experienced) Campers

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Joel writes in:

First, what is your car camping set-up. I’m thinking of getting a canopy tent for hanging out — something like a 10×10 foot bug protection for placing over the picnic table. Wondered if you had recommendations or even use one then thought I’d just ask about the set-up in general.

Before I dig into our own camping history and how we camp today, I want to talk a bit about why camping is a great idea.

The big reason why camping fits well on The Simple Dollar is that camping is an extremely inexpensive way to get out of the house for a few days. Once you’ve covered the initial startup costs of a tent and a few other items, the cost of camping is basically the fuel to drive to a spot, any fees associated with the campsite… and that’s about it. You have to bring your own food, but the food costs for us are typically comparable to eating at home. It is a very inexpensive form of leisure and getting away from it all. Plus, camping can also be a very inexpensive summer vacation, as you can simply drive a long distance and camp in some new part of the country.

There are many different flavors of camping, and I’ve found that not everyone likes every flavor of camping. The two main varieties of camping are “car camping,” where you drive to a premade campsite, pitch a tent or a small camper, and live on the supplies you brought in your car or small camper, and “backpack camping,” where you literally carry the gear you need for camping on your back and explore wilderness. Within each, there’s a lot of variation.

Having said that, camping isn’t necessarily for everyone. Some people enjoy almost every kind of camping out there. Some people enjoy backpacking but find car camping dull; others feel the exact opposite. Some people don’t like any kind of camping.

Sarah and I have been avid campers for many, many years. Both of us used to do car camping growing up, and for the full time we were dating and for perhaps the first ten years of our marriage, Sarah and I were frequent car campers. At first, we had a smaller four person tent and kept our camping equipment in a tub in our apartment.

During those early years, Sarah and I got into a habit of camping several times a summer. It was a pretty regular weekend activity for us – we’d often come home on a Friday, grab our tent and sleeping bags and box of camping gear and a small cooler, toss them in the trunk, and we were ready to go. We’d stop at a grocery store on the way and fill up the cooler and get a few groceries, head to our campsite, and get our tent up before dark, and then spend Saturday and much of Sunday at the campground before heading home.

Over time, we gradually accumulated more camping gear – stuff that wasn’t really necessary but was kind of neat to have along. People knew we loved to camp and would often give us camping gear as a gift. We picked up things like tools to make starting a campfire easier or some really sturdy dishes for the campsite or a Dutch oven to use for campfire cooking. Gradually, our one tub expanded to two tubs, but it still wasn’t a problem.

The challenge came when we had a child, then another, then another. Camping quickly morphed into a much greater logistical challenge requiring us to remember stuff for five people rather than two, plus a lot of baby-related gear. The number of times we camped each summer declined, and we both missed it.

When Sarah was a kid, she had two younger sisters and their family used a popup camper, so she spent a good year shopping around for a used popup camper in good shape and, a few years ago, she found one she liked for a really good price (I think it was a liquidation type of situation where a family needed to get rid of unwanted items rather quickly) and we bought it. It’s a mid-2000s Jayco popup that looks quite a bit like this, but with some key differences and some minor wear and tear on it. We paid substantially less than $1,000 for it.

This served several purposes. One, it provided a single place to store all of our camping items. We simply keep them all stored in the Jayco when it’s folded up and there’s more than enough space for all of the camping gear for five people. Going camping is now quite simple again – we just hook the camper to our van and take off. Two, it made Sarah incredibly happy, as she loved the popup camper that her family camped in when they were kids. Three, a popup is pretty inexpensive as such things go. Four, it’s lightweight, meaning it’s easily towed by our van with a towing package. The cost per year of it has not been much more than a well-equipped tent, either, since we bought it used and have kept care of it.

Personally, I didn’t mind our tent at all. For the first few years we camped with our kids, we used a six person tent that worked really well for our needs and I was really happy with it. Part of the reason for the popup was my wife wanting one, so she conserved her personal spending budget for a while to afford one (it seemed like an “extra” that she wanted but not me). Now that we have it, I appreciate what it offers, but I wouldn’t object a bit to using a tent in the future.

