Manage your money smartly

February 1, 2006

Search out the smallest FDIC-member bank in your neighborhood and give it your business. You'll receive more personal attention from a small bank than you will at a financial behemoth and you'll have exactly the same insurance protection.

Not anymore. The world of personal finance has become so complex that failing to keep up can put a big dent in your financial health, regardless of your professional success.

Below are several ways in which you can better manage your money and make it work better for you.

Keeping your money in a standard bank savings account isn't in your best interest. Today's range of rates on investment vehicles begins at nearly zero, and one of the lowest rungs on that ladder is the bank savings account.

That's why you should never put a penny of your money into one. If you do, the paltry interest rate you'll get will be below the inflation rate. That means you'll be losing money. Instead, put the money you want to keep available on demand into a bank money market account. Better yet, open a money market mutual fund where you'll get much better interest - and most have free check writing privileges.

Online money transfers

If there is a place that will pay you less interest than a bank savings account, it's your checking account, the lowest rung on the investment ladder.

That's another reason to open a bank money market account linked to your checking account. Never make a deposit directly into your checking account. Instead, make all deposits into the money market account where your money will immediately begin drawing interest. Then transfer money into the checking account online only as needed to cover the checks you write.

Take advantage of the availability of online money transfers. They are easy and safe. Your bank will explain how to set up the procedure.

Interest on automatic CD rollovers

Don't be fooled into thinking that your bank will give you the best available rate when you allow a CD to rollover automatically. It almost surely won't.

Always call or visit the bank and ask to review all current interest rates for CDs, including any promotional rates that might be available. Banks often run special promotions offering interest rates higher than their regular rates. You can be certain that an automatic renewal won't get that rate unless you ask.

Bill pay timeline

There's a good reason why checks are slow to come in from people who owe you money. It's because hanging onto cash as long as possible keeps that money available to draw interest.

That's why it's important for you to set up a system to pay your bills only when they come due.

At the same time, it's important not to jeopardize your credit standing by paying bills late. Pay your bills when they are due - not before, not after. It's especially important to avoid late payment on credit card bills because of the oppressive penalties that most card issuers have put into place in recent years.

Shop around for interest rates

Whether you're paying interest or receiving interest, it's important to shop around.

Bank deregulation has produced a competitive environment with wildly differing interest rates and bank charges. If you can find a better deal than your present bank is offering, take it. Don't stick with a bank that isn't competitive.

Checking account overdrafts

These days, some banks are making customers pay big penalties for small errors.