Sometimes our lives get stuck on autopilot. For those of you in the colder climes, it’s always good to add a little heat to the cold winter weather.
Between work, family, home commitments and other needs, checking all the boxes can be difficult; if not seemingly impossible.
Here are a few tips to help you heat up your money life.
Get a grip.
Get to know your spending. If you are on salary, then you know what is coming in each month (pay period). Many people find it difficult to understand where their money all really goes.
The best way to figure this out is to automate your spending process by using Mint.com or a similar program. These helpful systems will categorize your spending, allowing you to take a critical bird’s eye view at your spending habits.
It takes a small amount of effort to set up the categories, but once accomplished, you’re pretty much up and running.
Look at your spending in terms of “buckets.”
You should have a bucket for fixed things like: rent/mortgage, loan payments, and other items that remain the same each month.
Another bucket would be items that are potentially controllable, like: food, utilities, clothing and other costs that might vary somewhat by month; but that you still generally have control over.
The next bucket is for purely discretionary items like entertainment, vacations, gifts, etc.
The final bucket is for savings and investments aimed at your important goals; for example, saving for a home, car, large projects, college, or retirement.
Set up the buckets that work with your life—personalize them. Using one account for everything almost assures that you will spend down your monthly income without even a thought.
Automate EVERYTHING possible.
Pay everything you can online or by your credit card. This takes away from the drudgery of bill paying and helps keep your money life organized.
Review your spending twice a month; it shouldn’t take you more than 10-15 minutes. Knowing things ahead of time is much smarter for long term money success than being surprised.
Discuss with all stakeholders what you value vs. what’s not so important.
Take a look at things like subscriptions to music sites or other media that might not used sufficiently enough to be worth it.
Review the deductibles on your insurances and see if they are too low.
Review where your discretionary dollars are going (using the buckets and websites mentioned above) and consider what’s working and what can be improved.
Every dollar you find or create from these decisions needs to be channeled directly to the goals you value most. It’s like finding money in your jeans pocket and saving it for something valuable.
If you have credit card balances, investigate whether you can transfer to a lower interest rate card.
But most of all, create a spending plan that will eliminate your debt entirely.
When you reach a debt-free state, first, celebrate the great accomplishment; then channel whatever you’ve been spending in retiring that debt to something you really need to make happen.
As interest rates rise, see if your emergency fund and savings are maximized.
A quick scan online can tell you whether you are getting ‘market rates’ or being fleeced by your current bank. While this probably won’t put you over the top, it’s still putting dollars into your pocket.
If you participate in a company 401(k), check out the option to increase your contributions based on a percentage of your salary.
This will keep your investments inline with your salary. Review your investments and rebalance at least annually (quarterly or semi-annually are fine; monthly is not necessary).
Don’t let short-term market volatility guide your allocation. Your investments should reflect your time horizon.
Down turns in the markets only mean you will be buying at a lower price.
The idea is to find a workable balance between your money life and the rest of your life.
Your money life should not be ignored, but nor should it be what captures too much time away from what you love and care about.
The spring is coming soon—a time of rebirth and regeneration, so while the weather is cold or inclement, get moving on these money tips. You’ll be glad you did.