Avoiding Financial Hardship

Safeguarding Against Financial Hardship

Many were ok financially until the 2020 economic downturn. Some may have been still rebuilding from the Obama era recession, and some of you reading this may have been ok during this economic downturn. For any of you who may still be in high school/college, heed the advice posted here so you can hopefully avoid experiencing what many of us older than you go through at least once in our lifetimes.

The year 2020 has wreaked havoc on everyone from individuals losing jobs or cut hours to small business owners taking revenue cuts to being forced to shutdown. As hard as people and businesses alike try to prepare for the worst, something’s just can’t be foreseen. And 2020 was no exception. Regardless how prepared you were, even if you ultimately survived, your finances most likely took a hit. Early in the year I started part of my plan that evolved into what I’m doing now. What I posted earlier in the year is now only part of this plan. Below you will read about the current part I’m putting into action. The first part involves investing and trading in the stock market (linked below).

If you found this post, it’s most likely because you’re struggling and are looking for ideas of how to prevent another job loss, career transition, or economic downturn or economic shift, from causing you such a large financial blow. Where I may agree that no plan is 100% full proof, I do believe what I’m doing myself is as close as it gets. People speak of having a “plan b” or a “contingency plan”. Throughout my life experiences, I’ve learned to build contingencies, or multiple backups, into the initial plan. No plan is perfect, if you trust your plan and adapt it to any failures, the plan becomes stronger. It is important with anything in life to look at a failure not as a failure, but a lesson. It is finding the lesson in a failure that helps one grow and adapt to avoid repeating the same mistakes over again. And that’s precisely what I’ve done over the years which first led me to the stock investing/trading (which does take time to learn how to do profitably) and now what I’m doing savings and budgeting wise. I wish I thought of this idea earlier. 

Like most, I’ve had a good struggle in my life. Possibly harder than most as I’ve gone from business to business of my own since I was 22yrs old dealing with a job temporarily when I had to. Things finally started looking up, finances were finally starting to go from a struggle to to comfortable, then 2020 happened.

From what I’ve seen, more than are willing to admit it, live in a perpetual struggle. The smallest vehicle repair, needing a new appliance, or other similar happenings puts people into instant stress mode because the funds for such aren’t there for these things. Life is good only until a seemingly small, but expected, event that requires money comes up. Now the game of “financial roulette” begins as one decides which bill can be delayed to cover this expense. This plan, in time, should help avoid this in the future. 

First I go through the basics of the plan/strategy. Below I cover why each institution was chosen.

My Plan / Strategy

When it comes to paying bills, making sure you have money for emergencies, etc I’ve seen it all from a single “emergency fund” to putting cash in envelopes labelled for different expenses. Consider this plan similar to that but on steroids. And unlike the envelope idea, where your money isn’t protected (unless its in a fireproof safe) or insured, I’m utilizing banks and financial institutions to hide money on myself. I, personally, prefer online accounts so much of who I mention are either strictly online and mobile or have online access.

A different bank/institution for each purpose is recommended. I explain why and how this is possible at minimal to no cost/fee per month below. If you can’t see the money, you can’t spend it…..until you need it. For this, I utilize:

  • Varo: Primary spending and primary savings
  • Ally: Money for stock investing
  • SoFi: Splitting money into different areas/folders (they call vaults) for each purpose (emergency fund, vehicle maintenance, home purchase, etc)
  • Novo: Business Banking
    • Payroll
    • Secondary/Emergency spending
    • Red Conrad’s Wellness Alternatives Wellness Fund (for customers)
    • Reds Delivery Services Grocery Fund (for customers)
    • Perks Fund (for team members)
  • NBKC:
    • Personal: Extra money set aside and personal taxes
    • Business: Business taxes
  • BlueVine: Business primary daily spending
  • CashApp:
    • All my personal monthly bills (paid via the CashApp card)
    • Long-term stock portfolio (CashApp Invest)
  • Credit Karma:
    • Secondary checking account for bills (hoping to get it to at least 6 months worth of bills and expenses (groceries, supplies, etc))
    • Secondary savings account
  • Ameritrade/thinkorswim: Swing trading stock portfolio on riskier stocks (OTC markets)
  • AllOfUs: Swing trading stock portfolio for less risky stocks (exchange traded)

The reasoning of the combination of BlueVine/Novo as primary is explained below. 

For my stock investing and trading plan, click here. This coupled with what’s explained in this post and you should be able to set yourself up pretty nicely financially.

