How much time do you spend on your finances each week? A couple of hours? Or do you rarely spend any time at all?
It’s understandable why some of us shy from what getting our hands around our finances. It can appear to be a daunting task. Really, though, the job turns out to involve several smaller tasks, none of them particularly difficult.
To simplify things, we’ve down several tasks here. Tackle these small jobs and the payoff will be big, for your wallet and your peace of mind.
1. Modify spending habits
If you complain about not having the money to make ends meet it’s time cut back on discretionary spending — quick runs to the nearest fast-food joint, daily trips to Starbucks or cable package upgrades, to name a few.
Also, shop smarter. A few suggestions to get you started:
- Buy secondhand. Craigslist and garage sales are my best friends when I’m searching for big-ticket items. I refuse to pay full price and have saved 50% in some instances on things that would have easily cost $1,000 in the store.
- Bargain shop. Reduce your spending drastically by avoiding paying full price. I can’t remember the last time I paid retail for a piece of clothing; I head to the clearance rack instead. I avoid temptation by telling myself, “If it’s not on sale or clearance, I’m not buying it.” Sounds corny, but it works!
- Never pay full price. Check online for promotional offers and check the store policies to see if they allow price matching.
2. Use cash-back sites
How does a cash-back site work? Take Rakuten, for one example: When you shop online through its website or app, or use the browser extension, you get cash back on purchases from thousands of retailers and merchants that partner with Rakuten.
3. Create a spending plan
Having a hard time keeping your spending under control? You may already know what a budget sets a clear plan for where your money goes each month. It lets you make provisions for savings and figure out where you need to trim your discretionary spending.
What you may not know about is the power of using budgeting software to track your plan and your spending in real time. At Money Talks News, we like using YNAB (short for “You Need A Budget”), a powerful online budgeting tool with a mobile app. You can use it free for the first 34 days.
Use it to keep an eye on your expenses and income and to make decisions that help you meet your financial and life goals.
4. Open a savings account
If you haven’t got a savings account, contact a financial institution and open one. If you already have a savings account, take a minute to do some comparison shopping and make sure you have the best rate available. One place to find the best rates on savings and CDs (certificates of deposit): Money Talks News, of course.
Interest rates are low right now, so you won’t make tons of money on savings (although every little bit helps). The important point is to feed and build your savings so you can gradually amass the money to meet your goals and put aside some for fun.
If you are struggling to save, here are a couple of tricks that help:
- Allocate a percentage of your monthly income. Set the money aside yourself or have it done automatically, through electronic transfer. Automated transfers are effortless (your bank or credit union will help) and will prevent you from accidentally skipping a month.
- Plan now for irregular income. Expecting a hefty tax refund or a raise at work? Or maybe you got a holiday or birthday gift of cash. Plan now to put it in savings to boost your emergency fund.
5. Be vigilant about your account activity
Haven’t paid much attention to your statements in the past? Now’s the time to start. Identity theft is at an all-time high, and your account activity may serve as the first indicator that you have been victimized.
Start by reviewing the activity on both your bank and credit accounts at least once a week. Also, review the comprehensive statement when you receive it at the end of the month.
If you think you might have been a victim of identity theft or a data breach, use the Federal Trade Commission’s reporting website, IdentityTheft.gov. It is meant to make it easy for victims to report and recover from these incidents.
6. Check your credit
Reviewing your credit report takes only a few minutes, yet so many people choose not to bother.
Here’s why it’s worth the time: You could end up with a higher interest rate on a loan because of a mistake on a credit report that lowered your credit score — a mistake that could have been corrected with a quick call or letter to the creditor.
A Federal Trade Commission study of the U.S. credit reporting industry found that 5% of consumers had errors on at least one of their three major credit reports.
7. Gather these documents
Have you prepared for someone else to handle your affairs if you were suddenly unable to do it? If not, now’s the time to gather important documents that pertain to both your finances and health care. They include:
- A will: If you die without a will, state laws will determine where your assets go.
- A durable power of attorney for finances and for health care: Designate the people you want to oversee your finances and your medical care if you become incapacitated.
- Life insurance documents: Don’t leave your beneficiaries in the dark about the policies you have.
Store each of these documents in a safe place in your home or use cloud storage. Be certain that those who will handle your affairs know where to find them.
8. Renegotiate interest rates
Have you tried reaching out to lenders to secure lower interest rates on your debt? Here are two things to try:
- Request a lower APR on your credit card. Pick up the phone and give the credit card company a ring. You never know until you ask, and the worst thing the representative can say is “No.” If that fails, see if you can transfer the balance to a card with a lower rate.
- Look into refinancing your auto loan and/or mortgage. Interest rates are at one of the lowest points in history. Depending on your loan, refinancing to reduce your mortgage rate could save thousands of dollars.
9. Adjust your tax allowances
Does your tax liability or refund always seem to catch you by surprise? It is definitely jarring to get a big bill at tax time — and it can throw a wrench in budgeting, or force you to borrow.
Getting a big refund seems better, but it’s not, really. It just means you paid too much to the government during the year, when you could have been putting that money to work for you by using it to meet your goals, invest or pay down debt.
Talk with your tax preparer or human resources department at work about adjusting your allowances on Form W-4.
10. Maximize 401(k) contributions
If you can, make this the year you contribute the maximum amount allowable under law to your 401(k). If not, at least don’t leave any money on the table by contributing less than the amount needed to capture your employer’s entire match.
Keep building your retirement fund:
- Explore the options. If you don’t have a 401(k) at work, look into an IRA or Roth IRA. You don’t want to be kicking yourself when retirement time rolls around.
- Maximize your Social Security benefits. How much you will receive depends on how many years you worked, how much you earned, when you start collecting benefits and other factors.
11. Make your money work for you
Are your investments in your 401(k) and other retirement funds getting a decent return?
One thing’s for sure: You won’t get full value for your retirement funds if you are paying too much in fees. Of all the ridiculous fees and charges you pay, the fees attached to 401(k) plans and other retirement accounts are the worst.
Also, get smart about starting early to invest for retirement. The younger you are when you begin, the easier the job will be. That’s because compounding interest can be working in your favor over more years.