So, as I mentioned, we store our camping gear in this used popup camper. It folds down into a pretty small footprint with roughly 80 square feet of storage space, which we fill up with sleeping bags, extra pillows, firestarting tools, dishes, a Dutch oven, and many other items.

What about a canopy tent, as described in the question? For bugs, we use citronella candles, which we light in the late afternoon before bugs emerge and do a pretty good job of keeping them at bay. We position a few large citronella candles around the front of our camper and this seems to keep almost all bugs away from us within a pretty nice radius. I haven’t found any need for a canopy tent, as we just go in the popup when it rains and the candles keep bugs at bay when it’s not raining. I prefer to get the large bucket-sized citronella candles, as they last for a long time and you don’t have to worry about buying new ones very often.

What items do we take? As I said, we keep most of our stuff in the camper, and we have a checklist of items to grab from around the house or at the store before we go camping – things that we use during non-camping months (like clothing) and things that are perishable or consumable that need to be replenished, like sunscreen and bug spray for hiking. Our overall camping checklist isn’t too far off of this family camping checklist from REI, though our list is pared down a little from that.

My recommendation is that if you’re camping for the first time, borrow a tent or a popup camper and some gear from someone and take a short 2-3 day trip using mostly borrowed gear.Ask your family members or very close friends if they have camping gear and ask to borrow it. Choose a campground that’s near features that seem interesting to you and go there for a long weekend. You’ll figure out on that trip whether camping is really for you and what kind of style you want. Do you want to backpack? Do you want to camp out of a car? Do you want to use a small popup? Is camping just not for you? You’ll probably be able to figure this out within a couple days of car camping with a borrowed tent and borrowed equipment.

Often, what you’ll find with your first camping experience is that it was mostly positive with a few serious nitpicks or issues. In general, someone who thinks camping sounds like fun will usually find the fun it it, whereas people who aren’t excited by the idea will dislike it. The thing is, almost always, the “serious nitpicks or issues” can be solved quite easily for future trips. Camping is a very flexible activity with tons of advice available online for tips and strategies for specific situations.

For us, we usually camp three or four times during each summer. We usually camp once within an hour or two of home for our first camping stop of the summer, mostly to give us an opportunity to really check over the camper and make sure everything is in order. Some summers, our full summer vacation is camping, as we’ll tow our camper to a national park and camp there. We did this most recently in 2017, when we camped at Yellowstone National Park for more than a week and spent time in Grand Tetons, too. During other summers, we’ll usually still go on a four or five day camping trip at some point in the summer, usually not too far from home (usually in our state or a neighboring one). We also usually camp once late in the summer with another couple, and we sometimes also camp with several old friends of ours on a group camping trip. In addition, our kids often have “camping birthday parties” where we take them and several of their friends camping. In 2017, I believe we camped six times, which was our record.

My main future goal for camping is that I would like to try an overnight backpacking trip with my family (where you carry a tent and all needed gear and food in your backpack with you) but this requires somewhat different gear than we already have. I have a cousin who is into backpacking from whom we may be able to borrow most of the gear to try it out.

If you haven’t tried camping and it sounds appealing as both an enjoyable activity and a frugal way of getting out of the house, I recommend simply borrowing gear and giving it a try. If it sounds appealing, you’ll probably love your first trip (with maybe a challenge or two), and then it’s time to start looking for bargain camping gear (which may be an article in the near future).

Good luck!

The post How We Go Camping – And Some Suggestions for New (and Experienced) Campers appeared first on The Simple Dollar.

The best rewards credit cards of 2019

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If your goal is to maximize rewards, get the best bonuses, and play the points game no matter the cost…

You’re on the wrong page.

We have a different philosophy on rewards credit cards.

It’s the same philosophy that we have for all of personal finance: ignore the small stuff and focus on the Big Wins.

Points hacking is small stuff.

Finding a great rewards card you can depend on and then never thinking about it again is a big win.

Finding the best card for you is pretty simple when your goal is to maximize your rewards with the least amount of effort possible. The main decision you’ll need to make is to get a travel points or a cash back card. We’ve sorted through hundreds of credit card offers to find the best card for both categories.

