Let’s move the needle TODAY, right now. When it comes to winning with money procrastination is the worst enemy in our lives and inaction is what will cause you to wake up 10 years from now in the same spot you are today. I’ve studied personal finance for several years, and have done a lot to limit my expenses and increase my income; of course this has caused a lot of sarifices along the way. I was talking to a friend the other day who mentioned that it seems like too difficult of a lifestyle to lead, even if it is only temporary. I thought about this for a bit, and of course it take a big commitment to drastically change direction overnight. To find a better balance, at least to start out with, I came up with a set of action steps that can be done in 30 minutes or less to win with money, without a lot of pain. Take one step at a time and the more you do, the more you think, the easier it is to make more changes to win with money.
Task 1: To win with money you first need to get organized. Look up all your debt, and make a physical list of how much is owed, at what interest rates, and with what monthly payments. Organize all of your online investment accounts together using Personal Capital to keep track of your progress. Write out a plan to pay them off, working smallest to largest.
Task 2: Write out a rough budget. It doesn’t have to be as extreme as the Dave Ramsey philosophy of every dollar has a name, I cheat on mine and have a “Misc.” heading with a few hundred dollars in it. Include savings in you budget. This will at least show you where most of your money is going.
Task 3: If you are offered a 401K through work, check to ensure you are contributing enough to receive the full company match. If you are not sure if your company offers a 401K to you, ASK. Many companies have waiting periods of 30 days to 1 year before employees are eligible for a match. Mrs. C.’s store manager told her that since she was part time, she didn’t get any benefits, including 401K. After asking HR she found out that this wasn’t true and that she had been eligible for a 401K since she hit 1 year of service.
Task 4: Look for low hanging fruit in your budget: Look at your budget and find ways to save money. Do you need all the movie channels on your cable bill? or cable at all? How many times did you eat out last month? When was the last time you used that gym membership? Are you paying too much for cell phone service? Consider switching to Republic Wireless or Zact.
Task 5: Vehicle assets: If you have car loans or expensive cars: Look up the value on Kbb.com, check what similar vehicles are selling for on craigslist, and look for a replacement vehicle that can get you around. If you owe $10,000 on a car that is worth $12,000 It can be sold and replaced with a $2,000 car. This move cuts $10,000 in debt, allows for substantially lower insurance rates, and gets rid of the large monthly payment. If you are upside down in the car, make a plan to save up enough cash to sell the car, pay back the difference to the bank and put yourself in something more affordable, with cash. Here is a great video on paying for cars.
Task 6: Open an IRA and/or Roth IRA with Betterment.com or Vanguard.com. If you don’t have a few thousand to invest, starting with Betterment may be the best option. With first dollar investing you have instant diversification across several index fund ETFs. I would invest at 100% stocks, and set up an automatic investment. To avoid a $3 maintenance fee a transfer of at least $100 a month is needed.
Task 7: If you have health insurance, look up to see if you have a high deductible health care plan eligible for an HSA. If not, compare plans to see if you can get an HSA qualifying plan elsewhere. If you do have an HSA plan, consider opening an HSA with Health Savings Administrators and set up automatic investing. Most banks that offer HSAs essentially put the money in a low interest savings account, HSAAdministrators allows for investing in 22 different vanguard funds.
Task 8: Renegotiate insurance: Call around and shop for homeowner and car insurance. Keep in mind there are large discounts for multi-policy, pay in full, and for using their tracking systems. Ask what discounts are available. If you sold the expensive car and are no longer in car debt, consider dropping full coverage to minimum coverage.
Task 9: Look around for stuff you don’t use that you can sell and list on craigslist: video games, exercise equipment, tools, toys, boats, motorcycles, whatever. Most people have all sorts of crap hanging around that has little utility to them, turn this stuff into cash.
Task 10: Ask for a raise. My favorite way to do this is to have a private conversation with the decision maker. I list my most recent successes and contributions to the company, re-iterate that I enjoy working for the company and my boss in particular, and then ask what I can do to become more valuable to the company. A simple conversation like this has provided me with 3 decent raises from 3 different employers. Even if they can’t make a raise happen immediately, usually they will give you action steps to take to earn one. This strategy of course doesn’t work if you show up late, leave early, and half ass it while you are there. Asking for a raise is one of the quickest ways to win with money.
Task 11: Ask for extra hours, or look for a second job. Yeah, this one takes only 30 minutes to do, but then causes a time commitment going forward. This action can seriously move the needle. For someone working a 40 hour week, 4 extra hours a week, 16 hours a month, is a 10% increase in pay for someone who doesn’t get OT or 15% for someone who does, and we know how that can move the needle!