Yes, I have multiple bank accounts and multiple investment accounts. Each with their own purpose. The year 2020 put me into a position financially I never want to end up in again. Granted, saving money is easier said then done. Building a savings account and emergency funds will take time for most of us. However, utilizing multiple institutions for different purposes helps you get a clearer picture of what’s going on financially. As you open these extra accounts and begin moving funds into them for their specific purpose, you may find subscriptions you’re paying monthly, semi-annually, or annually that you no longer need and can cancel. That cancelled subscription is saved money, more money you can put towards something you need.

Yes, this would require moving money each time you’re paid to put $X in each fund elsewhere. But this can be set to happen automatically too. The institutions I use can also all be connected to each other through the Plaid service. So moving funds between accounts is seamless. You’ll just need to remind yourself this is what you’re doing before you question “missing” money. It’s not missing, it’s where you moved it for its purpose. I’ve connected most of my accounts to Varo and have funds automatically moving weekly. I only manually move bill money into CashApp. Likewise, I have my secondary business account attached to the primary account.

Most probably can’t pull off starting multiple accounts with separate funds/goals for every little thing from the get go. But if you at least start off with separating all bills into an account just for bills, open a savings account and automate it (if possible), and start an emergency fund, you’ll be on your way to avoiding a financial hardship in the future. Once you get going, you may be able to set aside funds for additional goals. Even if you start a savings account with just $1/week, it’s a start.

In my primary account, I have my savings account automatically put 10% of deposits into my savings, and automatically roundup my purchases and place the change in my savings. I also have a preset amount going into my Credit Karma savings weekly. As a business owner, I also try to put about 20% into my taxes account to help cover me at tax time. The amount you would be recommended to set aside for your business would be dependent on your income bracket. 

Solopreneurs, Sole Proprietors, freelancers, and other small business owners, I recommend having a primary business account for your businesses main spending needs and then have at least one secondary business account for purposes of taxes. This will keep all your business taxes separate and you’ll know no matter what you’ll have any tax money needed to pay any owed taxes. When possible, consider a third account as a business “emergency fund” so when a crisis hits, you have a safety net to keep your business afloat without requiring you to borrow your personal funds for your business.

I hope the plan makes sense to you on a personal level. If your a business owner, whether it be a solopreneur, freelancer, gig workers, or other one person small business, it is still a good idea to separate personal funds from your business funds. Even if you look at your business as a hobby, a business bank setup is recommended. As your business grows you’ll eventually need the business account(s) anyway. Starting now will help establish your business identity and help prove business spending vs personal spending to the IRS. If your business is already growing, or already has a business account, the additional account strictly for taxes and a third as a business savings account of sorts will only help your business in the long run. Should an economic downturn happen, you’ll be able to fall back on the business savings account to keep your business afloat just as you would fall back on your personal emergency fund to keep your personal finances in order.

Some may argue fees, etc with multiple accounts. Each of these institutions are fee free. There is no minimum required and no monthly fees. I like this setup because 1. “Out of sight, out of mind”. If I can’t see the money, I can’t spend it. Likewise, if I’m trying to be sure I have enough funds to cover something, I don’t need to “watch” what I spend, as the money for what I’m saving for is in another place. And I feel having money split between various institutions is safer. In the bank:

  • Your money can’t get stolen by houseguests
  • You don’t need to worry about losing it in a fire 
  • You don’t need to worry about people finding out how much money you have laying around, therefore making you a possible target for break-in
  • Your money is insured in each account. So the more institutions your money is spread between, the more (higher lump sum) of your money is insured. Most banks insure your money upto $250,000 through the FDIC. The more accounts you have, that much more money is insured upto another $250,000.

To me, it only makes sense to have a setup similar to this to safeguard oneself against future financial hardships. This, coupled with my investing/trading plan, could equate out to a comfortable financial future. And if you’re still young, starting this now, will set you up for a very financially secure retirement. Even if you have to start with one extra account and go from there, automate as much of it as possible and over time you’d be amazed how much money you end up saving for the future and how large a safety net you can build against a future financial/economic hardship.

As with anything, this plan will take time to completely be setup if you’re starting on a tight budget. It will also take time to build up savings and any goals/funds you opt to grow. There is no quick “overnight” solution to hardship. But I feel this plan is a good way to help budget oneself out of hardship and avoid a future hardship. I also recommend trying to grow your emergency fund to be able to cover at least six months worth of living expenses. Again, this won’t happen overnight. But the sooner you get started, the sooner you’ll reach your goals and the sooner you’ll be able to fend off another hardship.

