Money Management

The number two cause of divorce in America today is finances. Managing your money is a lot harder than it used to be.

You have to make a lot more decisions than folks did a generation or two ago, and be much more up on your financial toes than your grandfolks perhaps did.

Instead of one health plan, you may need to choose from half a dozen- if you can afford coverage at all. Instead of an employer-provided traditional pension, you have to manage your own 401(k) and figure out not only how much to save but how to invest- without losing it all.

Instead of a single credit card with a relatively low rate- all that was available to most households in the 1970s- you probably have a wallet full of options, all with different rates, terms and due dates to monitor.

Fortunately, technology is riding to the rescue. I love the advice from MSN Money's Liz Pulliam Weston, and she's rounded up - again! - totally - make-great-sense tips for having an easier time managing your finances. Used properly, it can help you stay on top of your money with minimal effort. Liz spells out these tips in her book "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life", and could go a long way towards helping you streamline your financial life:

Simplify and De-Clutter

Use direct deposit. This should be a no-brainer, but many people who are eligible for direct deposit of their paychecks don't ever sign up. Perhaps it's an irrational fear of electronic transactions holding them back, but they should get over it. Direct deposit is easier, faster and safer than running around with a live check in your wallet.

Get true overdraft protection. Real overdraft protection links your checking account to a savings account, line of credit or credit card. Money is drawn from one of these sources if you write a check or initiate a debit card transaction for more than you have in your account. The annual cost is reasonable -- $20 to $50 is typical -- and you may pay another small fee anytime you use the overdraft.

What you don't want is "courtesy overdraft" or "bounce protection" that many banks and credit unions automatically offer their customers. That "service" can cost you $30 to $40 every time you make an over-limit transaction, and those fees can add up quickly. Take as example someone who racks up more than $200 in bounce fees buying songs for an MP3 player; because of an overdraft- even by a mere dollar! - each 99-cent tune could trigger a $30 fee. Be very careful navigating around overdraft protection; in the end, your bank will profit from the "courtesy" extended toward you.

Consolidate your accounts. Clutter isn't limited to the tangible stuff in your home. You also can create financial clutter when you have accounts all over the place. Too many accounts make it harder for you to adequately monitor your money, and you may pay more account fees than if you were able to maintain higher balances in fewer accounts.

For example, you could:

• Roll 401(k)s from previous employers into your current plan or into an individual retirement account (IRA).
• Combine IRAs as long as they're the same kind and they're all yours. You can't combine yours with a spouse's, for example, or combine regular IRAs with Roth IRAs -- at least not without serious financial consequences.
• Combine taxable brokerage accounts. If you have different goals for the various accounts you have now, you could consider maintaining separate accounts but at least consolidating them with the same brokerage house.

Trim your credit cards. The more cards you use, the more due dates and interest rates you're forced to monitor. If you pay off your balances in full, consider carrying just one card in your wallet, with another at home as a backup. If you're carrying credit card debt, consider leaving all your cards at home. Don't close accounts, since that could hurt your credit scores, but stop using them until you've retired your debt.

Consider two checking accounts. Consolidation isn't always best. If you have trouble figuring out how much money you can spend and how much needs to be reserved for bills, consider a two-account system.

Folks who utilize a two-account system typically have their paychecks deposited to a checking account at a brick-and-mortar bank -- often one that offers free checking if you use direct deposit. They have a second checking account they use to pay bills. If they can't get the second account free from their bank, or their bank doesn't have free online bill pay, they use an online bank, such as ING Direct, that offers fee-free checking and bill-pay services.

Next, they total all their bills for the year, using the previous year's bills as a guide, and divide the result by the number of paychecks they get each year. They set up automatic transfers so that this sum is whisked every payday to the second account.

Some go further by setting up automatic payments for most or all of their bills. Others prefer to control when bills get paid using the online bill-pay system that comes with their second account.
This two-account system takes a little effort to set up and monitor, but done right you'll eliminate uncertainty about whether you can cover your bills. What's left in the first account is the cash that's available for spending on clothes, eating out, etc.

A Schedule for Success

Set up a high-yield savings account. Saving for retirement and paying off credit card debt need to be the first and second priorities for most folks. Once you're on track there, though, you should consider building up an emergency fund, and today's high-rate online savings accounts can help you accomplish that. Accounts offered by ING Direct, Emigrant Direct and HSBC Direct, among others, are FDIC-insured and offer attractive rates. They typically link directly to your checking account at your brick-and-mortar bank. Set up automatic transfers so you don't have to think about saving -- you just do it.

Create alerts. Banks, brokerages and credit card companies will send you e-mails to alert you to all kinds of events: when your checking account drops below a certain level, for example, or when your credit card payment is due. Get online access to your accounts and explore the possibilities.

Move your due dates. If you have too many bills falling due at the same time, see if you can shift some to another time of the month. Many credit card companies, for example, will allow you to pick your own due dates.

Create a bill calendar. Even if you have e-mail alerts, you still should have all of your bills' due dates mapped out on a calendar. This can be a calendar on the wall, on your desktop or on your phone. The only requirement is that it be a calendar you look at daily. You're responsible for paying your bills even if you don't receive a statement, and this calendar can help make sure you don't wind up paying unnecessary late fees or inadvertently ruining your credit. (A single skipped payment on a credit account can knock nearly 100 points off your credit scores- what a big YUK.)

Pick the no-brainer options. If you really love picking individual stocks or researching the heck out of your mutual fund choices, go with that. If you want an easier route, though, seek out funds that do the heavy lifting for you. "Life cycle" and "target date maturity" funds not only choose the investments but re-balance them regularly so you don't have to mess with figuring out how much of your 401(k) to put in stocks and how much in bonds.

Don't Procrastinate -- Aggregate

Monitor your money. People who wait for their statements to arrive in the mail typically catch fraud later than those who monitor their accounts online, according to Javelin Research & Strategy, an online research firm. Real-time access to your accounts can help you prevent overdrafts and over-limit fees, too. You can try bouncing from site to site to check all your accounts, but you have better options.

Your bank may offer account aggregation, which allows you to view accounts held at other institutions. If you're comfortable having your transactions aggregated online, you can use sites such as Wesabe, Mint and Yodlee.

Many people would prefer personal-finance software programs like Microsoft Money and Quicken. These programs, which live on your computer rather than online, allow you to automatically download transactions and keep track of your finances while providing some powerful financial-planning software. Recent updates have vastly improved cash-flow-forecast features, which can show you in advance when your checking account is about to run on fumes. (Microsoft is the publisher of MSN Money.)

Each of these 10 options requires some upfront effort on your part, but after your systems are in place you'll be able to stay on top of your money in just a few minutes a week. If that isn't a worthwhile goal, I don't know what is, and what if you could have a little more "me-time", instead of "bill-time"? Sounds pretty good.

[John Tesh]