There are a few other situation-specific cards to consider too. All-in, there are only six cards that are worth looking at.

We’ve done a deep dive on all these cards below.

What makes a great rewards card

The usual advice focuses on how to squeeze out every last percentage point from restaurants, gas, groceries, and 50 other categories.

I disagree.

You see, we need to factor in the effort required to get the rewards.

Some cards have rotating spending categories and all sorts of hoops for you to jump through in order to hit some hypothetical maximum reward.

At I Will Teach You To Be Rich, we’re adamantly against these types of games.

A few extra rewards points are not going to fundamentally change your lifestyle. Automating your finances, getting a great rewards card that doesn’t require ongoing effort, and then focusing on bigger wins WILL change your life.

The best rewards credit cards have rewards programs that are easy to understand, require little to no maintenance, and yield at least 1.5% back in cash or rewards. Add in a few perks and you’ve got a great card.

Should you get a travel or cash back rewards card?

Whether to get a travel or cash back card comes down to one simple question.

What’s more important to you, the value of the rewards or simplicity?

If you want to get every dollar in rewards possible, travel rewards programs always beat cash back cards. For credit card companies, there’s always a percentage of people who forget to spend their points, so they’re able to increase the value of their points over a more straightforward cash back program.

Of course, don’t get a travel points card if you hate to travel. That would be … unhelpful. It’s still worth it as long as you travel once per year.

Maximizing the value of your rewards does come with an extra cost though. You’ll have to manage your points. They’ll accrue in your credit card account and you’ll have to make choices on when and where to spend them. For example, different redemption methods have different values. The American Express Membership Rewards points are worth $0.07 on Amazon and $0.10 on Uber. Every card has its own redemption methods with its own values.

You could use the rule of thumb of always redeeming your points for miles on an airline program. This is a good rule, and it’ll usually maximize the value of your points. But you still have to transfer your points to miles. Each credit card points program will transfer to some airline programs and not others. And once you get your points into the right miles program, you’ll have to deal with whatever points restrictions your airline has (blackout dates, only certain flights being available, etc.). To add even more complexity, some credit card programs allow you to book flights and hotels directly through them, but then there’s a separate set of restrictions and point values that you have to deal with.

Sounds like a pain? It is.

For me, the extra hassle is worth the free international flights that I’ve been able to get.

If the extra hassle of a travel rewards programs sounds exhausting, get a cash back rewards card instead.

Cash back cards still have plenty of benefit without any work:

  • You get a straight percentage back on all charges to your card.
  • The cash back shows up on your statements either automatically or with very little effort. Worst case, you’ll have to log in and hit a button to initiate the cash back.
  • While some cash back cards have maximum payouts, rotating categories, and other nonsense, there’s plenty of cards that keep things ultra simple.

That’s as simple as it’s going to get.

Here’s how to make your decision:

  • To maximize the value of your points, get a travel rewards card.
  • To maximize simplicity, get a cash back card.

How we evaluate credit cards

These are the criteria that we used to whittle hundreds of credit cards down to the few cards that we recommend.

Rewards or cash back program

How many points or how much cash back does a card earn? And under what conditions?

This is where the bulk of rewards value comes from, so when in doubt, choose the card with the better rewards program.

And watch for restrictions on rewards. It’s common to have a points boost of 5X on a spending category combined with a cap or restriction on how that charge is made. Some of the travel cards force you to book through their website in order to get the full points bonus on that charge. To me, that significantly reduces the value of the card. I place a lot of value on flexibility and choice.

Get a deep understanding of your card’s rewards program so you know exactly how it’ll work.

Bonus value

Most credit cards have a bonus offer for new customers. It usually works like this:

Get X if you spend $Y within Z days.

Hit that milestone and you’ll get the bonus added to your account within a few months.

Be careful with these though. If the spending amount is a huge stretch for you, it’s a sign that the card isn’t a good fit for your current spending habits. Whenever I’m looking at a bonus program, I only consider it if I can easily hit the spending amounts that trigger the bonus.