Why I Chose The Institutions I Chose 

I’ve looked into multiple personal banks, business banks, brokerages, and other financial institutions. These I’ve mentioned here are the ones I trust above the others with my money. Downtime is minimal, when the mobile app is down for maintenance the web app still grants you access to your accounts, and customer service with each have been excellent. You don’t have to use the same institutions I use, you want to work with institutions you trust.

Varo is the first all digital officially chartered bank. I’ve been using Varo since they were still a partner bank and have never had issues using them as my primary bank. Mobile check deposit is possible, as well as direct deposit, and cash can be deposited at any GreenDot location (CVS, Walgreens, etc). The savings account can be automated as well. You can set it to deposit a percentage of your direct deposits from your checking account, and you can also set it to roundup all your purchases and put the change in your savings account. Over time, this builds up.

Ally has history in the financial world, rebranded from GMAC. I know many who remember GMAC may have ill feelings toward the former GMAC, but as Ally I haven’t had any issues. 

SoFi I love because the simple layout and functionality. And you have upto 20 separate folders to place money in for different funds/goals. You can automate each goal to the amount and frequency you choose. They also offer  loans and investing. And with SoFi Relay you can track spending in all your accounts, SoFi and external. You’re also able to monitor your credit score.

CashApp I prefer to use over PayPal. They’re owned by SquareUp, who I use for payroll services and other business services. But I have used PayPal for over 12yrs before I opened another personal bank account. So it’s not that I’m necessarily biased, I just have higher trust in CashApp then I do PayPal currently.

BlueVine is a basic business checking account. No bells or whistles some other accounts may come with. Despite Novo having many features I like, BlueVine is the main primary account for the simple fact I’m able to deposit any cash payments via GreenDot locations. Each week all funds minus daily operating funds are then forwarded to my Novo account.

Novo is a great alternative to Azlo since Azlo is shutting down. Like Azlo, they have separate folders called “Reserves” to separate funds and they integrate with other services as well. It is also extremely simple to move funds in/out of the account. Possibly the simplest setup of all the business banks looked into when choosing a bank. Should Novo ever introduce cash deposits, they will go from secondary-primary to first-primary business account and bump BlueVine to a secondary status.

  • If you’re looking to switch from an Azlo account, you can move to Novo with a chance at a bonus $25 by clicking here

NBKC is very simplistic in their accounts. No bells or whistles. They are one of many I came across in my searching and decided to work with them. They offer both personal and business accounts.

  • Note: Upon creation of my business account, I accidentally locked myself out of it, twice. Customer service was quick to help and get it back up and running. I’m still recommending this bank as an option. But issue fair warning that unlike most others, they do not have online/email password resets. All password resets, etc that other institutions do securely online is done only over the phone with this bank. So they’re a little behind the times in that area. 
  • It is possible to connect personal and business accounts under one login. Since my NBKC business account is a secondary account, I find I need it directly linked to my personal account and/or to use Venmo to transfer funds into the account. In a way this defeats the purpose, I would much rather the funds go from business account to business account without routing through a personal account; but as a sole proprietor for the time being and considering the high level of security, I won’t hold it against the bank (for now).

Ameritrade has a long history in financial markets and recently sold to Schwab; formerly owned by TD.

AllOfUs is a newer player in the game, but I love the user interface. Really simple to navigate. 

Credit Karma I started an account with initially to monitor my credit. But now they offer savings and checking accounts, so I have a secondary savings and checking account through Credit Karma. This savings account you can also automate with the amount and frequency you choose. 

Conclusion

I hope you found the plan I’ve laid out here to make sense. You don’t need to use the institutions I chose, nor do you need to include stock investing in your personal or business financial plan. This plan, like any other, will take time to put in full effect. At the time of writing this, I’m still putting pieces into action myself as I recover from the financial hit this year caused me. 

This style of financial plan may not make sense to everyone. It is simply being out there as another option that maybe you haven’t thought of before, and if you have, now you know you’re not alone in the idea and implementation of the plan. Either way, if you’re seeking ways to secure against financial burden, any plans you’ve had prior to this one, and implemented, may not be working as well as they were planned too. At least not by itself. What was laid out in this post is flexible, you can set it up the way I have, or connect it in a hybrid plan of sorts with one you already have implemented to strengthen it.

In the end, you, and you alone, know your situation and how best to implement a financial plan to stave off a future financial burden. It is also upto you, and you alone, to stick to the plan you choose to implement. But for me, using this plan laid out here with my stock investing and trading plan and strategy is how I plan to fend off future financial woes and build myself a retirement fund.

 

Disclaimer: I’m not a financial advisor or fiduciary. All advice stated here is what I’m doing personally, and is simply an option for you to think about in working your finances. Ultimately, your finances are up to you to decide how to best work them. 


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