This was on Yahoo... a pretty good read for a refresher in keeping your finances under control You don't have to be an expert to manage your money and prepare for life's unexpected twists and turns. If
you're like most people, your New Years Resolutions have already
expired. You haven't lost 10 pounds, you're not going to the gym five
days a week, and when was the last time you called your mother? Chances
are, your financial goals have fallen by the wayside too. I don't want
to discourage you from paying down debt, saving a down payment for a
house, or any of those big goals that you may have set for yourself at
the beginning of the year. But if you sort of tuckered out on the big
things (or even if you're still going strong -- go you!), maybe it's
time to set some more achievable goals. Here are 10 things you can do in
an hour or less apiece to make yourself -- or your household -- more
financially sound. 1. Join Mint I'm an unabashed fan of the site,
and not just because they do some great data-mining on their blog.
(Don't worry, all at the very aggregate level). It will track and
aggregate your spending for you, showing you where the money is going,
and what's happening to your net worth over time. If you have sort of
complicated finances -- as I do, living in a two-journalist household --
then it's an absolute godsend at tax and expense time. And in the last
year they've added goals, allowing you to set your spending, saving, and
debt-reduction goals and then track how you're doing with a
thermometer. It's surprisingly motivating, and it's free. I
probably spend 20 minutes a week in Mint, categorizing our expenses and
monitoring our financial position. But even if you don't put in that
kind of time (and most of you don't have to keep track of which meals
are tax-deductible), it's still incredibly helpful at tracking the broad
outlines of your spending. 2. Get Your Papers Together If
you die, someone is going to have to clean up the financial aftermath.
Make it easy on them by putting everything in one place where they can
find it. Dave Ramsey calls this a "Legacy Drawer,"
and suggests putting in a cover letter and letters to your loved ones
as well as the financial papers. But we're trying to keep this under an
hour, so the notes are optional. Here's what it should contain: • Insurance papers. • Loan documents. •
A list of every financial account: loans, bank accounts, investment
accounts, 401(k)s, whatever. Security experts will kill me for saying
this, but I'd say this list should have the account numbers, the PINs,
and the passwords. • Deeds and titles to any property you own (cars, land, etc). • Birth certificate and social security card, if you have them. • Information about your will/estate plans: who has them, who the executor is. • Funeral instructions (if any; mine are "cheapest coffin you can find"). • Tax returns. • A list of your major recurring expenses (so people know which bills to pay). Start
by putting this in a drawer; eventually, you should move this to a
safe-deposit box, and tell whoever's likely to be taking care of your
final details where to find the key. This should only take you an hour
-- if it takes you longer than that, well, you really needed to get
these documents while you could find them anyway. 3. Buy Life Insurance If
you're single, you don't need this unless you have a kid or someone
else depending on you -- your job usually offers you enough to bury you.
If you're married, I think you do need a little, even if you don't have
kids. Married life is usually built on the expectation of two incomes: a
mortgage (or lease), the cars, all sorts of other recurring expenses.
At a minimum, make sure your partner will have enough to bury you and
pay off any outstanding debt -- including not only mortgages and cars,
but credit cards and student loans in their name alone, if you own
property. You don't want to have to hassle with someone coming after
their half of the house or car to pay off their unsecured debt.
Obviously, if your partner is at home, or makes very little money,
you're also going to want to replace some of your income. You do
not want "whole life" insurance, "return of premium" or any other
product that promises you to give you some or all of your money back --
all this is is a savings vehicle with bad rates of return, bundled with
expensive term life insurance. Buy a simple term life policy for 20 or
30 years -- long enough for you to accumulate enough assets to take care
of your partner if you die. You can compare rates online or mosey down
to your local insurance office, but either way, this shouldn't take you
too long provided that you resist the blandishments of insurance agents
who will attempt to upsell you "features" you don't need. Stand firm,
buy term. 4. Cancel Stupid Recurring Expenses Remember
when you thought you'd try Stamps.com? How about that credit monitoring
service you signed up for eighteen months ago? The dual subscriptions
to Netflix left over from before you moved in together? For many of you,
I am sad to say, your gym membership also falls into this category. Whatever it is, if you haven't used it in three months, cancel it.
