Mike O’Donnell – Personal Finance Infrastructure

Posted on August 17th, 2011 in Personal Finance | No Comments »

Unless you were a finance major, chances are when you graduated college you only had a basic idea of how to manage your personal finances. If you were in a business school, you may have had the luxury of taking a couple required financial courses such as an introductory accounting course or intro to financial markets. These types of courses are beneficial to your overall financial knowledge, but they do little to create a framework from which to build your personal finance system.

Typically, students open up their first personal bank account during their freshman year of college. They get a checking and a savings account and as long as the bank treats them well, there is little incentive to change things. The pain to create a personal finance system does not outweigh the convenience of keeping things the way they are. I was in the same boat until I read Ramit Sethi’s book, “I Will Teach You To Be Rich.”

Ramit geared this book specifically to college graduates who want to get a hold of their finances. By creating a personal finance system, you can overcome the majority of psychological barriers associated with saving and managing your money. Instead of consciously keeping track of where you are spending your money and how much you are saving, Ramit offers a system that takes advantage of automation so you don’t have to worry about where your money is going.

Recently, I decided to use Ramit’s advice and build my own version of his personal finance system. For the last 4 years, I have had a basic PNC account with checking and savings. Now, my personal financial infrastructure includes an INGDirect Orange Savings Account, a PNC Virtual Wallet, and a linked PNC Points credit card.

Using INGDirect, I can have up to 20 different automated savings accounts. I haven’t taken full advantage of these benefits yet because I honestly don’t have concrete savings goals right now. Currently, I have my ING account automatically take $500 out of every pay check to put into savings, but once I get organized I can automatically send money into multiple accounts. For example, I could have it automatically send $20 towards my future wedding, $20 towards my next vacation, $50 to an emergency account, $30 towards a business experiments account, and so on. You can see how powerful this account can be over the long term towards reaching your savings goals. As Ramit would say, it allows you to have “guilt free spending” because you know all of your savings goals are being taken care of.

I also decided to keep my PNC account and upgrade it to a Virtual Wallet. Besides an easy to understand, organized user interface, my favorite feature is that it helps you track your spending. Similar to www.mint.com, the Virtual Wallet breaks your spending down into categories such as restaurants, gas, entertainment, etc. This feature is great because you can clearly see where the majority of your money is going instead of playing the guessing game.

The final piece of my infrastructure is my credit card. Growing up, I always told myself that I wouldn’t get a credit card because it is too easy to get into debt. This statement may be true for some people, but if you have the discipline to live within your means, then a credit card can be a huge asset to your finances. I chose to get a points credit card because I get points (read free money) for every purchase I make. By linking my credit card to my Virtual Wallet, I am able to track where all my money is being spent instead of falling into the psychological trap of just placing it on my card.

Taking the time to set up an automated financial system has incredible long term benefits when compared to a basic bank account. Automation lets me make a decision once and stick to it instead of having an internal argument every time I receive a pay check. Multiple savings accounts give me the peace of mind that all of my savings goals are being met instead of keeping mental notes on one large pool of money. Finally, tracking my spending allows me to analyze my spending behaviors and make educated adjustments as needed.

 

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    Mike O’Donnell Time Management

    Posted on June 20th, 2011 in Time Management | No Comments »

    I have always worked on trying to manage my time as efficiently as possible. While I was in college, I was a master at making the best use of my time during the day so when night time rolled around, I would be able to go out with my friends. I read and incorporated all of the time management advice I could find on the internet to make sure that I was optimizing my free time. This allowed me to get my work done earlier and in less time, so I could spend the bulk of my time doing the things I enjoyed.

    One of the key strategies I used was outlining the goals/assignments I wanted to complete each week on a post-it note. Then, on a separate post-it note, I would outline the steps I needed to complete the night before I was going to do them. This allowed me to get my thoughts together and plan my work out ahead of time so I knew exactly what I needed to do each day. If I had a research paper do on Friday, I knew that on Monday and Tuesday I needed to spend time doing research, on Wednesday I needed to make a quick outline of the paper and start preliminary writing, and on Thursday, I needed to fill out the rest of the paper. By constantly cycling through short and medium term post-it notes, I was able to segment out both my personal and educational goals into manageable chunks.

    The next element of my time management strategy was setting specific time limits on every task. Having an end time is extremely important because it keeps you from swaying off track. If you know that you are only going to spend an hour on a given task before moving on to something else, then it forces you to be as efficient as possible. It sounds self explanatory from a time management perspective, but time and time again in both the academic and working world, you attend meetings that seem like they have no end in sight. Without having a predetermined agenda and time span, you are wasting your time and the rest of the group’s time.

    Finally, the third element of my strategy was to approach each task with complete focus. This means no distractions or multitasking! With the exception of light music, nothing else should distract you from finishing a task once you have started it. If you’re checking Facebook, watching TV, texting your friends, and trying to write a paper all at the same time, you’re never going to get anything done. Every time you switch between tasks, it takes time for your mind to switch gears and start thinking about what you are currently doing. If you focus on each task separately, you can reduce the amount of wasted time and increase your overall productivity.

    Since I have graduated college, I have added a new element to my overall time management strategy. Once I started working, I quickly realized that my time was limited from when I got home to when I had to go to bed. There just wasn’t enough time for me to play sports with friends, read books, relax, write on my blog, etc. So I started thinking about even more ways to optimize my time. After analyzing my time, I realized that I spend about 2 hours a day in the car. Instead of listening to the same old songs on the radio  everyday, I started downloading audio books and podcasts. I’ve only been using this strategy for a short period of time, but during my “wasted time” in the car, I have already read Jeffrey Gittomer’s Little Red Book of Selling 3 times and listened to Alex Epstein’s The Triumph and Tragedy of the Oil Industry once. This week I am planning on downloading more audio books or just stopping by the library to check out their audio book collection.

    No matter how old or how experienced you are, there is always room for improvement in time management. I have outlined the 4 most important elements of my time management strategy, but there are many more effective techniques that you can adopt. The most important part about self improvement is taking action. You can spend all day researching different time management techniques (But you wouldn’t because you have 100 percent focus and set deadlines now) to find the perfect strategy, or you can take action now and start managing your time efficiently.

     

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