Ever once in awhile, I realize that I’ve fallen into bad habits. I spent WAY too much money on coffee shops and eating out last month. I forgot to max-fund my health savings account (so now I am playing catch-up). The point is, even someone who looks at this stuff every day needs to remind herself to get back to basics and start fresh.
8 Money Moves
Here are my top eight things that people can do to update and refresh their finances right now. You might have heard me say some of these before, but that’s the whole idea of good financial stewardship—we’re never “done.” To a certain extent, we can “set it and forget it,” but review and assessment still need to happen.
1. Track your spending. You probably want to punch me in the neck right now because I say this SO OFTEN. But are you doing it? Do you know exactly how much money is in your checking account right now? How much is on the credit card that (I hope) you pay off every month? Do you know how much you spend on coffee last month? Because I need Mint to give me a reality check, even after ignoring it for a month. You might like YNAB or Quicken (blegh), but you need a system. Download my ebook Getting Started with Conscious Spending if you’re starting this from scratch.
2. Increase your savings. Employer plans like 401ks, 403bs, etc. have a maximum IRA contribution limit of $18,000 for 2015. So if you’re already saving to the limit, you don’t need to do anything. But, if you’re not saving to the limit, tick up your savings by 1-2%. You probably won’t even notice when everything is said and done, but it makes a huge difference—especially if your employer will match those additional funds (and I recommend you always save enough to at least get the employer match!).
3. Consider Roth. Without getting into all of the mechanics of a Roth IRA versus a Traditional IRA, here’s why I like the Roth:
- You can potentially save into one even if you’re covered by an employer plan at work
- If you believe taxes will be higher in retirement than they are right now, it’s a good deal
I actually believe taxes will be higher in the future, so I like the Roth. The ONLY problem with the Roth is that if you’re single and make over $116,000 in income (or married and make over $183,000), the Roth is not an option for you. So you might need to skip this step (or talk to me, ha-ha).
For 2015, the maximum you can contribute to all of your traditional and Roth IRAs is the smaller of $5,500 ($6,500 if you’re age 50 or older), or your taxable compensation for the year.
4. Review your debt. Go to a debt calculator like this one and see how long it will take to pay off your debt—and then increase your current payment by $25. And do I need to say it: If you can’t seem to reduce your debt, you need to put your credit cards away. Or you might need some non-profit credit counseling and to get an advocate to help negotiate a more doable plan.
5. Plan major purchases. Think about everything you need to buy for the next 18 months to 2 years—like cars, remodeling, furniture, travel, etc. Where is the cash coming from? Will you save for it? Will it be funded through bonuses and if so, is there any funding gap? Make sure you have a plan for funding these short-term items and a savings bucket away from your normal spending/checking account so you can track progress.
Do you always seem to put your travel on a credit card and then pay it down every year? I see this a lot…simply take your credit card balance, divide by 12 and start saving that amount into savings every year, so you can have an ongoing travel fund.
6. Make a rebalancing appointment. You might do your own rebalancing in your employer retirement plan, or you might work with a planner. Whoever helps you assess and review your accounts, it should be happening twice per year (I like June and December for geeky, financial-nerd reasons, but any time is fine). It doesn’t have to take more than 15-30 minutes, but get those tasks on your calendar NOW.
7. Automate. What could be happening automatically to improve your finances? Autopayments to debt? To savings? To your health savings account, like moi? I have noticed that for me, it’s easy to fall off the auto-wagon when I have to pay for something major, like taxes. But the sooner you can start and/or increase your automatic withdrawals to fund things like taxes, cash savings and debt, the easier it is. There is something about removing that decision from your brain every month that just make life easier.
8. Follow a blog. I admit it…most of the time, my blog is 50% personal finance and 50% behavioral-coachy stuff, so you probably don’t get the minutiae of personal finance discussions with me. But I notice that if people follow a blog—even if they don’t read it all of the time—they tend to get smarter and more focused on their finances. So here is a list of top personal finance blogs (I followed Get Rich Slowly for years, until the founder left…but it’s still great!). Here is another list of 101 Personal Finance Blogs — it covers a variety of topics for 20, 30 and 40-somethings.
Actions This Week
Even if you took the rest of this month and tackled two things per week, you would be ahead of 90% of the people out there! So that’s my advice:
- Schedule two of these tasks to implement per week for the next four weeks.
- Make sure you set aside minimum 30 minutes for each session (and hey, if it takes you 8 weeks, you’re still ahead of 50% of the people out there)
- Brainstorm your own list of personal finance updates you’d like to explore in the next few months
And in the comments, tell me…
Which tip do you want to implement first, and/or what else made it onto your personal finance “to-do” list?
And thanks for being part of the Creative Money Community!
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