One hack is to get a new card around the same time that you’re making a larger purchase that you already planned and saved for. Furniture is a great fit for this. If you’re already planning on getting a new couch or mattress, that could get you the bonus on its own. Get your new card, make the purchase, immediately pay down the balance with the money you already saved, get your bonus.

While it’s good to look around for the best bonus promo on the card you want, we never choose cards based on the bonus program alone:

  • You’ll be using the card for years, the perks matter a lot more than the bonus.
  • Points are not created equal. One card might offer 100,000 bonus points while another offers 60,000 points. There’s no way to tell which one has the better deal without really digging into the value of their points programs.
  • Just about every great card has a decent bonus.
  • Point hackers will chase bonus programs but we don’t recommend that approach. There are more important things for you to focus on.

We recommend choosing the card you want based on the rewards program and perks. Then accept whatever bonus the card happens to offer.


There are a number of perks that you might get from your credit card. For some, perks are more important than rewards.

Most credit cards have a host of perks that we all forget about, like car rental insurance and lost luggage protection. Standard perks that come with most cards:

  • Rental car insurance
  • Purchase protection
  • Return protection
  • Extended warranties
  • Trip cancellation insurance
  • Lost luggage replacement

These perks are so ubiquitous that you don’t have to factor them in when choosing the card you want. If one of them is super important to you, double check and make sure the card you’re considering does have it.

There ARE perks that only come with certain cards. These are the perks we get excited about. They include:

  • Uber reimbursement
  • Global Entry and TSA Precheck reimbursement
  • Lounge access
  • Travel reimbursement
  • Hotel upgrades and credits

If a perk is super valuable to you, it could be worth getting a less valuable rewards program just for the perk. Frankly, this is why most people get the American Express Platinum. Access to the Centurion lounges makes flying much more enjoyable.


Some credit card fees matter more than others.

While we absolutely hate maintenance fees on checking and savings accounts, all the best rewards cards have annual fees. The rewards and perks easily cover the annual fees as long as you’re regularly using the card. Cards tend to fall into three tiers with their annual fees:

  • No annual fee: There are no-fee cash back and rewards cards out there. The perks and rewards will be limited but it is possible to get a no-annual-fee rewards card.
  • $100 annual fee: Most of the good rewards programs start with annual fees in $90-100 range. This is a good level for your first rewards card.
  • $500 annual fee: The best cards are at this level, like the American Express Platinum and Chase Sapphire Reserve. They have perks none of the other cards have.

If cash is tight and you’re watching every dollar, get a no-annual-fee card. Once you’re more financially comfortable, the $100 annual fee cards open up the real rewards programs. And after you’re making $100,000 or more per year, get one of the $500 annual fee cards to maximize your rewards.

There are other fees to look out for too, like the foreign transaction fee.

I hate foreign transaction fees. I travel internationally a few times a year and I only choose cards without them. Traveling is expensive enough — the last thing I want is a 1-3% charge on top of everything.

Even if you don’t travel and you don’t think this is a big deal, you can still get hit with a foreign transaction fee within the U.S. The fee triggers any time a charge goes through a foreign bank. So if you buy something online, even if the price is in U.S. dollars, you could get an extra fee without realizing it.

Plenty of cards still have foreign transaction fees, so watch for this if you travel.


Some folks love playing points games.

I am not one of those people.

I want 1-2 cards that I can always default to. I’d much rather get 80% of the value without having to spend any time thinking about points.

No matter how good the rewards program is, it’s just not worth the effort if I have to actively think about it. I have plenty of more important things that need my attention.

When looking at rewards programs, look out for these common traps:

  • Rotating rewards categories. Cards that change the rules are never worth the extra effort in our opinion.
  • Increased rewards for minor spending categories. I don’t really care if I get 10X points when buying 7-Eleven slushies. Give me a break. I need categories where I spend regularly.
  • Points that get locked up in obscure programs. Yes, a random hotel credit card might give more points per dollar than other cards. But are the points worth anything if you can only use them at a hotel you never wanted to go to?

If a rewards program has too many restrictions, we don’t include it in our recommended cards.

