Hey Paul: What are some of the easiest (and free) ways to improve our financial picture?
I like your approach to tackling what may be big financial challenges by starting with the quick, simple and free actions. These small steps can in some cases solve or ward off much bigger problems. So without further ado here are some quick fixes.
Start by Filtering out the Noise. Do you get inundated each and every day with junkmail, spam emails, robo sales calls, and credit card applications? To reduce junkmail go to www.dmaconsumer.org I also suggest setting up a token email account like My.Name.Junk@gmail.com to use for those one time signups requiring an email address. To opt out of credit card and debt relief solicitations go to www.optoutpresecreen.com/. To sign up for Do Not Call register at www.donotcall.gov. These won’t cut off all unwelcome marketing but it will dampen the noise allowing you to better hear the signals.
Money can only go one of three places – spent, saved or taxed. There are several popular, free apps such as Mint and Personal Capital that can track your spending and net worth. There is about 1 in a 1000 people that can manually keep a budget. Today’s technology takes over most of the legwork – if you are willing to trust access to your finances to the cloud.
A Big tax refund could have helped earlier. Suppose that just this week you got a check from the U.S. Treasury for $1000 – Myrtle Beach vacation or new couch? But suppose you’ve got some really nasty credit card debt sitting at 29.99% for over a year. If you had an extra $85 a month in your paycheck rather than giving the IRS an interest-free loan, you are paying down debt in this case saving roughly $300 in interest. You can adjust your withholdings at any time by filing an updated W4. Unfortunately the W4 doesn’t let you directly select the dollar amount of tax withholdings. The IRS and tax preparers have online calculators that can do this calculation for you. See http://www.hrblock.com/get-answers/w-4-calculator.html.
Doubling your money happens much more often through your employer’s retirement matching plan than at Keeneland. Not everyone works for an employer who will match their retirement contributions. Typically the employer matches your contribution up to say 3% of your earnings. There are variations in the plans such as vesting over a few years and the level of matching. I realize that some budgets are so tight that devoting even $100 a month to retirement may seem impossible. But if you can find that money by taking on that side hustle job or trimming back the entertainment or restaurant tabs, you will have effectively doubled your money with each retirement contribution.
Cash transactions remind us how long it took to earn that money. The convenience of credit cards or even debit cards or writing a check blur our wants and our ability to afford those toys. You don’t need to use cash for fixed transactions like your mortgage or utilities. Start by paying cash for the budget busters – restaurants and clothes.
Credit, Loans, Mortgages, or Capital are just nice names for Debt. I suggest cutting (literally) back to at most three credit cards. Preferably you primarily use a debit card that draws on your bank checking account. To see all your debt related accounts request your free credit report at www.annualcreditreport.com. It’s also good to know your credit score that can be purchased for less than $10 or is offered free with many credit cards.
Do you have an exit strategy in place? Every adult needs a will. I have used the Nolo.com online software to create my will and a living trust. A living trust typically keeps your estate out of probate saving your heirs about 5% of the assets – maybe ask them to spring for the money to put a trust in place. There are a few different health related documents that are simple to complete (other than the contemplation of the scenarios when these would become effective) such as a living will and health and financial power of attorney.
Challenge yourself by completing one of these tasks today!
Dr. Paul Hamilton is an Associate Professor of Economics at Asbury University and a CFP providing financial coaching to middle-class Americans. He is available to provide free workshops to churches, local businesses and other groups.