With the New Year right around the corner, everyone will be looking to make fresh starts. Here are four simple money rules that could make 2013 your best financial year yet.
Give every dollar a destination.
Ever discover that you have more month than money?
Ever wonder how all your hard-earned money simply seems to vanish?
Control your money before it controls you by making 2013 the year you give your Washingtons, Jeffersons and Benjamins their marching orders. At the beginning of each month sit down and tell your money exactly where it’s going.
Decide which dollars will be used to cover the essentials like food, rent, and transportation. Tell your money how much of it will be used to pay down debt and how much of it will go toward building savings.
Many experts advocate giving marching orders to your money according to the 50 – 30 – 20 balanced money formula. Fifty percent of your take-home pay should cover absolute necessities like food, shelter, and transportation. Thirty percent should be directed toward your “wants”, those things that are nice to have but not absolutely essential like cable television. Twenty percent should be dedicated to paying off debts and building savings.
While such a break-down may or may not work for you, the important thing is to have a plan for you money at the beginning of each month. When each dollar understands its mission your financial life will fall into place.
Make a resolution to cut the fat.
Consumer Reports estimated that Americans pay around $216 billion annually in fees. According to Bob Sullivan, author of Gotcha Capitalism, your family’s portion of this $216 billion tab is close to $4,000. For a family earning the median US income of $50,303 a year, fees eat up nearly 8% of their pay. We essentially work nearly a full month each year just to cover fees.
Make 2013 the year you that you really trim the fat by eliminating these unnecessary fees and other wasteful expenses. You’ll quickly discover that you’re wasting more money than you could ever imagine. Take a minute to go through your finances with a fine tooth comb and look for ways to save money and eliminate waste.
Have you called around to negotiate a lower auto insurance rate? Are you utilizing all of your cell phone minutes? Could you switch to a cheaper plan? Perhaps you could switch to a credit union to avoid high bank fees?
Create road bumps to your spending.
Have you ever walked into a store intending only to window shop but come out hours later having spent a small fortune? It happens to all of us, and credit cards make it all the easier because they reduce the “pain of paying”. It’s simply easier to hand over a credit card than it is to part with cold hard cash.
That’s why it’s so crucial to erect small speed bumps that make it harder to spend. These speed bumps give us a little more time to think about our purchase and whether or not we really need it.
Try using cash instead of credit or intentionally leave your credit cards in the car. When you find a retail temptation the trip back to the car to retrieve your credit card may give you the necessary time to rethink the potential purchase.
Here’s a tip. If you do use credit put a reminder of your fiscal goals right on the card. Saving for a new home? Clip an image of a house from a magazine and wrap it right around your credit cards. The next time you’re considering that leather handbag or the Madden 2013 video game, the picture will be there to remind you of what’s really important.
Save your money. One day it will save you.
L. Marie Joseph, author of First Generation White Collar, frequently reminds people of the African Proverb: “Save your money and one day it will save you.” When it comes to building an emergency fund no truer words were ever spoken.
Yet, according to the National Foundation for Credit Counseling, 64% of Americans don’t have at least $1000 in savings. Cars break down. Pipes bust. Washing machines stop working. Emergencies happen when you least expect them. That’s why its crucial to be prepared.
You don’t have to create your emergency fund all at once. Creating your emergency fund is a work in progress. Saving even $20 or $30 a week allows you to slowly build a cushion of financial security. Direct deposit part of your paycheck into a savings account. Ten percent is what experts advise, but if times are tough, start off small. Direct 5%, 3%, or even 1% of your paycheck into savings each month. Without even breaking a sweat you’ll start accumulating savings in no time flat.
Use money that you save from trimming the fat from your budget to build your emergency fund. Putting your little “luxuries” on hold, selling some of your excess junk, or even finding a side-hustle are also ways to come up with the money for your emergency fund.
Remember, save your money and one day it will save you.
BMWK, What are some of the money rules you follow to become more financially secure?