personal finance tool stack

Your Outdated Personal Finance Tool Stack is Costing You Thousands of Dollars

We all care about our money. Everyday, we try to make more and save more.Personal Finance Tool Stack

But how many of us have looked closely at the services, banks, credit cards that we have entrusted our money to?

What if I told you that having an outdated personal finance stack could be costing you thousands of dollars?

Yep, that’s right.

Whether you believe it or not, not all personal finance services are alike. The personal finance tools that you use should help you reach your financial goals, not set you further behind.

What is a personal finance tool stack?

Simply put, your personal finance stack is the collection of services, tools, banks, and apps you’ve carefully (or not so carefully) chosen to manage your financial life.

Here’s a list of services that define your personal finance stack:

  • Checking and savings accounts
  • Brokerage/investing accounts
  • Retirement accounts
  • Credit cards
  • Asset tracking and budgeting tools
  • Identity protection and credit score monitoring
  • Financial advisory services

If you’re like me, then you probably haven’t given much thought to the bank that you choose to hold your money in.

Until I did an audit of my personal finance stack, I was still using the same bank account that I had opened when I got my first job at 15.

It’s no surprise then, that almost everybody has room to improve their personal finance stack.

Before we talk about the modern (and best) personal finance stack, let’s see how much an outdated personal finance stack can be costing you.

What an outdated personal finance tool stack looks like

Here’s an example of what an outdated personal finance stack looks like:

outdated personal-finance-tool-stack
Looks pretty normal, right?

Wrong! The personal finance stack above will cost you $2,577/year in opportunity cost and unnecessary fees.

Assuming 5% returns, that is around $55,000 in 15 years! Wow wow wow, if that doesn’t make you consider updating your personal finance stack, I’m not sure what will.

A quick note on assumptions: while the comparison between outdated and modern personal finance stack will hold across income levels, asset levels, and credit score, I made some assumptions to simplify the calculations:

  • $5,000 daily balance in primary checking account
  • $15,000 daily balance in primary savings account
  • $50,000 in taxable investment assets
  • $50,000 in tax-deferred retirement assets
  • A 750 credit score
  • $3,000 in monthly credit card spending with no monthly balance carry

Let’s figure out how much this outdated personal finance stack will cost you.

Total cost of the outdated personal finance stack

An outdated personal finance stack has the following characteristics:

  • Low interest rates for both checking and savings accounts.
  • High transaction fees/expense ratios associated with brokerage accounts and mutual funds.
  • High advisory fees charged by financial advisory services.
  • Recurring fees for credit monitoring, identity protection, and financial account security services.

In fact, the personal finance stack detailed above will cost $2,577/year in these fees and opportunity costs.

Here’s how:

Account
Company
Annual Cost Description
Annual Cost ($USD)
Checking
Bank of America
No maintenance fee with a daily balance above $1,500
$0.00
Savings
Bank of America
No maintenance fee with a monthly balance above $300
$0.00
Brokerage/Investing
Merrill Lynch
Average Expense Ratio of 0.68% (x $50,000)
$340.00
Retirement
Fidelity
Average Expense Ratio of 0.6% (x $50,000)
$300.00
Credit Cards
Citi Simplicity and AmEx Premier Rewards Gold
Annual fees of $0 and $195, respectively
$195.00
Identity/Credit Monitoring
LifeLock
$220, when paid annually
$220.00
Financial Advisory Services
Merrill Lynch
Annual Management Fee of 1.3% (x $100,000)
$1,300.00

Total cost of annual fees: $2,355.00

But there are some cash back & interest charges associated with the outdated personal finance stack that will benefit you:

Account 
Company
Outdated Stack Interest/Cash Back ($)
Checking
Bank of America
$0.50
Savings
Bank of America
$1.50
Credit Card
Citi Simplicity and AmEx Premier Rewards Gold
$216.00

Total returns from interest and cash back rewards: $218

With the assumption profile I detailed above, the annual cost of using the outdated personal finance stack is: $2,137 per year.