What about the card APR?

I never pay attention to it. I can’t even tell you what the APRs are on my cards because I always pay the balance off every month.

Look, if you don’t pay off your balance every month, it’s not worth doing a rewards program at all. You’ll pay more in interest than you’ll ever get back in rewards. Get out of debt, get ahead of your spending, and build a habit of paying off your balances.

First build the financial habits and stability to pay off your balance every month. Then, and only then, should you get a rewards credit card.

The two best rewards credit cards

So what are the best rewards and cash back cards? Here are our recommendations.

Chase Sapphire Reserve

The best overall rewards credit card

  • “Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s $750 toward travel when you redeem through Chase Ultimate Rewards®
  • Named “”Best Premium Travel Credit Card”” for 2018 by MONEY® Magazine
  • $300 Annual Travel Credit as reimbursement for travel purchases charged to your card each account anniversary year
  • 3X points on travel immediately after earning your $300 travel credit. 3X points on dining at restaurants & 1 point per $1 spent on all other purchases. $0 foreign transaction fees.
  • Get 50% more value when you redeem your points for travel through Chase Ultimate Rewards. For example, 50,000 points are worth $750 toward travel
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Access to 1,000+ airport lounges worldwide after an easy, one-time enrollment in Priority Pass™ Select
  • Up to $100 application fee credit for Global Entry or TSA Pre✓®”

If you travel at all, get this card. The perks are phenomenal.

First, you get $300 reimbursed every year on travel charges. I just booked a domestic flight yesterday and I got the whole flight reimbursed.

No foreign transaction fees either. The card’s also a Visa, which is the most widely accepted card internationally. That’s as good as it gets for having a reliable credit card to use internationally.

Global Entry and TSA Precheck were game changers for me when traveling. Half my stress and anxiety when traveling was eliminated. I never imagined how much better I’d feel without having to take my shoes off or my laptop out when going through security. Getting the application reimbursed is an amazing perk. Pro-tip: Get Global Entry, which includes TSA Precheck and is only slightly more expensive.

I spend a lot on travel and food. For racking up points, the Chase Sapphire Reserve is perfect for me. I get 3X on the majority of my spending. If only they had 3X points on cashmere sweaters, I would be in heaven.

There is one big downside: the $450 annual fee. That’s high for a lot of people.

The travel and Global Entry reimbursements do cover most of the fee. With the $300 annual travel reimbursement, the annual fee comes down to $150. We also have the $100 credit for Global Entry or TSA Precheck. These programs last 5 years, so that equals $20 per year. Basically, the real annual fee is $130.

When most travel rewards cards have annual fees of $95, paying $130 for the Chase Sapphire Reserve in order to get 3X points on travel and restaurants is a fantastic deal.

Citi Double Cash

The best cash back credit card

  • “Earn 2% cash back on purchases: 1% when you buy plus 1% as you pay
  • Balance Transfers do not earn cash back
  • 0% Intro APR on Balance Transfers for 18 months. After that, the variable APR will be 15.74% – 25.74% based on your creditworthiness*
  • Click ‘Apply Now’ to see the applicable balance transfer fee and how making a balance transfer impacts interest on purchases
  • No categories to track, no caps on cash back, no annual fee*”

I love the simplicity of this card. 2% cash back, no nonsense. Get your first 1% cash back when you spend, get another 1% when you pay down the charge. There’s no cash back limits and no annual fee either.

You won’t get cash back on any balance transfers but that’s pretty reasonable in our view.

There isn’t much in the way of perks, but that’s not why you should be considering this card in the first place.

It’s a no-frills, ultra-simple, maximize your cash back card.

For those of you who want to get a card and never think about your rewards every again, the Citi Double Cash is the card for you.

There is one major downside to the Citi Double Cash card. It has a 3% foreign transaction fee, which is super high. If you travel regularly, the 3% fee will stack up fast and negate any of the cash back rewards that you’ve earned. So only get the Citi Double Cash card if you rarely travel internationally. If you do travel regularly, I have another cash back option for you later on in this post.

