personal finance
In honor of Financial Literacy Month, we have been sharing daily financial tips online. Each is very simple and easy to implement. Here's a recap of our 30 financial tips for Financial Literacy Month.
Tip #1: Set up autopay for recurring bills
Stop wasting your hard-earned money on late fees. Set your bills on autopay and never pay another late fee again.
Tip #2: Small reductions in spending add up to big savings over time.
Making one small change a day can make a huge impact on your ability to save. Making coffee at home instead of buying it out is a simple example that many people refer to. Let's say it costs $0.50 per day to make coffee at home, and it costs $2.50 to buy coffee out. If you made the switch, you would be able to save an extra $2.00 per day. Over the course of the year, you could save an extra $730 just from that one simple change. If you invested that money at a 7% annual return, you would have saved over $10,000 over a 10-year period. That's huge savings for such a simple change.
Tip #3: Don't connect your saving and checking accounts.
Often when I meet with clients, when they tell me that they have a savings account that is linked to their checking account, they use it as an extension of their checking account rather than as a true savings account. If you want to build up your savings for longer-term goals, you cannot make frequent withdrawals from it. Sometimes it's as simple as making it a little harder to transfer between the two accounts.
Tip #4: Start saving for retirement as early as possible.
If you are eligible for your employer's retirement plan, get signed up and start contributing today. If you are not able to contribute to a plan through your employer, open an IRA, and start an automatic contribution. Do not procrastinate on this.
Tip #5: Create a budget and revise it as necessary.
There are lots of people out there that hate budgeting, so even if they do get around to making a budget, they never revise it—life changes. Your income will change. Your expenses will change. Your budget should be adjusted accordingly to help you continue to reach your long-term goals.
Tip #6: Automatically contribute to your savings account from every paycheck.
I'm sure that you have heard that you should pay yourself first. Setting up an automatic deposit from your paycheck into your savings account is a great way to make sure you do this. Remember that you want to spend what is left after saving, not save what is left after spending.
Tip #7: If your employer does not offer a retirement plan, open an IRA, and start contributing today.
I mentioned this in a previous tip, but so few do it that's it's worth reiterating. If your employer does not offer a retirement plan or you are not eligible to participate in it, don't use that as an excuse to put off saving for retirement. Open an IRA today and start contributing. You can do it at discount brokers online, at your local bank, or with a financial advisor.
Tip #8:Contribute at least enough to your retirement plan to get the full benefit from your employer's match.
If your employer offers matching contributions for your retirement account, make sure that you contribute enough to get the full match. This is a valuable benefit that is part of your overall compensation package.
Tip #9: You do not need to have a lot of money to start investing.
Have you heard of Acorns? You can literally start investing with spare change. While many financial advisors require a minimum amount of assets to establish a relationship, there are still lots of ways to get started investing without a huge nest egg.
Tip #10: If you are married, review your budget together each month.
Budgeting and financial planning together create a solid financial foundation for you both. It may take a little work to get started, but once you have things in place, it's basically just a monthly check-in to ensure you are on track.
Tip #11: Saving for retirement is easier if you start earlier.
Remember that time in the market is more important than trying to time the market. Dollar-cost averaging is a great way to get started building wealth so that you can enjoy a comfortable retirement later in life. You don't want to work forever, do you? If you don't start early, you may end up needing to work much longer to catch up on your retirement savings.
Tip #12: Track your spending.
It's easy to overspend when you are not paying close attention. Tracking your spending keeps it top of mind. It can be as simple as writing it down on a small piece of paper in your wallet or purse, or it can be a more sophisticated computer program like I use with my clients. Regardless of how you do it, tracking your spending will help you get to your bigger goals more quickly.
Tip #13: Add value for your employer and ask for a raise.
There is a lot of focus on reducing spending as a way to increase your savings. However, increasing your income can actually have a far greater impact. If it has been a while since you asked for a raise, find out what additional projects or responsibilities you can take on. Impress your boss with your performance, and then you will have very clear evidence of why you deserve a raise when you ask for one.
Tip #14: Consider large purchases for at least 24 hours before committing.
Large purchases should not be made on impulse. Set some guidelines for yourself to avoid financial commitments that are not well thought out. A good one is to wait at least 24 hours before committing to a large purchase.
Tip #15: Limit your credit use to 30% of available credit.
