Some important financial moves are painful, time consuming, or both. Tackling mountains of debt or complex estate planning come to mind. Yet many smart financial steps are simple and take just a few minutes.
These simple steps can increase our savings, decrease our spending, or make us smart investors. Here are 20 ideas to get you started.
1. Track your net worth:
Your net worth is the value of what you own less the amount of any debt. Tracking your net worth not only shows where you stand, but it also shows your progress over time. Think of it as your report card. It shows you the results of how you handle your money, and knowing your progress will help motivate you to make smart financial decisions. Tracking your net worth takes just minutes in Excel one one of these online tools.
2. Create an investment plan:
Investing without a plan is like cooking without a recipe. Experienced investors (and chefs) can get away with it, but new investors cannot. A plan should be simple, including the amount you’ll invest in U.S. stocks, international stocks, and bonds. A good place to start is this list of asset allocation plans.
3. Calculate your investing costs:
Investment costs quietly reduce returns year after year. Even 50 basis points in fees can result in a loss of hundreds of thousands of dollars over a lifetime of investing. Yet many do not know how much they are paying their investment advisor or how much their mutual funds cost. Tracking your costs is easy with one of several free online investment tracking tools.
4. Compare car insurance rates:
Car insurance is a necessary evil. But there’s no reason to pay more than you have to for the same amount of coverage. Comparing rates online takes just minutes, and it could save you a significant amount of money. There are many websites that make comparisons easy, including Quote Wizard.
5. Raise your interest rate:
With the Fed dragging its feet on rate increases, many savings accounts offer interest rates near zero. But there are several options, mostly from online banks, that offer rates of 1% or more. While we may long for the days of 5% interest rates, we should at least get the best rates we can.
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6. Check your credit report:
Credit bureaus aren’t perfect. According to a 2013 FTC study, 1 in 4 consumers had an error on their credit report that might affect their credit score. Correcting an error can be an easy way to increase your score and lower the cost of borrowing. On a home mortgage, a lower rate can save thousands of dollars over the life of the loan.
7. Check your credit score:
Your free credit report doesn’t come with a free credit score. You need to get access to your score separately. Fortunately, there are a number of ways to get your FICO and other credit scores. These tools also come with an evaluation of your score and how to improve it.
8. Eliminate credit card interest:
There’s no reason to pay interest on credit card debt as you work to become debt free. Transferring a balance to a 0% card is easy, and there is even an offer today that doesn’t charges a balance transfer fee.
9. Track 3 spending categories:
Tracking every dime you spend is a hassle. It’s also pointless. The purpose of budgeting is to control spending. To do that, we don’t need to track every spending category. Instead, pick the three categories that are the most likely to blow your budget and track your spending in those categories.
10. Write a goodwill letter:
Late payments can hurt your credit score for up to seven years. To avoid this pain, consider writing a goodwill letter. A goodwill letter is a request to a creditor to remove a negative mark on your credit report. In many cases a creditor is willing to do so to keep a customer happy, especially if late payments aren’t persistent.
11. Consolidate insurance polices:
You’ll get a discount from most insurance companies when you have multiple policies. We consolidate our car, homeowner’s and umbrella policies with a single carrier, and save a significant amount in annual premiums as a result.
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12. Get cash back:
With the great cash back credit cards available today, there’s no excuse for passing up free money. At a minimum a cash back card should deliver 1% cash back on every purchase. The best offers today enable you to earn 2% or more.
13. Get cash back again:
Don’t stop with credit cards. There are a number of free websites that enable you to earn additional cash back with every online purchase. Two of my favorite options are Ebates and Swagbucks.
14. Fire your investment advisor:
We’ve already discussed investing costs. One of the most expensive costs is an investment advisor. If you are paying an advisor more than 0.50%, look for a new one. Vanguard charges just 30 basis points, and there are plenty of others that charge a reasonable fee. Alternatively, consider one of several robo advisors, all of which charge 50 basis points or less.
15. Refinance your mortgage:
This may be an obvious one, but that doesn’t mean everybody has taken advantage of the low rates we have. At a minimum, it’s worth comparing your current mortgage rate to what is available to see if you can lower your monthly payment.
16. Increase your 401k contribution gradually:
Maxing out a 401k is a challenge for many. One simple approach is to gradually increase your contributions each year you receive a raise. Direct half of the raise to your 401k until you’ve reached the annual contribution limit.
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17. Refinance student loans:
Students loans have reached crisis levels. One simple approach to this problem is to refinance education debt to lower interest rates. You’ll want to make sure there are no federal repayment plans that would be preferable over refinancing to a private loan. If refinancing makes sense, a number of online companies make refinancing student loans very easy.
18. Audit your monthly bills:
Over time our monthly bills take on a life of their own. We either pay for services we don’t use or we pay more than we should. A simple solution is to audit your monthly bills. Look at each bill and ask three questions: (1) can the service be eliminated; (2) can the service be changed in a way that lowers the cost; (3) can you get the service for less. With this approach we’ve lowered the cost of everything from trash collection service to our cable package.
19. Automate your savings:
Automating finances is not only convenient, it also ensures that we do smart things with our money. Contributions to a 401k plan are automated through salary deferrals. But we can also automate savings to an emergency fund, IRA, or other investment accounts. It takes just a few minutes to set up, and over time we won’t miss the money.
20. Travel for free:
In my weekly podcast I interviewed a young man who traveled around the world with his girlfriend for free. The trip involved 21 free flights, and 95% of their hotel stays were free as well. While not everybody will go to this extreme, there are some simple steps you can take to get free flights and free hotel stays.