Task 12: Look into how much life insurance you have and see if it is sufficient. Most people need 10 -12X their annual income to replace their income if they were to pass away. For a stay at home parent, this will vary based on total number of children being looked after, but at least get a minimum of a $250K policy. If your numbers are lacking go to Zander Insurance to compare rates and sign up. Don’t delay, we don’t get to know when our time is up.
Task 13: Make a plan: jot down some goals, and decide where you want to be in 2 years, 5 years, and 10 years with money, and how you will get there. Then, before buying something or spending money, ask yourself, “Does this action help or hinder me in achieving my goals?”
Task 14: Lower your energy bills: Replace light bulbs with cfl or led bulbs. Check your plumbing system for leaks. A running toilet can cost you over $100 a month. Check for air loss in doors and windows. Turn off computers at night. Just being cognizant of wanting to reduce these bills helps you find ways to reduce them.
Task 15: Plan out and pack work lunches. This alone can easily save $5 a day. Across a year that’s about $1,500 per person. You can also pack healthier food than you will get hitting up fast food restaurants or the plant cafeteria.
Task 16: Quit smoking: Smoking a pack a day directly costs about $3,000 a year. Cutting back even to a half pack saves $1,500. Getting rid of it entirely will also drop health and life insurance costs. Set up a system to track your smoking. Just being aware of how much you are smoking will help dial it down.
Task 17: Plan your taxes: Most people have a rough idea of how much they are going to make in the current year. Use my spreadsheet to help with tax planning and see how much you can save on taxes by taking advantage of tax deductions and credits through retirement savings, HSA savings, educational expenses, and childcare expenses.
Task 19: Run a credit report. See if there is anything incorrect or outstanding against you. If there is an error, dispute it and if you owe something, call up the creditor to settle, or make a payment plan. Most items on your credit report won’t roll off until 7 years after you have paid it.
Task 20: Check your property tax statement to see if your assessment is out of whack with the market value of your home. There are many horror stories of municipalities cranking up assessments. In Michigan proposal A limits the increase to 5% or the rate of inflation, whichever is less each year. If the amount is seriously off, consider writing a letter to the assessors office to have them come re-assess it. You may have to go through a formal process and get an appraisal done.
Task 21: Don’t worry about anyone else. Okay so this is more a thought process than a task, but it really matters. People tend to get so wrapped up in the deal someone else has. Wether it’s jealousy or sour grapes, it doesn’t matter. Be HAPPY when you see someone else being successful. Then focus on YOU. Your broke friends think your crazy for selling your car? Don’t stress it, just focus on your goals.
Task 22: Involve your kids. Let them know what your goals are and why. Ask them for ideas on saving money. Make a chore list to pay them for working. Get work = money instilled in their brains.
Task 23: Ask someone who you see as successful what they are doing or have done to win with money. Most successful people are happy to share their stories and to help others.
Task 24: Sign up for a free Future Advisor account to get professional level advice on asset allocation.
Task 25: Look for a bank or credit union that offers a high interest checking account. Mine pays 3% interest. Not a ton, but it adds up. These accounts usually also come with ATM fee reimbursement.
Task 26: Combine trips: Gasoline is expensive. The best way to reduce your gas cost is to reduce your miles driven. Planning out trips and tracking how much you drive can yield substantial savings.
Task 27: Buy used. The vast majority of what I own is used. Houses and cars are the most obvious, but I also buy used appliances, furniture, tools, video games, books, clothes, toys, etc. If you plan on buying something compare the prices of new vs. used.Craigslist, yard sales, ebay, habitat restore, and thrift stores are all great places to find used stuff.
Task 28: Get an idea for how much you need to save for retirement and what you have to do to get there. I use the investing calculator at Daveramsey.com. I also have a spreadsheet to help with tracking retirement income.
Task 29: Consider refinancing your home. If you have an interest rate over 1% higher than todays rates and plan on staying in your home for a while, a refinance may make sense. I would suggest getting a refinance for a shorter term if you do. For example, if you are already 10 years into a 30 year mortgage, refinance to a 15 year or 20 year, not a 30 year. Interest rates are still very low. I just refinanced a property from a 15 year to a 10 year, and saved $100 a month. Closing costs for a refi will vary, I think around $1,500 is about right. Check out Lending Tree to compare several mortgage options at once.
Task 30: This one should probably have been at the top of the page; talk with your significant other about finances. If both people are on board and working towards the same goals they will be achieved much quicker.
The more action that takes place the easier it is to make changes in your life to win with money. What other quick action ideas do you have to win with money?