Money Habits Saving $2.74 a day over the course of a year will get you an emergency fund of $1000. Keeping your car engine tuned and its tires inflated to their proper pressure could save you up to $100 a year in gas. Save using a Pay-Yourself-First approach. This means setting aside money from each paycheck as soon as you earn it, rather than waiting to see what is left at the end of the month. The best way to Pay-Yourself-First is to use some type of automatic deposit plan.
Money Habits Establish financial goals and take actions to achieve them. Be specific with a date and a dollar cost. An example is “save $8000 for a used car in 4 years”. Knowing your timeline can help you choose appropriate places to put your money. Learn about managing your personal finances and how economic conditions affect your finances. Double your money. To figure out how long it will take, divide the interest rate being earned on your savings into 72. For example, with a 4% average annual return, $1000 will double to $2000 in 18 years.
Money Habits Financial planning is similar to planning a trip. You need to know where you want to go, when you want to arrive, how you plan to get there, and how much it will cost. Once you have determined your financial “destination”, savings will get you there. It is never to late to start saving. Changing spending habits is hard to do if the whole family doesn’t work together. Make sure everyone in the family is committed to making the new financial plan succeed.
Financial Statements, Tools, Budgets Identify your financial values, goals, and strategies so you can always keep a balance between spending and saving and stay committed to your financial plans. Develop your own balance sheet and update it annually. Develop your own cash-flow statements monthly or quarterly and compile them into an annual statement each year.
Financial Statements, Tools, Budgets Calculate your financial ratios annually to assess your financial progress. Develop a list of your financial goals. Start with the shorter-term goals and then expand your list to longer- range goals. Update and revise your goals annually. Start an uncomplicated personal financial record- keeping system that meets your needs.
Emergency Fund The $20-$40 you could save monthly by not bouncing checks or overdrawing your account could equal enough in a year to nearly fund a $500 emergency savings account. Build up your emergency fund until you have 3-6 months of expenses set aside. Remember that a shoe sale or electronics at a discount are not an emergency! Only touch the fund for unexpected repairs or expences.
Energy Savings How energy efficient is your home? Get tips from the US Department of Energy for conducting a DIY home energy assessment. Learn simple tips for evaluating your home for air leaks, insulation, heating/cooling equipment, and lighting. An energy efficient home will save you money on your monthly utility bill. http://www.energysavers.gov/pdfs/energy_savers.pdf
Taxes Reduce your income taxes by signing up for tax- advantaged employee benefits at your workplace. Contribute to your employer-sponsored 401(k) retirement plan at least up to the amount of the employer’s matching contribution. Set up automatic contributions to your Thrift Savings Plan. Maintain good tax records. Use tax refund to build up emergency fund and pay off debt.
Checking & Savings Accounts Use a free, interest-earning checking account for your day-to-day spending needs. Use high-interest savings accounts for funds you will not need for six months to about five years in the future. Use investments for needs that will not occur until five or more years in the future.
Checking & Savings Accounts Maintain an emergency fund sufficient to cover three to six months of expenses. For example, if your monthly expenses total $1500, you will need $ 4500- $9000 in your emergency fund. Buy certificates of deposit when saved funds will not be needed until a specific future date. Reconcile your account statements monthly.
Groceries Most supermarkets offer store brands which cost about 25% less than the big name brands. Use coupons for products you buy often Marketing tactic to be aware of: stores stock priciest items at eye level so be sure to check high and low on shelves for better deals.
Groceries Compare prices by using cost per unit. Unit price is cost of item per ounce, gallon, pound, etc. Learn to cook from scratch. Mixes and convenience products cost more.
Credit Protect your credit reputation just as you would guard your personal reputation. Calculate your own debt limits before taking on any credit. Obtain copies of your credit bureau reports regularly (www.annualcreditreport.com), and challenge all errors or omissions on them.
Credit Never cosign a loan for anyone, including relatives. Always repay your debts in a timely manner. The average interest rate on a credit card is 15%. Get the best rate by paying your bills on time, not maxing out the credit that you have, and staying away from new debt.
Credit Cards and Consumer Loans Move credit card balances to lower-cost accounts, if necessary. Never make convenience purchases on bank credit cards on which you carry a balance. Pay your credit card balances in full each month, or no longer than two or three months later.
Credit Cards and Consumer Loans Check your monthly billing statements against your receipts for accuracy, and challenge discrepancies. Use student loans for direct education expenses only rather than to maintain a better lifestyle. Select installment loans that have a low annual percentage rate.
Credit Cards and Consumer Loans The best investment most borrowers can make is to pay off consumer debt with double-digit interest. For example, if you have a $3000 credit card balance at 18% and pay 3% minimum payments, it will take 14 years to pay it off. Add in accumulating interest , and you will pay $5625 in interest charges!
Major Purchases Think through all of your major purchases using the planned buying process. When planning to buy vehicles, check repair ratings history in the April issue of Consumer Reports magazine. Purchase late-model, high-quality used vehicles and check their ownership history at www.carfax.com and any recall history at www.nhtsa.gov.
Major Purchases Obtain price information from at least three sources and aggressively negotiate prices and financing terms for major purchases. Never tell a seller what payment you can afford. Promptly and firmly seek redress when dissatisfied with purchases or services.
