3 Steps to a Simple, Automated Personal Finance Setup

Personal finance can be scary and intimidating. We all know we should be saving for retirement and large purchases, but don't like to talk or even think about it. This article shows you the 3 steps needed to a simple, solid personal finance system.

The Elements of a Solid Personal Finance System
Everyone needs at least 3 accounts for a secure financial set-up. First, a high-yield checking account for everyday purchases. Second, a high-yield savings account for your emergency fund and large purchases. Third, a retirement account, at least a 401(k) (or equivalent), with preferably an IRA in addition. Let's look at each element in detail.

1) High-Yield Checking Account
The foundation of your personal finances should be a checking account that earns interest. If your current bank charges fees for your account, dump it! The bank should be paying you to use their services.

Interest rates are pretty low right now, but check with your local credit union, they usually offer higher interest rates. By finding a high-yield or rewards checking account, your bank will pay you simply for keeping money in your account!

2) High-Yield Savings Account
Are you one of those conspiracy theorists that keeps their savings under your mattress? Get over it! You're losing money by keeping it out of a bank. Your bank should be paying you to keep money in a savings account.

Once again, check with your local credit union first, but most of the higher-interest savings accounts are now found online. ING, Everbank, and Ally are good options to look into. Set up automatic monthly deposits from your checking account into your savings until you have a 3-6 month emergency fund.

3) Retirement Account
If you aren't saving for retirement, plan on flipping burgers at McDonald's in your 80's. Everyone procrastinates saving for retirement and underestimates how much they'll need; bad combination! Talk to your employer about any retirement accounts they offer, such as a 401(k).

Then, set up your own traditional or Roth IRA with an online broker such as Vanguard or Fidelity. Save about 15% of your take home pay by first funding your 401(k) up to the employer match, then maxing out your IRA, then back to your 401(k) if there's any left.

By following these 3 easy steps, you will have a secure financial future.