Cancel it whether or not you think you should be using it. You can
always rejoin the gym after you've developed a burning desire to
actually go. With the hundreds of dollars you will save between now and
then, you will easily be able to afford any re-initiation fees. 5. Ramp Up for Retirement Unless
you are already at the legal maximum, increase your 401(k) contribution
by 1% of your income. Unless you are already pinching pennies so hard
that Abraham Lincoln is actually screaming in pain, you can afford to
put an extra 1% of your pre-tax income into your 401(k). Then every time
you get a raise, you increase your contribution by another 1% until you
hit the legal limit ($16,500) or 15-20% of your income. Almost
painless, and you'll feel a lot safer in retirement. (Of course, if you
want to save faster, you can -- try 2% or 3%). 6. Start Saving If
you don't have an emergency fund, you need one. Here's how to do it so
that you almost won't notice: set up an automatic transfer into your
savings account from every paycheck. Figure out how much can you afford,
but even if it's only $25, transfer it from every paycheck, and resolve
not to touch that money unless it's an actual emergency. (Emergency: my
car won't start. Not an emergency: I really need a break, so I'm going to the beach for a week.) The
ideal way to handle this is to have a separate account that isn't
linked to your other bank accounts, and to have the transfer done as
part of your auto-deposit. That way, you never see the money -- and I
think you'll be surprised to find that you don't much miss it. But if
you don't want to go to the trouble, you can do this with your regular
savings account, as long as you're resolved not to touch the money in
that account for anything but an emergency: just use online banking to
do a recurring transfer on the same day as your paycheck hits the
account. Over time, increase the amount that you're saving.
Eventually you'll have a tidy nest egg, and because the money was never
in your checking account, you won't have been tempted to spend it on
incidentals. 7. Re-balance Your Portfolio If
you already have substantial assets, it's time to make sure they're
correctly structured for your priorities. Are your mutual funds
allocated the way that you want them, or over time, has one grown faster
than the others, leaving your portfolio lopsided (many companies now
automatically re-balance, but you should check.) You should also be
thinking about your portfolio's life-cycle. If you're in your fifties,
you should already be transitioning some of your money to bonds. I
know what you're going to say: you'll never be able to retire at those
kinds of returns. My response is a piece of wisdom that I picked up from
my driving instructor: "If you left late, you're going to get there
late." Trying to flout that simple equation only gets you in trouble.
Just as it's a bad idea to race through red lights in the hopes of
making up the lost time, it's a bad idea to leave your assets in 100%
equity because you're hoping that higher returns will still let you
retire in comfort at 65. Risking destitution now is just compounding
your earlier planning errors. 8. Make a Will If your finances are pretty simple, you can do this in half an hour with something like Quicken Willmaker, which took Lifehacker half an hour. LegalZoom
will also do it for you for a pretty modest fee. If your finances are
complicated -- well, OK, this won't take under an hour, and you need a
lawyer. But if your finances are complicated, you really need a will.
If it freaks you out too much to meditate upon your own death, pretend
that you are preparing this will so you can drop out of sight and assume
your new identity as Agent 007 of Her Majesty's Secret Service. 9. Fix Your Withholding Are
you looking forward to a nice big refund from the IRS this year? Don't
look so happy -- that refund means that you made the government an
interest-free loan for most of the year. And if you're like many
freelancers, and you owe the government a hefty chunk, then you may be
liable for interest and penalties. The easy way to fix either
problem is to adjust your withholding. HR can help you do this. If
you're getting a big refund every year, raise your exemptions; if you're
having to pay, lower them. (If they're already as low as they can get,
look at what you owe this year, adjust for what you'll owe next year ...
and start making estimated payments every quarter.) 10. Shop for Better Deals Can
you get a better interest rate on your credit cards? How about your
bank accounts? You don't have to follow through, if you decide it's not
worth it. But it's worth taking 15 minutes on the web to find out. Also
worth doing: threaten to cancel your cable. You don't have to actually
do it -- though with Netflix and Hulu and Amazon Prime's new
subscription service, it's possibly worth it. But if you call to cancel,
they'll usually offer you a better deal. I will add an 11th, something that has always helped me.. If you are in a store and see something that costs over $100 ($50 for some) that you think you might like to have, don't buy it right on the spot.. Go home, if you really want it go back and get it, but most of the time, as soon as I left the store, the urge for the item went away .. this also helps to minimize clutter as often these buys just end up in the closet or the garage. |
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