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After posting an in-depth look at the underlying funds in our portfolio, a few readers had additional questions on the connectivity between accounts and services.

Here we’ll look to provide an overview of our account landscape as well as some additional color on the “how” and “why” we leverage these accounts and services.

Let’s get to it!

Background

Our various accounts interact automatically for the most part, but semi-automatic is the most accurate description. We like to be able to control certain components more than others – when we pay credit cards and our rent, in particular.

Our savings and investments are automated – even if not ALWAYS turned on. As all the accounts are interconnected, we do have the ability to adjust our cash flow. Our account structure or architecture guides cash like a dam and canal system regulate water flow: we direct cash to our long-term investments as well as toward immediate expenses and shorter-term goals.

Sometimes we temporarily suspend savings toward a specific goal; other times we might increase retirement contributions or make an additional lump investment if we have excess cash available. It’s not static – the ecosystem continues to evolve as we need to adjust to find the right balance.

The Balanced Dividends (Semi-) Automatic Ecosystem

Balanced Dividends Account Ecosystem — Source: Balanced Dividends

Overview of Primary Parts

Here is a more detailed analysis of the 7 major components.

1. Paying Ourselves First

The primary source of our income comes from our regular day jobs via our current employers. On pay-date, Mrs. BD and I automatically have pre-tax contributions invested into our 403(b) and 401(k), respectively. In addition to reducing our gross taxable income, the money gets invested directly and never hits our bank account in the first place. If we don’t see it, we don’t spend it.

Our employers do offer a Roth option, but we currently utilize the traditional pre-tax account types. While not a current focus, our Roth IRAs at Vanguard are the primary accounts utilized when we wish to make Roth contributions (see point #5).

After some other pre-tax deductions from transit, insurance (including dual Flexible Spending Accounts (FSAs)), the federal and state governments take their share. Our net income is then direct-deposited into our bank accounts.

2. Primary Checking Account

We have 2 joint checking accounts at Ally Bank. We refer to our first as Mr. & Mrs. BD’s Primary Checking. This is where the bulk of our paychecks end-up (100% of Mrs.’ BD net pay and roughly 85% of my net pay). This checking account is used to pay our credit card bills in full each month, as well as to pay rent and a few other reoccurring expenses that are not placed on a credit card.

Ally Bank does offer competitive rates for checking and savings accounts, but our account balance virtually goes flat each month; we’re trying to not keep too much excess cash sitting in this account. A few hundred dollars that do linger between pay periods gradually get transferred elsewhere (see points #4 and #6).

3. Savings Checking Account

We refer to our second joint checking account at Ally Bank as our Savings Checking. To be clear, this is the same type of checking account as our primary checking; we just utilize it as a separate spigot to direct cash toward various savings goals.

This particular account is also linked to our various investment accounts outside of our current employer-sponsored 403(b) and 401(k) (see points #5 and #7). Approximately 15% of my net pay gets directly deposited into this account. Similar to our Primary Checking, we typically earn very, very little interest in this account.

4. Short-Term Savings

A separate tool that automatically transfers cash from our Primary Checking account at Ally Bank based on rules we create, Qapital enables use to save effortlessly to various goals that we’ve created. We thought of items that cause some level of pain or anxiety each year – primarily annual expenses and/or items we encounter on an ad hoc basis. A few examples follow.

Acorns interface overview. — Source: Qapital

Holiday Gifts

Whether end-of-year or sometimes birthdays and anniversaries, we set aside a fixed amount each week. We typically find ourselves using the bulk of the funds in late November through early January.

Renters Insurance

A relatively fixed cost, we currently pay our annual premium in June. I got tired of forgetting to set aside cash for this important item and then stressing about having to pay a larger than usual expense that month.

Doggie Vet

While we do have pet insurance (a topic we’ll cover at a later date), even just our dog’s annual vet visit costs a substantial amount (let alone an actual doggie emergency!). Not seeing this expense from month-to-month is another item that had caused a bit of stress.

Annual Income Tax

We do try to ensure we have an appropriate amount (not too little and not too much) withheld from each paycheck, but we’ve owed much more than we anticipated in the past come tax time. If we don’t owe, then great – we invest the cash we had set aside.

