Please, Recommend a Personal Finance Product to Me!

thumbs up by dev null on Flickr!All the time, I get requests from readers asking me for recommendations of financial products. What bank should I use? Where should I put my investments? Where should I open up my retirement account? What credit card should I get? Where should I get my insurance from? What kind of software should I be using to manage my finances?

For the most part, I don’t like to actually recommend or endorse financial products. It’s not fair for me to do that because, frankly, I don’t use most of the products that are out there. I’ve never had a checking or savings account at most of the banks in the world. I’ve never held a credit card with a lot of banks. I’ve only had accounts with a few investment houses.

For me to make a blanket recommendation and say that a certain account is the best out there would be a lie and a fraud. I don’t know that any given account is the best one out there.

All I can call upon is my own experience, in which I looked at a bunch of different options for accounts and financial products, chose one, and tried it out. In some cases, it wasn’t right for me, so I tried another one until I found a product that met my needs for ease of use, good returns, low fees, and great customer service.

In short, the closest I’ll come to a recommendation of a financial product is to simply tell you what I personally use. If I don’t actually use it, I’m not recommending it.

So, in order to get all of the questions out of the way in one swoop, here are the products I use. In most cases, I tried at least a few different variations on that product before settling on my current choice, so these aren’t just “blind” first picks. However, I don’t claim to have used all of the products on the market – there may yet be a better product out there. These just happen to be the financial products that I use – and hopefully that will provide some useful information to you in your searches.

Checking and savings Most of my long-term readers know that I use ING Direct as my primary checking and savings account. They excel at customer service, ease of use, and lack of fees – I’m completely happy with them. I also maintain a free checking account at a local bank for teller access, for the purpose of having paper checks drawn from a local bank and having a teller available to me during normal business hours.

Retirement I have a Roth IRA through Vanguard. At previous jobs, I’ve had dealings with other investment houses, but none of them offered what I wanted – extremely low-cost index funds and electronic-based customer service. That’s why I use Vanguard – my Roth IRA savings are in index funds, just waiting until I’m old enough to start grabbing those tax-free returns.

Other investments I do not invest in individual stocks, so I don’t have any reason to have a stockbroker at this time. Instead, I keep my non-retirement investments in index funds as well, so I also have a Vanguard account for those. Again, I choose Vanguard because the costs are very low, I agree with their investment philosophy, there are a ton of index-based investment options available, and their customer service and online interface are strong.

College savings We use a 529 to save for our children’s education. Since Iowa has one of the best programs around, we chose College Savings Iowa right off the bat for our education savings purposes. The investments there are handled by Vanguard and their online interface is solid, as is their customer service by phone (which I’ve used twice, once for each child).

Credit cards My wife and I have three credit cards between us, which we use only for specific types of purchases. Since we pay off our balances in full each month, we don’t really care about interest rates or billing. Each one is worth talking about individually.

We have a Target Visa for some of our household supplies, our prescription purchases, and some of our food. This card gives us a certificate for 10% off our total purchase at Target every time we run $1,000 in purchases through that card or when we refill ten prescriptions there. Since I use a monthly maintenance prescription for my thyroid and Target has two pharmacies within ten minutes of my house, we did the math and realized that the card could easily add up to a 4-5% return if we planned our purchases carefully. We use this card only at Target.

We also have an Amazon.com Visa for similar reasons – for Amazon purchases only. It’s effectively a 3% return on our purchases and it also happens to be our oldest card, too.

Our general use card is a Citi Driver’s Edge Platinum card, because most of our remaining charges are for gas (or for car repairs, it seems). It gets a 3% return on those, plus we get a $0.01 rebate for each mile we drive in either of our cars – we just send them our receipts from automotive maintenance work for proof of mileage and they give us an appropriate amount. The rebate is easy to cash in, too – we just send them a receipt from some automotive-related purchase (like a new car or a repair) and they cut you a “rebate” check. It’s taken a big edge off of some of the recent car repair bills.

My suggestion is that you should have only cards that actually match your most routine purchases. If you buy all of your gas at BP, for example, a BP Visa might be worthwhile (I don’t know any specifics about that card, but I would look seriously at it if I bought all my gas at BP). Similarly, if you do all of your grocery shopping at the Costco in your town, a Costco American Express card might be worth it because of the bonuses given for shopping there (again, I don’t know about the specifics of that card offer, but if I were a very regular Costco customer, I’d look into it). The cards listed above happen to be the ones that match our lifestyle – we shop for household supplies and prescriptions at Target and buy a lot of items (housewares, bulk food, gifts, etc.) off of Amazon. If a card doesn’t match your lifestyle, you shouldn’t bother – and you should avoid credit cards entirely for a while if you can’t keep the balance paid off. Credit cards are like a power tool, but just like a power tool, they can hurt you badly if you’re not prepared.