Credit cards have a certain credit limit. When you use most of the credit available to you, it has a negative impact on your credit rating. Limit your credit use to 30% or less of your available credit.
Tip #16: Monitor your credit report regularly.
With all of the issues with identity theft, it's important to monitor your credit report regularly. You can access a free credit report from each of the reporting agencies at annualcreditreport.com. You can also use a credit monitoring service such as Credit Sesame or Credit Karma.
Tip #17: Unsubscribe from promotional emails.
Sometimes getting a promotional email can give you the impulse to spend when it's not part of your plan. Just unsubscribe from those promotional emails to avoid the temptation.
Tip #18: Check out your local credit union for better interest rates.
Credit unions often offer better interest rates than large banks. Be sure to check with your local credit union when considering a HELOC or auto loan.
Tip #19: Have a financial accountability partner.
You may need some tough love from time to time to help you stay on track to reach your goals. Having a financial accountability partner can help with that. I serve as an accountability partner for many people professionally. However, your partner does not have to be a professional. It could be a spouse, a friend, a co-worker, or someone else. Just pick someone with who you can be completely honest and who truly has your best interest at heart.
Tip #20:Don't save your credit card information online.
Saving your credit card information on your favorite online shopping sites makes mindless spending way too easy. Make it, so you have to take the extra step and get your card out of your wallet. That simple extra step may be enough to limit mindless spending.
Tip #21: Get the right insurance coverage in place.
The less you have saved, the more important it is to have the right insurance coverage in place. This means not being over or under-insured. In addition, you should review your coverage annually as your needs may change. Open enrollment is a great time to do this since you are reviewing your health insurance coverage at that time anyway.
Tip #22: Set specific, measurable financial goals.
It's hard to know where the race ends if there is no finish line. Getting specific with your goals gives you something to work toward. Your goals may change, and that's fine, but being specific will propel you forward more rapidly.
Tip #23: Pay off your highest-rate debt first
I'll be the first to say that not everyone agrees that you should pay your highest-rate debt first. However, I am an analyst at heart, and from a pure numbers perspective, you save yourself the most money in interest if you aggressively tackle your highest-rate debt first.
Tip #24: Save 3-6 months of living expenses in an emergency savings account
Life happens, and we do not always have control over when expenses arise. By having an emergency savings account, unexpected expenses won't force you to incur debt or throw you too far off your financial plan. To determine the amount you should save, figure out how much you spend each month. If you spend $4000/month, then you need three to six times that amount or $12,000-$24,000.
Tip #25: Plan and save for large purchases ahead of time
This may seem like a no-brainer, but if that was the case, Americans would not be carrying the levels of debt that we are. By planning and saving for large purchases, you can avoid significant interest expenses.
Tip #26: Rebalance your portfolio at least once per year
When you first determine your investment allocation, it is based on your time horizon, your goal, and your tolerance for market volatility. A lot can happen in a year. There could be life changes. Your goals could change. Various areas of the market will out or underperform relative to other areas. If you do not rebalance your portfolio at least once per year, then the allocation will no longer be appropriate for your time horizon, goals, and tolerance for risk.
Tip #27: Shop your insurance rates every couple of years
When was the last time you shopped your car insurance rates? Make a few calls, and you might be surprised at how much you could save. At a minimum, call your current provider and see if there are any discounts you are eligible for that you are not currently utilizing.
Tip #28: Educate yourself about investment basics
I get it. Investing might not be your thing. That's okay. You do not have to live and breathe the stock market like I do, but it is helpful to develop a basic investment vocabulary. It's also important to understand some basic investment principles such as risk and reward and asset allocation. Pick up a book on personal finance or just keep following my blog - I'll help you learn the basics a little bit at a time.
Pick up a book on personal finance or just keep following my blog (like my posts about the principles of sound investing, consistency, courage and balance!)
Tip #29: Review the beneficiaries on your accounts annually
Ideally, you should review the beneficiaries on your accounts anytime you have a major life change. With that said, it is very often forgotten. That's why I encourage you to make it part of your regular annual review process.
Tip #30: Have a written plan in place to reach your long-term goals
AsAntoine de Saint-Exupéry said, "A goal without a plan is just a wish." There is power in writing down not only your goals but your plans to accomplish them. It's not written in stone, so it can always be adjusted, but the act of writing down your plan increases your level of commitment.
I hope you have found at least a couple of these tips to be useful. If you have tips to share, please do so in the comments. We can all learn from each other.
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