Other cards to consider

Depending on your circumstances, there are a few other cards that could be the best option for you. Let’s go through them.

Chase Sapphire Preferred

  • “Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s $750 toward travel when you redeem through Chase Ultimate Rewards®
  • 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 60,000 points are worth $750 toward travel”

The Chase Sapphire Preferred has a slightly less valuable points program and fewer perks than the Chase Sapphire Reserve. And the Sapphire Preferred comes with a smaller annual fee at $95.

You’ll still get 2X points on travel at restaurants, a great bonus offer, and no foreign transaction fees.

But you’ll be missing the travel credit, Priority Pass™ Select for lounge access, and the Global Entry or TSA Precheck credit. And you’ll only be getting 2X points instead of 3X points on travel and restaurants.

We recommend getting the Sapphire Preferred if the $450 annual fee on the Sapphire Reserve is too much of a stretch. The Sapphire Preferred is a great first step into the world of rewards credit cards that have annual fees. Plus, you can always upgrade to the Sapphire Reserve later.

If you make more than $100,000 per year, you should probably go straight to the Sapphire Reserve card.

Capital One Quicksilver Cash Rewards

  • “One-time $150 cash bonus after you spend $500 on purchases within 3 months from account opening
  • Earn unlimited 1.5% cash back on every purchase, every day
  • No rotating categories or sign-ups needed to earn cash rewards; plus, cash back won’t expire for the life of the account and there’s no limit to how much you can earn
  • 0% intro APR on purchases for 15 months; 16.24%-26.24% variable APR after that
  • 0% intro APR on balance transfers for 15 months; 16.24%-26.24% variable APR after that; 3% fee on the amounts transferred within the first 15 months
  • Pay no annual fee or foreign transaction fees
  • See if you qualify for a better offer with Capital One:”

Yes, the 1.5% cash back isn’t as high as the 2% cash back from the Citi Double Cash.

But the Capital One Quicksilver has no foreign transaction fees, which means it’s perfect for folks who travel internationally and want the simplicity of a cash back card.

The annual fee does depend on your credit score. If it’s good enough, it’ll be waived. Otherwise the annual fee is $39.

If you travel internationally once per year and want a cash back card, we recommend getting the Capital One Quicksilver card.

American Express Platinum

  • “Earn 60,000 Membership Rewards® points after you use your new Card to make $5,000 in purchases in your first 3 months.
  • Enjoy Uber VIP status and free rides in the U.S. up to $15 each month, plus a bonus $20 in December. That can be up to $200 in annual Uber savings.
  • 5X Membership Rewards® points on flights booked directly with airlines or with American Express Travel.
  • 5X Membership Rewards points on prepaid hotels booked on
  • Enjoy access to the Global Lounge Collection, the only credit card airport lounge access program that includes proprietary lounge locations around the world.
  • Receive complimentary benefits with an average total value of $550 with Fine Hotels & Resorts. Learn More.
  • $200 Airline Fee Credit, up to $200 per calendar year in baggage fees and more at one qualifying airline.
  • Get up to $100 in statement credits annually for purchases at Saks Fifth Avenue on your Platinum Card®. Enrollment required.
  • $550 annual fee.
  • Terms Apply.”

The Amex Platinum is all about the perks. If you’re looking to get perks that none of the other cards have, this is the card for you.

The Uber reimbursement is awesome. I easily spend $15/month on Uber rides, so that’s money right back in my pocket.

What’s the Uber VIP status that comes with the card? It’s an exclusive option that will match you with drivers who have a rating of 4.8 and above. It’s certainly nice, but it’s only available in a handful of cities. It also means you could wait a lot longer in order to get a driver with a high enough rating. It’s cool, but I wouldn’t get too excited by it.

The 5X points on flights and hotels booked directly with airlines is a pretty amazing perk. But I wouldn’t use it myself on flights. Honestly, I only book flights directly through airlines. I’ve heard too many horror stories from sites like Expedia or Orbitz. A good friend of mine booked a flight through Expedia and the airline never received the notice, so they didn’t reserve a ticket for him. He didn’t find out until he showed up for his connecting flight and had to buy another ticket on the spot for a crazy price. The worst part is it took him 9 months to get a refund from Expedia. I avoid that nonsense completely by finding the flight I want through Hipmunk or Google Flights, then booking directly through the airline.