Software To be honest, I don’t really like any of the major software packages for personal finance management – not Quicken or Microsoft Money or anything else. I started off using spreadsheets for my budgeting and net worth calculations and found no compelling reason not to use them. For the longest time, I simply used the free open source OpenOffice.org spreadsheet, but lately I’ve moved to using Numbers for Mac for this purpose. Given that I write The Simple Dollar, I’m constantly encouraged to try different packages – if I were starting from scratch, I’d probably give the PearBudget spreadsheet a shot – I used it a lot early on until I found that I wanted to modify a lot of things.

Insurance Over the years, we have been with several different firms for our homeowners and auto insurance policies, and we’ve mostly been driven away by really bad customer service. We’ve been with AIG for about a year and a half now and have been quite happy with them – strong rates, very efficient customer service, and nice curbside services that don’t cost a dime, like helping my wife out when she locked her keys (and her insurance card) inside her car. While this happens to be what works for us, what has driven us from other firms was the shoddy customer service on the local agent level. Don’t tolerate getting the runaround from your insurance agent – there are a lot of companies out there that want your business.

For life insurance, my wife is sticking with the whole life insurance policy that she’s had since near birth, which is pretty large. I have a smaller term policy I’ve had since I was in my early teen years that will expire soon, so at the moment, I’m actively shopping around for life insurance – I’ll update you when I find a term life insurance provider I’m happy with. I’m also looking for long-term care and long-term disability insurance, but haven’t found a provider that suits me yet.

Groceries I do my grocery shopping at a mix of Fareway (best prices, sometimes poor selection), HyVee (best selection, esp. of healthy stuff, but often high prices), and Super Target (often the most convenient for a small shopping trip and the prices are competitive) – I sometimes make stops at both Fareway and HyVee if I have plenty of time to grocery shop, as that gets me the best prices on most stuff and also lets me get some specific health food selections and esoteric items at HyVee. We buy some bulk items at Sam’s Club and a few online at Amazon, but we mostly use the latter two for household supplies and toiletry purchases. On rare occasions, I’ll hit a drugstore specifically for toiletries, usually if I happen to notice coupons that stack well in the papers.

For your area, I recommend finding the cheapest grocery store and using it for your staple purchases. Then, if you have some esoteric items you want, find a grocery store that carries those items and use that store mostly just for the esoteric items.

Whew! I think this handles most of the financial services that we personally use. In the future, I plan to just provide this page to people when they ask for suggestions or recommendations.

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32 thoughts on “Please, Recommend a Personal Finance Product to Me!

  1. Rocky says:

    Great article,

    I don’t know that you can offer one specific magic cureall financial product or service. So, I really liked the way that you approached this one. Well done and keep up the great work.

    Thanks,

    Rocky

  2. I agree about only getting credit cards that match your shopping habits. I have a Costco AMEX, a Discover gas(5% back on gas, which rocks! I only use it for gas), and a Chase Freedom, which gives 5% on grocery and drugstore purchases. Between these, I get a nice cashback amount on most everything I buy. I considered the Target one, but I don’t buy enough at Target for the 10% to be worth it. Maybe if I was lucky enough to have a Super Target like you do, I’d get one.

  3. Kevin says:

    I agree with you on Vanguard – their index funds are great. I just wish my employer used them for our 401(k).

    I personally like Quicken to track my financial life. It’s easy to use – I can download all my credit card transactions in seconds and don’t have to enter all that stuff manually. Reconciling that and my checking is a breeze and it easily updates all my investments so I can get a quick snapshot of my net worth. I just don’t see a spreadsheet doing that without a ton of initial setup time.

  4. Grant says:

    I use Scottrade for buying and selling stocks and ETFs. I think they still charge only $7 a trade, and there is no minimum balance or amount of activity required.

  5. Angie says:

    I am a big fan of the Driver’s Edge card mainly because they will cut a check to send your rewards to your student loan company. This ensures I actually send it there rather than spend it.

    But how do you get miles for more then one car? I thought you could only register one car for the card. Also, if I am an authorized user on my fiance’s Driver’s Edge can I apply for a separate card too? (In order to maximize the mileage rebates)

  6. Aaron says:

    I really, really like Mint.com. It is still in development but I have used it for over a year and love it for planning my budget and organizing my purchases. If you mostly use credit and debit cards, I highly recommend it.

  7. Kenny Johnson says:

    I agree about software. I actually want to find something that works best for my needs, but find each thing I’ve tried to be lacking. I use Mint right now as a one-stop place to track all my accounts in one place (except I can’t get it to track my student loan or car loans for some reason), but none of the software packages seem to handle budgetting the way I’d like to. So far, Excel has actually worked best for me. Because I’ve significantly reduced using my debit card and am not carrying cash (envelope system), I don’t need to track as many transactions.