Now let’s look at the modern, hyper-efficient personal finance stack.

What a modern personal finance tool stack looks like

Here’s an example of what an efficient, modern personal finance stack looks like:

Modern Personal Finance Tool Stack

The modern personal finance stack:

This stack of financial services and tools is optimized for the following attributes:

  • Avoiding “at rest” fees (i.e. maintenance fees, inactivity fees, etc)
  • Avoiding “movement” fees (i.e. foreign transaction fees, ATM withdrawal fees, wire transfer fees, etc)
  • Highest possible interest rates on checking and savings accounts
  • Lowest possible investing expense ratios for mutual funds emulating the performance of the S&P 500.
  • Strictest identity protection and account security practices available.

Total Cost of the Modern Personal Finance Stack

Using the same assumptions we used for the outdated personal finance stack, let’s examine how much money the modern personal finance stack will cost you every year.

Account Type
Modern Stack Selection
Modern Stack Annual Cost (description)
Modern Stack Annual Cost ($)
Checking
Capital One 360
No maintenance fees
$0.00
Savings
Ally Bank
No maintenance fees
$0.00
Brokerage/Investing
Vanguard
Average Expense Ratio of 0.18% (x $50,000)
$90.00
Retirement
Vanguard
Average Expense Ratio of 0.18% (x $50,000)
$90.00
Credit Card
Chase Freedom and Chase Sapphire Preferred
Annual fees of $0 and $95, respectively
$95.00
Identity/Credit Monitoring
Credit Karma and Credit Report Freezes
$45 one-time credit report freeze fee
$45.00
Financial Advisory Services
Self-Directed
N/A
$0.00

Total annual fees: $320

But the modern personal finance stack is also optimized for cash-back rewards:

Account Type
Modern Stack Selection
Modern Stack Interest/Cash Back ($)
Checking
Capital One 360
$10.00
Savings
Ally Bank
$150.75
Credit Card
Chase Freedom and Chase Sapphire Preferred
$600.00

Total returns from interest and cash-back rewards: $760.75

Using the modern personal finance stack, you would actually make money using these tools and services! As it should be.

And this isn’t even considering the many sign-up bonuses that these products offer and which I’ll cover later on in this article.

Outdated vs Modern Personal Finance Stack Overview

Total Annual Fees
Total Annual Benefits
Net Annual Cost
Outdated Personal Finance Stack
$2,355.00
$218
$2,137
Modern Personal Finance Stack
$320.00
$760.75
-$440.75

Current Deals and Sign-up Bonuses

If your personal finance stack looks more like the outdated one than the modern one, you should really consider upgrading your stack.

Luckily, there are many sign-up bonuses that these companies offer that make upgrading even MORE of a no-brainer.

Checking account: Capital One 360 offers a $25 sign-up bonus when you create a free checking account with them. Sign up here.

Savings account: There are no signup bonuses for Ally bank but they’re a great bank and 1.8% APY is pretty damn good these days. Sign up here.

Brokerage/Investing Accounts: Vanguard doesn’t offer any sign-up bonuses at this time. Sign up here.

Credit Cards:

  • Chase Sapphire Preferred (my favorite credit card) offers a sign-up bonus of $500 worth of points ($650 if spent on travel) when you spend $4,000 within the first 3 months of opening your account. Sign up here.
  • Chase Freedom offers a signup bonus of $150 when you spend $500 within the first 3 months of opening your account. Sign up here.

Credit Score Monitoring: Credit Karma doesn’t have any sign-up bonuses right now. Sign up here.

Asset Tracking and Retirement Planning: Personal Capital is currently running a promotion where they’ll give you $20 when you sign-up for a FREE account! Don’t miss out. Sign up here (or read my full review of Personal Capital first)

Identity Protection and Account Security: No sign-up bonuses exist for 1Password. Sign up here anyways.

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