There has been a recent post on a Facebook group I follow from someone who is optimising their short term cash.
They have spent the last 12 months working out a system to make the most of every dollar.
Optimising everyday money to work harder
The outcome of all of the trial and error is the following:
1/. Income comes into bank account.
2/. All money other than that not deducted from the bank account (i.e mortgage) goes to the Booster Savvy account. Bills that are paid by automatic payment are paid from this account. In the meantime, money sits in the account earning the going interest rate (currently 2.5% per annum before tax) until due date for bill payment. Note that Booster only allows automatic payments, not direct debits. So any bills that require a direct debit payment will need to be transferred out of Booster. This poster though kept all money reserved for direct debit payments in the Booster account until needed, thereby earning interest.
3/. When direct debit is due, transfer money out of Booster via automatic payment back to the main bank (Westpac, ANZ, Kiwibank etc), and payment made with a virtual debit card such as Debut or Emerge. The only purpose I can think of for the virtual debit card here is security. Acting as a buffer between online merchants and your bank account details.
4/. Every day spend (Supermarket, personal; grooming, entertainment, etc) is transferred from Booster to Dosh (a digital wallet provider) the day before spend so it is ready for spend the following day. The reason for this is spend with Dosh is rewarded with 1% cashback to a maximum of $1,000 spend. So $10 a month available in cashback.
Extra work required to achieve this optimisation
So what extra ongoing steps are required here than just having your bills come out of your 0% interest cheque account that you may have at a main bank?
You have to monitor how much you are transferring from your bank to Booster. As your income changes or your bank payments change (i.e mortgage), the amount you transfer to Booster will need to change too.
You have to monitor which of your regular payments are direct debits and which are automatic payments.
Any bills that require a direct debit need to have an automatic payment set up from Booster back to your bank. This needs regular monitoring as you add and subtract automatic payments.
You have to monitor you have enough in your bank account as direct debit payments can change. For example, electricity bills. This is not a problem with your typical banking transactions. Is an issue if you are only transferring just enough from Booster to the bank.
You have to know ahead of time when you are going to spend and how much on everyday items like food. You also have to make a transfer from Booster to Dosh to ensure you have enough for your spend.
You need to regularly monitor your spend with Dosh, as well as your account balances in Booster and the bank to ensure you are optimising each account.
These are just the ongoing steps required. In addition, you will spend considerable time setting this up.
The payback of optimising your everyday money
So what is the payback then for all your effort?
Lets say you spend $5,000 a month (not including any mortgage you may have). We will also assume you put $5,000 of income into the accounts discussed today.
Most months you will be spending most of the $5,000 as that is your average monthly spend. But just to be generous to the argument for this set up, we will assume your Booster balance is $3,000 for most of the month.
This means your monthly interest is $6.25 before tax. $75 per year. After tax, that may be closer to $50. Plus another $120 in cashback from Dosh. Total $170 per year.
Arguably, when not using this strategy, you could use the Dosh card with your main bank account. Since you aren’t earning interest with your typical spending money, it doesn’t matter if you transfer too much to Dosh each month. One simple monthly automatic payment from your bank to Dosh.
That means for the rest of the complexity, you are only earning around $50 for the year based off spending $5,000 a month and having $3,000 in your accounts for most of each month.
Final thoughts
The original poster admittedly has a mortgage, so all the effort they have gone to to try and explain they are optimising returns is a bit disingenuous. They would be far better off utilising an offset mortgage or a revolving credit facility. If you read between the lines, they have more of a problem with banks and that is where the crux of the matter is. They are most likely doing this as their way of sticking it to the bank but trying to sell the financial benefits.
I get it. The desire to stick it to the big banks is real. But c’mon. All the effort for such little savings is optimising for the sake of optimising. There is no real tangible benefit. In fact, the effort far outweighs the benefit in my opinion.
I place far more value on time freedom. And by keeping life simple, you can focus on what is truly most important. What brings you the most joy. And it isn’t just the time freedom, but the mental bandwidth too. Freeing your mind from worrying if you have enough in your bank account or if you are optimising every dollar. Keeping your mind free from such mundane stuff allows you to focus on the big things. Things that actually move the needle like planning for a better work/life balance, transitioning to retirement, being present for the family, pursuing your passions, or investing in low cost index funds. There is only so much time and space available. Use it wisely. Get out of the weeds.
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