    I tried Mvelopes, but their subscription price is just ridiculasly high, and I’m not very impressed with their interface. Besides, it’s nothing I can’t do in Excel for free (and possibly faster).

  8. Ram says:

    Agreed on the credit cards aspect to choose the ones best suits the needs/lifestyle. My wife and I together use 2 cards (visa, amex) though we have 4 other cards stored somewhere at home. We use Visa at places where they don’t accept amex and that happens to be local grocery stores to buy Rice,Lintels, some vegetables not availble in Safeway/FredMeyer/QFC stores. Amex has 5% cashback for purchases on superstores, gasoline and pharmacy; around 2% for all other general purchases.

    Software: I like Microsoft Money, I have been using it for about 6 years now, and I like it just because it gives me a report for any timeframe and helps me budget as appropriate. It helps me to analyze the spending trend, networth, and other information in seconds. XL would not give me that much of information when I need for all the previous years unless I write some macros to handle all those requirements I need. Although it can downlad the bank transactions online, I somehow preferred to enter myself once or twice a week.

    I am yet to take a look at the ING direct options. and I need to understand about Index funds you have mentioned about.

    Question about credit card:
    Any idea of any pros and cons of keeping those cards though not used for over 2 years now? I would rather like to cancel them but I haven’t gotten around that. I wasn’t sure if keeping unused or cancelling those cards would impact/influence the credit history. Although, I understand it is not a good thing to keep those cards as they are potential to get into debt according to the writeups i have read so far.

    -Ram

  9. Ram, I believe that depends on whether or not you are carrying balances. If you have existing credit card debt, it’s not good to get rid of all your cards with available credit. It looks good on your credit report if you have some credit that’s not used.

  10. Emily says:

    I just stumbled upon your blog as I was searching, I believe Dave Ramsey, on Google Reader. I had a tip for the insurance (life, disability, and Long Term Care). Have you looked into Northwestern Mutual? http://www.nmfn.com They have been the top of Fortune’s America’s Most Admired Companies. http://money.cnn.com/magazines/fortune/mostadmired/2008/snapshots/10209.html
    I highly suggest them for insurance and investments, but you seem pretty happy with Vanguard.

  11. Ryan McLean says:

    That is a really great list of the financial tools you use. Thanks for sharing the with us. I don’t have any financial tools I would like you to review however I do need a financial tool to keep account of how much I earn and spend online for my business.
    Anything you would recommend??

  12. Kevin says:

    Ryan -

    Quickbooks or Microsoft Office Accounting might work for you. Or just a simple spreadsheet showing what your income & expenses are. It really depends on how sophisticated you want to get.

  13. Mark D says:

    Good sensible advice. Costco also offers a business AMEX card that I use for gas purchases. It offers a 5% rebate. I concur on Vanguard and have been with them for years. The Hilton AMEX card is great for hotel points and is really beneficial if you travel a lot.

  14. ChrisB says:

    At this point, we’ve decided to keep our kids’ savings in investments in our own name, for two reasons: first, we don’t want them to get a financial aid hit, and second, we don’t want the money to be locked in to one particular “item” (higher education). While it’s likely that our kids will all go to college — and I hope that they do — we are not fixated on it as the end all & be all for a vibrant life (cf. Trent’s posts on the non-necessity of college).

    And since there aren’t any options for saving in our kids’ name that accomplish both things, we’ve decided — for now — to just put their investments in our name. Besides, there is an additional benefit: by pooling their savings, we get them to the $1k minimum for Vanguard’s Star fund, and like Trent, I’m a major fan of Vanguard & its philosophy.

  15. Faith says:

    I just opened up an ING Orange Savings today because of all of the rave reviews I’ve been reading about it all over the blogosphere. Good to hear more positive comments about it!

  16. Ram says:

    Kristen,
    Thank you.
    statement balance on the 2 cards we normally use are fully paid every month. The other 2 cards are not used for over 2 years now. so in a way, no credit card debt at all.

  17. Jules says:

    It would amuse you to know, I think, that ING is a Dutch bank. I, too, have an ING Online Savings account that I add to on a monthly basis (the goal is to accrue a decent emergency fund in US dollars). But I can’t access it directly from Holland, where I’m living now :-) Instead, I have to e-transfer money from my Dutch account to my American checking account and then from that to ING…

  18. I agree with your style of recommending things. That’s why I don’t ever feel shameful of plugging for ING referrals — everyone truly wins there. I use Vanguard too for my Roth but kept my Scottrade Roth open so I can hold on to a few stocks. That gives me a little more flexibility.

