The idea of diagramming you own personal finance network to show the relationships between your financial accounts is such a great idea. I was inspired by Jim at Bargaineering to create my own financial network map. Being a systems/software engineer by profession, I can’t believe I never though of the idea myself, but I think its a great tool for understanding your own financial accounts. In the past, I’ve often had to do some financial maneuvering to transfer funds between accounts electronically (like when I went away to college and did not have a physical bank located in my city), and this is a great way to see how you can make transfers more efficiently and more.
I used arrows to denote the flow of funds/payments, and a star to note where the transaction must be originated from. I have also listed abbreviations along the paths to show additional information, where applicable. DD for direct deposit, ACH for electronic checking account payments (technically stands for “Automated Clearing House”), WEB for payments made on a service providers website, and CHECK when I actually have to mail a check the old fashioned way.
As you can see above, I direct deposit into three accounts for specific reasons. My credit union checking account was my first checking account, and I really only keep it open so that I can easily pay my credit union auto loan via that account (ok, and I have more checks for that account than I could ever use). I direct deposit only enough money into the credit union account to pay the auto loan. I deposit enough money for the rest of my monthly bills into my USAA checking account, where I pay all of my other bills from. I use my Capital One money market account for holding my emergency fund and any other cash that I’m trying to make a little interest on, since this account has my highest rate of return. So I deposit the rest of my paycheck to the money market account. When I deposit money into my Scottrade account, it usually comes from my Capital One money market, which I currently have to transfer through my USAA checking account. This is an area where I could improve my network by making the transfer directly from my money market account.
I highly suggest making your own financial network diagram or map. Of course you can use whatever notation you desire, as long as it makes sense to you. The main point is that you understand how your accounts are connected. For more information, I highly suggest reading Jim’s article on Financial Network Maps.