28 (+1) Ways to Better 2016 Finances
Some of the steps below are applicable to everyone. Others are steps that older readers will want to make sure their grandkids know. Still others are items younger adults will want to pass on to their parents and/or grandparents.
1. Establish credit. If you don’t have a credit card already, get one. Use it, even if you don’t use it often.
2. Start out easy. Don’t race out to buy expensive things. Charge a cheaper product or service (or two) to establish and build your credit rating (or FICO score, the higher the better).
3. Protect your credit. Be sure to pay those things you charged on your card on time. Consistent on-time payments are essential to raising your FICO.
4. Save a few bucks. Late payments do more than lower your credit score. You will be charged penalties. Pay at least the minimum amount due on your credit card every month to avoid late-payment penalties.
5. Save a few more bucks. Pay more than the minimum due. Pay as much of the balance as you can each month to minimize or avoid interest. Pay it all if you can. (#2 makes more sense now, doesn’t it?)
6. Make saving money a habit. Even if you put aside only a few dollars from every paycheck, it will grow quickly. Your savings will grow by the power of compounding. The sooner you start, the more you end with – so put it into motion now. See #10 for more on this.
7. Pay off student debt ASAP! If you have student loan debt, try to pay it off as fast as you can. Research your options. Some loans can be re-financed; others permit income-based payment adjustments. Some let you postpone payments while you are still in school.
8. Pay student loans like credit cards. You may not know you can pay more than your monthly minimum to make your student loan disappear faster!
9. Be certain to repay student loans. Bankruptcy will not forgive student loan debt. If the worst should happen, these loans survive as financial weights to impede a new beginning!
10. Make a Budget … before you have to. If you’re young and still living at home, start balancing your income and expenses. When you’re out in the world, balancing rent, utilities, and fun money with your paycheck won’t seem so scary. If you’re older and cruising through life, examine things now before something unexpected forces you to. Make this another habit. Saving money becomes easier when you know how you are spending your money.
11. Live below your means. “Keeping up with the Jones” is a recipe for disaster. Just because you can do something doesn’t mean you should. Accelerating your lifestyle when you come into a few extra bucks can lead to hard times if those bucks go away again. Besides, an extra few bucks can be a good find for your savings.
12. Educate Yourself! Spend time learning about investing, taxes, and finances. We all invest in understanding our health and health insurance. Understanding health can lead to better health because we take steps to improve it. Money and financial literacy are similar. You’re worth it and you will save money because you understand how to save money! For more information on financial fitness, click here to read this InSights article.
13. Don’t over-extend your budget. It’s great to be able to go out to eat every night, but you also don’t want to be scrambling to figure out how to pay your rent or make it to your next paycheck. Controlling your budgeting permits you to add to your savings with minimal pain.
14. If you must eat out often, downscale. There are some fine restaurants that don’t cost the proverbial “arm and a leg.” Learn how to treat yourself without breaking the bank, and your checking account will thank you! Some simple tricks, don’t order alcohol, appetizers or dessert. Most of us don’t need those extra calories and extra expenses anyway.
15. Read the fine print on everything you sign. This is where you’ll find out if you’re expected to pay many extra fees, how much interest you’ll owe if you’re late on payments, etc. Ten minutes of reading small type could save you years of financial headaches because you will know what fees are being charged to you on any agreement.
16. Sign up for your 401(k): Most people do not participate in their employer retirement accounts, 401(k), 403(b), etc. This is a mistake. If you work where you get a matching contribution, you not contributing is leaving free money (yes, I said FREE MONEY) on the table. Contribute enough to reach the maximum percentage matched. That’s a 100% return on your money!
17. Contribute to your work’s plan. Even if your employer does not match your contributions, you STILL need to contribute. Remember no one else is looking out for your retirement. Like saving a little cash every month, saving for your retirement is one of the best things you can do for yourself, your family and your children. You don’t want these people to have to take care of you later in your life.
18. Start saving for retirement NOW! Even if you think it is too early to think about retirement, save anyway. You can never start too soon, so don’t be afraid to start early! Remember that compounding affect noted earlier. Click here to read more on the Retirement Crisis.
19. Do you know if you are behind on retirement savings? Most people who are already well into their financial lives are behind on their retirement plans. Call us to get a free helpful check-up on yours.
20. You can catch up if you are behind on retirement savings. It doesn’t matter if you are 25 or 55, your retirement funds will not heal themselves. You need a plan and you need to GET MOVING!
21. Monitor credit score like your health. Watch for any activity you didn’t initiate or expect. This a good way to minimize damage to if you are ever the victim of identity theft. You’re entitled to one free credit report per year from Experian, Equifax and TransUnion, the 3 main credit reporting agencies. Take advantage of it! You can also go to CreditKarma.com for FREE credit monitoring services. With all the available resources, you’d be foolish to not keep track of your credit.
22. Ask for discounts on services! You never know what kind of money you can save just by asking for a cheaper rate. It also helps if you’re nice to the customer service reps. If you make their job easier, they’ll be more likely to help you.
23. Get health insurance. If you’re young but not covered by your parents’ policy, it’s worth spending a few hundred dollars a year to prevent a whopping hospital bill if anything ever happens to you. If you’re older but been going naked because your employer doesn’t provide insurance, medical bills and debt could cripple your financial wellbeing for the rest of your life. Note that medical bills are the #1 reason for bankruptcies in the U.S. So take care of your health and your money’s health by getting health insurance.
24. Learn to cook! Eating at home can save you tons of money, and it’s generally a good skill to have. Money spent on groceries stretch a lot farther than money spent eating out.
25. Learn about social security. About 75% of retirees count on Social Security for a main source of income. Learn about how it works to maximize your benefits.
26. Increase your social security payments. Your monthly Social Security check can be as much as 76% higher by waiting to start your benefits. Call us to find out how, and click here to read an InSights article about Social Security.
27. DO THE MATH! Despite step #26, 73% of all beneficiaries claim Social Security early at age 62. Claiming early reduces your income both monthly and cumulatively if you live to the average life expectancy. How so? Life expectancies have improved! Make sure you understand how much money you are leaving on the table by claiming at age 62 versus age 66 or 70!
28. May 1, 2016 is the deadline for File & Suspend. For those within the right date range, act now to beat the loss of the File & Suspend (F&S) benefit for Social Security. There is significant money available if you act now. It’s gone forever if you wait. F&S is going away by May 1, 2016.
A non-financial holiday present bonus step
29. Take pride in your progress. If you miss a step, forgive yourself and get back on your plan again immediately. Nobody’s perfect … but falling isn’t failing. Not getting up and going on is!