One of the best perks of the Amex Platinum is getting access to the Centurion Lounges. These lounges are swanky — some of the nicest lounges out there. Unfortunately, they’re not in that many airports yet. Check to see if your main airport has one there. If you fly out of or through one of these airports regularly, this perk is a game-changer and is worth the annual fee on its own.

What about the 1000+ other lounges?

Credit card companies always inflate lounge access numbers. They’ll include a bunch of third-rate lounges that you’ll never want to go to anyway. Or they’ll add airport restaurants that offer a $20 discount off your meal in order to call that a “lounge.” When looking at lounge perks, I always check the exact lounges that are included in the airports that I fly through regularly.

So don’t assume you’ll be able to walk into any lounge. The majority of lounges will be out of your reach.

American Express Blue Cash Preferred

  • “Earn a $200 statement credit after you spend $1,000 in purchases on your new Card within the first 3 months.
  • 6% Cash Back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%) – that means spending $60 a week at U.S. supermarkets could earn over $180 back per year.
  • 3% Cash Back at U.S. gas stations. 1% Cash Back on other purchases.
  • You spoke, we listened. Over 1.6 million more places in the U.S. started accepting American Express® Cards in 2018.
  • Cash Back is received in the form of Reward Dollars that can be easily redeemed for statement credits, gift cards, and merchandise.
  • $95 annual fee.
  • Terms Apply.”

Do you have a long commute and spend over $100 per week in groceries?

For families, getting 6% cash back on groceries is amazing. Most families easily spend over $100 per week on groceries, so it won’t be hard to hit the annual cash back limit. You’ll hit it if you spend $115 per week — that works out to $360 in cash back per year on groceries that you have to buy anyway. That’s like getting 3 weeks of groceries for free. It’s too bad there’s a cap. This card would be incredible if there wasn’t one.

The other key perk on the American Express Blue Cash is the 3% cash back on gas. Right now, this wouldn’t do anything for me since I live in a city and rarely drive. But when I was growing up, gas was one of my biggest expense categories. I lived in a small town in Colorado that was 45 minutes from anything. My family and I were filling up our gas tanks every 2-3 days. Getting 3% cash back would have been amazing.

You’ll also get 3% cash back on streaming subscriptions and transit (taxis/rideshare, buses, parking, tolls, trains, etc.). The streaming cash back is nice, but there’s only so much any of us can spend on streaming in a given month. And while I know folks that spend a ton of money on rideshares, they tend to get the Chase Reserve card since they spend even more money on travel and restaurants. The cash back on these categories will help but I wouldn’t expect it to make a major difference in your rewards.

Watch out for the 2.7% foreign transaction fee on this card. I’d avoid using it when traveling internationally.

In other words, if you have a family and a long commute, consider getting the Amex Blue Cash to maximize your rewards on groceries and gas.

Should you get multiple rewards cards?

Don’t even consider having multiple cards until you’re comfortably spending over $3,000 per month.

I do recommend getting two rewards cards sooner rather than later if you want an American Express card. As great as the American Express cards are, plenty of businesses don’t accept them. So you’ll want a backup Visa or Mastercard when you can’t use your American Express. For a backup rewards card, I’d get one with a lower annual fee since you won’t be using it as often.

I might consider getting two rewards cards if my lifestyle covered multiple rewards programs. Let’s say I was spending a lot of money on gas, restaurants, and travel every month. In that case, the Chase Sapphire Reserve and American Express Blue Cash Preferred would be a great combo. I’d put all my groceries and gas on my American Express Blue Cash Preferred and put my travel and restaurant expenses on my Chase Sapphire Reserve. I’d rack up a ton of points and cash back with a system that I could easily remember.

I set a limit for myself of only having 2-3 cards. After that, things get too complicated.

The best rewards credit cards of 2019 is a post from: I Will Teach You To Be Rich.