Make 2015 be the year you feel in control of your finances! Todd Wasserman from Mashable offers 15 tips for financial wellness in the New Year.
1. Have an emergency fund
The idea here is to save enough to get you through three- to six months of unemployment. That’s the average amount of time it takes to get a new job. “An emergency fund is like a buffer,” Nash says. “It protects you.”
If you’re finding that you’re constantly being derailed by unforeseen events — like car repairs, vet bills or a $1,000 bar tab — then a chunk of cash will keep you from going into debt. If you enjoy a period of relative calm, then you can save some real money.
2. Realize that you’re emotional about money
That’s not a knock. When it comes to money, everyone gets a bit wobbly. For instance, many people work very hard to pay off their mortgages when they would be better off, in a cold, financial sense, if they kept their mortgage and invested their money instead. If you’re paying 4% on your mortgage and getting a tax break that makes it more like 3%, then you’ll make more over the course of a year if you put that $100,000 into an index fund making an 8% return. Yet the feeling of being “debt free” can make you overlook the possible savings.
Yet even Mr. Money Mustache, the personal finance blogger, admits to this bias. “I personally have no mortgage, because the psychological advantage of no monthly payments and no debt are worth it for me,” he says.
While that’s rational reason, to overcome irrational leanings, Nash suggests setting up systems to overcome your irrationality. You might, for example, buy stocks in regular, automated intervals rather than trying to time the market. “Good investing is actually boring,” he says.
3. Think net worth, not bank balances
Personal finance blogger J. Money of Budgets are $exy recommends taking the big picture of your finances by looking at your net worth with apps like Mint and Personal Capital. “If it’s going up, you’re doing great,” he says. “It keeps you accountable.”
4. Challenge everything
J. Money also advocates tallying your monthly expenses and then going through each line item, one by one. Then ask yourself: Do you really need to spend $9.99 a month on Spotify? Are you using that gym membership? Can you save a few bucks on your wireless bill?
5. Negotiate everything
Most of us are loath to haggle if we can help it, but Femme Frugality, the writer of her eponymous blog, says this is a mistake. She advocates trying to negotiate on all your monthly bills and she means all of them. “In many states, you can choose who generates your electricity, cutting your bill dramatically,” she says. “Generally the same provider will deliver your electricity, but you can get much lower rates by comparison shopping who generates it.” And by all means, haggle on your rent before you move in. Whatever discount you get will be multiplied across months or years.
6. It’s not savings until it goes into a savings account
Let’s say you challenge everything and you managed to shave $150 off your monthly wireless bill. Are you really “saving” that money? J. Money says not really, unless you’re actually putting $150 more into your savings account every month. In that case, he suggests opening a separate account and then transferring the money each month. “That way I can see it growing each month,” he says.
7. Cut back on stuff that you want to cut back on
Going back to the Starbucks example, if you absolutely love buying your morning cup of joe then keep doing it, but look for other places to cut. Maybe you can eat in another night or two instead of going out to a restaurant. “Figure out the stuff you bought that doesn’t make you happy,” J. Money says.
8. Sell your old junk on Craigslist
Personal finance isn’t just about saving money. You can earn more each month by selling stuff you don’t use on Craigslist. J. Money says he tries to sell three items a month. By the way, eBay is fine, too, but with Craigslist, you don’t have to worry about postage.
9. Buy stuff second-hand
If Goodwill isn’t your thing, consider more upscale second-hand stores like Plato’s Closet or (for women) Twice. Good deals can also be found on all kinds of items on eBay and Craigslist.
10. Figure out your limits
Mr. Money Mustache is known for being so hard core about saving money that he rides his bicycle everywhere instead of wasting cash on gas. Maybe you’re not willing to go that far, but what could you cut back on? Eating out? Clothes? “Almost every other consumer expenditure is an optional distraction from what really matters,” he says. “It doesn’t mean you have to give everything up, it just means that suddenly everything is a choice rather than a mandatory cost.”
11. Buy everything with credit cards to earn points
Club Thifty Founder Holly Johnson is a self-described “rewards junkie,” who puts all her purchases on credit cards to earn points. Her personal fave: Chase Sapphire Preferred Card. That offers 40,000 points after spending $3,000 within 90 days. That cash can be redeemed for a $400 statement credit or $500 in travel if you use your points to book via the Chase Ultimate Rewards travel portal. “So basically, it’s $400 in free money just for putting $3,000 on the card. I meet signup bonuses by using my card to buy groceries, gas, regular purchases, and health insurance,” she says.
12. Or don’t
Some personal finance advisors, most notably Dave Ramsey, advocate using cash envelopes to keep your spending in check. If you find that you just can’t control your spending with plastic, this might be a good option. You could also consider using cash for problem categories, like food.
13. Google “coupon” along with whatever you’re planning to buy
This is especially a good idea if you’re in the market for a big-ticket item, like a TV. “There are a billion coupon sites,” says J. Money, who says he saved $150 on a refrigerator recently by using this trick.
14. Google anything you plan to spend money on
Johnson says she recently saved more than $700 by searching a part that needed replacing on her car. These days, you can find anything online and there’s a good chance that it’s cheaper than the price you’ve been quoted.
15. Set realistic goals
“When we start out saving, we typically create massive goals,” notes Femme Frugality. “Most of the things worth saving for require massive amounts of money. Then, when our New Year’s Resolution euphoria wears off in February, we don’t see enough progress to keep our motivation levels high. So we quit.”
Instead, she advises that you break big goals into smaller, realistic ones.” Take joy in reaching each benchmark. And if you don’t reach that benchmark on time, keep saving. Even if you don’t hit every milestone on time, keeping with it will get you wealthier quicker than quitting.”