  19. Penny Squeaker says:

    Trent,

    I agree w/Vanguard, they’re the best in low cost service. Given time over compounding interest for your money to grow w/o a stockbroker.

    DIY investing – Traditional IRA + Rollover IRA’s from previous jobs.

    Investments actually double since rolling over. Other Investment houses eat into hard earned retirement savings w/their everything fees.

  20. getagrip says:

    Trent,

    As a suggestion, in addition to this article, there are other magazines like Kiplinger’s and Money which typically rate or review a number of these areas you are asked about. You could also point your questioners there as a starting point as well (this is based on your having stated in the past that you read these magazines and articles).

  21. Miranda says:

    Thanks for these great suggestions! We also have three cards that we use for specific things. Having a plan is very important — it keeps us honest in our spending habits, rather than putting items willy-nilly on credit cards.

    I also really like Vanguard.

    Another tool we use is Consumer Reports. While sometimes it does rate financial services, we find that it can also help us find the best value on consumer products, so that we get the most bang for our buck.

  22. Jamie says:

    To Chris B. (post #8). Currently, 529 plans count as parent’s assets, not the kid’s, for determining financial aid rewards. And, while you do have to use it for qualified expenses (college-related) to withdraw tax-free and avoid penalties, remember that it can be used for a variety of post-secondary institutions, not just your typical 4-year university. You can also name a new beneficiary (grandchild, yourself, niece/nephew) should your kid not use it for college. You can also withdraw and take the penalty, but I’ve read that with state tax savings and good returns, this hit isn’t as bad as it could be (still a hit). Just some things to consider.

  23. Brandon says:

    How about some products that you’ve had a horrible experience with?

    I had an MBA professor who told us every opportunity he got about how Wachovia lost him $800k in a 6 month period from his retirement. It wouldn’t matter to me if they were dang near giving money away I wouldn’t ever use them based on his story alone.

    Do you have any bad stories?

  24. @ChrisB – When your kids fill out the FAFSA (the federal application for financial aid), it asks questions about the parents’ income, money in savings, money in checking, and all sorts of other related stuff. I don’t recall if it specifically asks about investments, but having the college money in your name may not benefit your children any more than having it in their name would. It’s been a while since I’ve filled out a FAFSA using my parents’ info, so it may not ask about investments, but it’s probably worth looking in to.

  25. ChrisB says:

    Frugal, there is a significantly bigger hit if investments are in the kids’ name than if it’s in the parents’ name… that’s one of the benefits of a 529 or ESA over, say, a UGMA.

  26. Katie says:

    Check out the release of the Geezeo Financial Marketplace this week. You can rate all your financial products and discover what others think about them, too:

    https://www.geezeo.com/marketplace/credit_cards

  27. Erin says:

    As for money management programs, have you looked at mint.com? Mint syncs with your bank account online so you can track your spending. I love it.

  28. Emily says:

    Chris B and Trent,

    A 529 is owned by the parent (or whoever establishes the account) for the benefit of in Trent’s case the child. It is the asset of the owner. But a 529 can be used for your own benefit. So, say you wanted to go to college, but knew you weren’t going for some time. You could open a 529 for the benefit of yourself and it would be your asset for your benefit. UGMA/UTMAs are not used as much anymore because of the fact that you are stuck with your beneficiary and the child is technically considered the owner of the account.

  29. No Debt Plan says:

    I’m in the same boat with the software. I tried using Quicken and Wasabe and was not impressed. An admittedly complex Excel spreadsheet covers all of my needs.

  30. Ellen Kay says:

    I have several credit cards I have not used in over 3 years. I have not closed those accounts because I understood it might affect my FICO score. When I get the new cards I just stash them away and do not activate them……. does this do anything to my FICO score? I now have no credit card debt

  31. Wade says:

    I am an avid Quicken user and the new 2009 is great. However, I have never been a fan of Quicken’s budgeting feature and for that I use You Need a Budget, which is a simple Excel spreadsheet with some nice but simple features for budgeting.

    http://www.youneedabudget.com

    Thanks for all your blogging.

    Wade

  32. Jacqui says:

    Century Bank Direct for checking, savings, and moneymarket (all over 3% – why does no one know about them?). Primary CCD is Amex Clear – $25 Amex gift card for every $2500 spent, no min no max, automatically mailed to you after each statement (it, and the back-up MasterCard are paid in full every month). Sharebuilder for a Roth IRA, soon Zecco for my husband’s Roth IRA. Currently hunting for a self-directed Roth 401k. State Farm insurance (home & auto). NYS 529 (uses Vanguard funds). HSBC mortgage (no debt besides the mortgage). Moneydance personal finance software to keep track of it all.

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