12 ways to get your finances on track
Every year, we cycle through the classic resolutions. Eat healthier, work out regularly—and get your money habits in check.
The third one is easier than you think. If you’ve figured out how to improve your financial life (or if you’re already on track)—congrats to you! If not, here are 12 ways to turn around your financial life. Pick one or two (or all) of them and get going!
1. Sit down, once and for all, and make a budget. Mint.com is a free site that can help you see exactly where your cash goes in easy-to-use pie charts so you can make informed decisions about adjusting outflow and where to cut back.
2. Keep a spending diary. Try writing down everything you buy in a little notebook—and I mean everything: newspaper, gum, coffee, etc. Do it for a week or a month, and you’ll have an honest (perhaps brutally honest) look at your finances.
3. Be ruthless about finding ways to trim your spending. There are the obvious ways, like cancelling subscriptions to streaming services you don’t use or eating out less often. Another idea (and, I admit, this is radical): Could you consider a move? Someone I know downsized to a smaller apartment and now saves 25% more of her take-home pay.
4. Commit to a cash-only diet. The average American owes more than $7,000 in credit cards. The average student graduates with more than $4,000 in credit card debt—a tricky way to kick off an adult life. Plus, studies show that people are typically willing to spend twice as much for the same items when paying with plastic. Stick to cash by taking out a fixed amount at the beginning of each week, and no more.
5. Pick a day to buy nothing. Not only will you save money, you’ll discover ways to stretch your dollar and build your savings habits.
6. If you do have credit card debt, pay more than the minimum. Staying on the payment schedule your lender sets can take years and cost you thousands of dollars. Say you owe $1,000 on a card that charges 16% interest. Paying just $20 more than the minimum every month will save you four years of repayment and about $260 in interest charges.
7. Check your credit score. Your credit score is like a report card of your financial behavior—and a high score means you’ll be eligible for low-interest loans. Get your credit report for free at AnnualCreditReport.com and get a free version of your score at CreditKarma.com. Or, for an official score, go to myFICO.com and pay for it. If your score is lower than you’d like, boost it by paying all your bills on time.
8. Automate your bill-paying. To make sure you pay your bills on time, set up automatic bill pay for all your recurring payments. Your bank should offer this for free. Remember: One missed credit card payment could mean the difference between a good mortgage rate and a lousy one, potentially costing you tens of thousands of dollars.
9. Ask your credit card company to lower your interest rate. Make this the year you learn how to negotiate. Check out Bankrate.com or NerdWallet.com to see the best cards out there. Then, call your company and see if they’ll match the deal. The offer you walk away with may surprise you.
10. Stick with low-rate federal student loans. If you’re going back to school, or your kid is heading off to college, make sure you get all the federal loans you can before going to private lenders, who can charge double-digit interest rates. And if you have student loans with unaffordable monthly payments, look into federal income-driven repayment plans that could lower them.
11. Pick a day this month to get your 401(k) or IRA in order. Thanks to the tax breaks they provide, 401(k)s and IRAs are still the best places to put your long-term savings.
12. Save $3 a day. Start today and you’ll have more than $1,000 in a year. A 35-year-old who sticks with this habit and invests the money in an IRA could stockpile $129,342 by age 70, assuming a 6% annual return. Too strapped for cash to put any aside? You probably won’t miss the little extras that $3 can buy. Feel guilty socking away for your own retirement instead of, say, your kids’ college fund? Trust me: Not being dependent on your family when you’re older is the least selfish thing you can do.