Major Purchases Never purchase expensive items on impulse. Instead, think over each expensive purchase for at least 24 hours. Using this principle will result in fewer regrets and more money for savings. Always negotiate price, never payments. Payments can often be manipulated so that the item is affordable. Stay focused on the price because salespeople will always try to get you to talk payments. Once you have the best price, the payments will take care of themselves.
Major Purchases When buying a car, donʼt forget to consider other costs, like insurance, gas mileage, maintenance and repair. These numbers are available in new car guides or on websites such as www.kbb.com and www.edmunds.com.
Home Buying Read your leases and all other real estate contracts before signing. Get your finances in order before shopping for a new home by reducing debt, budgeting better, and clearing up anything that keeps you from having a high credit score. Buy a home as soon as it fits your budget and lifestyle so you can take advantage of special income tax deductions and the likelihood of substantial price appreciation over time.
Home Buying Thoroughly explore mortgage loan sources and options to determine which one best fits your needs. If you make a down payment of less than 20 percent on a home, cancel private mortgage insurance as soon as the equity in your home pushes the loan-to- value ratio to 80 percent.
Insurance Always insure your home and vehicles. Purchase insurance policies with very high liability limits to protect against the possibility of catastrophic losses. Verify that your auto insurance policy covers rental car losses so you can wisely ignore sales pressure to purchase such overpriced coverage.
Insurance Always comparison shop for insurance locally as well as online. Maintain a verifiable inventory of all your insured property so that you can collect what is coming to you in the event of a loss. Once each year, reassess what types of and how much insurance coverage you need.
Insurance Calculate your life insurance needs every three years or when major life events occur, such as the birth of a child. Avoid being talked into buying types and amounts of life insurance that you do not need. Shop for term life insurance on the Internet to obtain the lowest possible rates.
Insurance Employ the principle of “buy term life insurance and invest the rest” with guaranteed renewable or level- premium term life insurance. Contribute the money saved by purchasing term rather than cash-value insurance into your retirement plan. If you decide that you need a cash-value life insurance policy, get one with a guaranteed insurability option.
Investing Fundamentals Sacrifice some of your income by investing for your future needs and lifestyle. Start early in life to invest in a diversified portfolio of assets consistent with your investment philosophy. When investing for the long term, willingly accept more risk.
Investing Fundamentals Invest regularly through your employer’s retirement plan using an asset allocation strategy. Invest no more than 10 percent of your portfolio in your company stock, or any single company stock. Follow the buy-and-hold long-term approach to investing. Invest in stocks, mutual funds, bonds, and real estate, not life insurance or annuities.
Retirement Planning Save early and often by beginning early in life to invest in mutual funds through tax-sheltered retirement accounts and continuing to invest every year. Take enough risk to increase the likelihood that you will have enough money in retirement. Save within an employer-sponsored retirement plan at least the amount required to obtain the full matching contribution from your employer.
Retirement Planning Diversify your investments. Keep your hands off your retirement money. Do not borrow it. Do not withdraw it. When changing employers, roll over the funds into the new employer’s plan or a rollover IRA.
Estate Planning Every three years or whenever your family situation changes, review the beneficiary and ownership designations in your life insurance policies, retirement plans, bank accounts, and other assets to make certain they will transfer the property according to your wishes. Always have both an up-to-date will and a letter of last instructions and revise them as major life events occur. Prepare and regularly update advance directive documents so others can make the right decisions for you if you become incapacitated.
Estate Planning Once a year, discuss with your spouse or significant other your family’s financial and estate plans. Be positive that certain family members or friends know where you keep financial records, advance directives, your will, and an estate planning checklist.
Military Benefits Army Emergency Relief and other Military Aid Societies Veteran’s Aid & Attendance benefit can provide close to $2000/month for a qualified veteran or surviving spouse who needs help with everyday activities. (Program is for those with a net worth of $80,000 or less, excluding home and car). Go to annual physicals, medical tests and preventive medicine appointments to make changes now and to treat diseases such as cancer, heart disease and diabetes early to minimize their impact on health and finances.
Military Benefits Utilize GI Bill education benefits which may total up to $52,500. The Military Spouses Residency Relief Act ensures that the spouses of military personnel who move because their spouse is posted for military duty will be treated as not having changed residency for tax purposes. The Service Members Civil Relief Act clarifies and restates existing law that limits to 6% interest on credit obligations incurred prior to military service or activation, including credit card debt for active duty servicemembers.
Military Benefits Take advantage of free, confidential financial counseling services at Financial Readiness Programs. Military travel benefits currently available include: Space-A travel, airline and cruise lines offer military discounts, Amtrak offers a 15% discount and Greyhound gives a 10% discount to Military and their family. Military discounts and deals can be found at MilitarySpot.com Military One Source
Military Benefits Often overlooked Veterans benefits that go unclaimed include Disabled Veteran payments, Veteran death benefits and burial allowances, and Veterans life insurance. For general assistance with benefits due Veterans contact: Veterans Benefits Administration Department of Veterans Affairs 1120 Vermont Avenue, NW Washington, D.C. 20421 Phone: (800) 827-1000 to speak to a benefits counselor Site: www.vba.va.gov