Moving Expenses

While not always utilized or planned, we found it helpful to set aside some cash to offset the costs of moving – whether hiring a crew, fees for a new apartment, or anything related. This does not include savings for a down payment some day, but it does help when needed.

Random New Gadget

A new computer, a new phone, a new something – whatever. It’s nice to have something saved, even if not the whole cost.

There are other things that we could be saving toward (which we do – see item #5), but we didn’t want to create a bucket for EVERY single expense. This is just what felt right and works for us at this time. We’ll adjust as needed.

5. Mid- to Long-Term Investments

The vast majority of our net worth (tax-sheltered retirement accounts, as well as taxable accounts) is invested with Vanguard (mainly in their index funds, but some actively managed funds, too). Vanguard is well-known for their low costs and extensive offering of funds and ETFs. Our accounts at Vanguard include the following.

Roth IRAs

Both Mrs BD and I have Roth accounts with Vanguard. As mentioned, our current employers do offer Roth 403(b) and 401(k) options, respectively, but any Roth contributions we make go toward our Roth IRAs.

Rollover Traditional Pre-Tax IRAs

Technically just an IRA (mine) at the moment, Mrs. BD and I will likely roll or transfer funds from our existing employer-sponsored 403(b) and 401(k) accounts to Vanguard if and when we ever switch employers.

Joint Taxable Account

We’re currently invested in one of Vanguard’s balanced funds within a taxable account. This fund is currently allocated toward a down payment on a future residence. We’ve considered leveraging contributions made in our Roth IRAs as a potential option toward a down-payment, but we’d strongly prefer to not raid our retirement accounts – even if considered a qualified withdrawal.

We’re also leveraging an investment-grade bond fund for a portion of our emergency savings. With check-writing capabilities, this fund is very liquid but still offers some potential upside to ensure our emergency fund at least keeps up with inflation and also offers a slight amount of growth (if not all capital preservation).

About 85% of our allocated emergency savings are in this fund; the other 15% is in spread among our other non-investment accounts (see points #2, #3, and #4).

6. & 7. Other Goals & Investments

I recently began utilizing the following accounts (all taxable) to try to diversify additional sources of income and growth. Overall, a small percentage of our net worth is currently invested in these tools, but we’re looking to expand depending on our experience and on how much excess cash we have available in the future.

Acorns

An app that helps you automatically invest your spare change into a portfolio that you chose, Acorns has a beautiful interface and very helpful features. I’ve been using Acorns since late 2016, and I love watching the account balance slowly increase each week with money I barely noticed coming out of our checking account.

I’d estimate we currently invest $15 or so a week from our primary checking.

Robinhood

A free equity or stock trading app, Robinhood enables you to open a brokerage account with no trade commissions or fees. I invested a reasonable portion of my bonus the last 2 years so far. As I’m currently invested in limited individual stocks, I’m not looking to add too much more to existing holdings – or am I? More to come soon.

As mentioned, we invest primarily in broad-based, low-cost index funds along with some actively managed funds, so I’m still easing into individual securities (and only intend for a limited percentage of our net worth to ever by invested in a single holding).

Fundrise

My initial investment was only $500. Our balance is nearly $12,000 after adding to our position over the last 10 months. A newer online real estate investment platform, I’d originally been just exploring some alternate investment options beyond the traditional REIT Index Fund currently held in my Roth IRA.

I think Fundrise will continue to be a key part of our portfolio.

Fundrise investment plan overview. — Investors are offered portfolios based on respective goal type or investment objectives. Source: Fundrise

Wrapping It Up

Despite time and investing, we still have more goals than available capital – at least now. The Balanced Dividends (Semi-) Automated Ecosystem enables us to stay disciplined while also dynamic when necessary. Overall, it’s about finding balance – and it’s never-ending.

Readers, what does your account ecosystem look like? How do you observe and manage your cash flow and related activity? Do you have any recommendations to share for consideration?

Passive Income Engine: Under the Hood of the Balanced Dividends Portfolio

Passive Income & Portfolio