Today is the day to take charge of your finances while minimizing the effort involved. The world of finance has long been a realm of the great unknowns for many people. The good news? New technology is available to make it easier. Every day there seems to be a new app or service introduced that allows us to manage our finances without the need to earn a degree in accounting or economics. What I offer to you are five easy ways that you can take charge of your finances.
1. Get Connected
The daily maintenance of an account may seem difficult and time consuming; but with the help of technology, the effort necessary has dwindled. Why make that trip to the bank to make a transfer, check a balance, or pick up account statements? For some time, many banks have offered the ability to conduct telephone transfers, receive balances, transaction history and even pre-approval for a loan using a loan-by-phone service. Now with smartphones, many banks offer apps that allow you to manage your money on the go and even deposit checks with mobile deposit services. Even if you don’t care to check your account on a daily basis, most banks will allow you to set up alerts on your account so that you know will be notified when certain things happen to your account like a large deposit or your balance hits a certain amount.
. . . by stepping away and allowing yourself time to think the decision through, you’ll be able to sort out if the item is really worth the money to you.
2. Tame the Urges
It happens all the time. I find that one item that I don’t really need, but that I really want. Rather than bending to my impulse, I have a new system. I add it to a wants list and wait 30 days. If in 30 days I still really want it, I buy it. Usually, I find that I didn’t really want it as much as I felt like I did at the time.
The next time you find yourself in a similar situation, give it try. The average American spends roughly 11.3% of their income each year on non-essential purchases. In other words, if your yearly income is $31,000 you would be spending around $3,500 on such purchases. Every time you have a strong urge to buy something, add it to your own wants list and let it sit on that list for a few weeks. After the time has gone by, you can make the decision to make the purchase. However, by stepping away and allowing yourself time to think the decision through, you’ll be able to sort out if the item is really worth the money to you.
3. Budgeting Made Easy
Along with urges, many people (myself included) struggle with budgeting money from month to month. There have been times where I have had to pull money from a savings account to cover the rest of the bills. The nice thing is that this can be avoided. Rather than splurging after each paycheck, pay your savings, debt and bills first. Make the process as painless as possible by following these easy steps:
- Set up an automatic transfer to your savings or investment account recurring on every pay day. This way, you won’t have the opportunity to spend the money and your savings can really add up over time.
- If you often find yourself overspending on discretionary items and not having enough to cover your regular bills and debt payments, I recommend opening a secondary checking account to pay bills out of. By setting that money you need to pay your bills aside and out of sight, you’ll be less likely to spend it.
- To figure out how much needs to be transferred from your account on each pay day into your secondary account, take your monthly bills and divide it by the number of paychecks you receive in a typical month. Set up automatic transfer for that amount into the account on each pay day.
- See if your bank offers a free bill pay service and set up bill pay for all of your regular bills so you never miss a payment.
4. Quit Counting Change
Why count every penny that you spend when you are using your debit card? Instead make tracking the purchases on your account easy by opting to use a rounding program where each purchase is rounded to the next dollar or five dollar increment and deposited into your savings account. Not only does this simplify the process of balancing your check book, it is a great way to save. With regular account activity and an average roundup amount of fifty cents, individuals who have used rounding services found an extra $500 in their savings account after two years. Why is this so awesome? You never notice the change missing from the account and it will help you build a savings for those occasions when you wish you had planned ahead.
5. Your Retirement Matters!
As a senior in college, the idea of retirement hardly ever crosses my mind. Turning 65 seems like it is so far away and that I have plenty of time before I retire. While that may be true, there is no better time than now to start planning for retirement. We all procrastinate when it comes to saving for when we retire, but here are some facts.
- If you were to start saving at the age of 25 and deposit $5,000 each year into a tax-deferred account that earns a 6% rate of return, you would end up with a retirement account worth close to $800,000 by the time you reach the age of 65.
- On the other hand, if you are running behind on your retirement planning, there is still plenty of time for you to catch up. If you were to deposit $15,000 each year for 15 years before you retire into the same type of account, you would still end up with a retirement account worth close to $350,000.
Your money will have more time to grow and you’ll earn more compounding interest by starting early. If you can get into the habit of saving for retirement now, you’ll be glad you did later.
There you have it. Five very easy tips and tricks that you can use to make your financial life as smooth and easy as possible. I hope that these tips and ideas not only clear up any frustration and confusion your finances have caused you. If you need help or are unsure about where to get started, give your banker a call. We are at your disposal and are here in order to help you! Remember, today is the day to take charge of your financial life!