The US economic recovery continues as witnessed by recent job growth. In fact, according to the Brookings Institute employment increased in January by 267,000 jobs. In addition, private companies have now increased their payrolls for 59 consecutive months, which boosted their total employment by 11.8 million people.
However, the past few years have been difficult ones for most people and this may include you. If you’re typical, your number one priority has probably been financial security. Now that things have loosened up might be a good time to start revisiting personal finance and here are eight tips that could help you become smarter about it.
#1. If you don’t already have the budgeting habit you need to get started. The easiest way to do this is to log your expenses every day. Use a spreadsheet and group your expenses by categories. This needs to include everything from your once-every-four-week haircut to that sweater you bought on impulse last week. You should find it much easier to keep track of your expenses if you do it every day.
If you’re not quite sure how to make a budget, here’s what one woman calls the simplest budgeting technique ever.
#2. Be smarter about how you feel about saving money. Don’t think of it as denying yourself or renouncing something. Instead, imagine what you will do with the money you save. For example, if you usually buy a $3 latte on the way to work every day think of the $60 you would save by forgoing it and how you might use the money for something important such as saving for a vacation or a weekend getaway.
#3. Spend some time thinking about the biases and assumptions that could be holding you back. As an example of this you might have been a student a few years back and had little or no money. Today, you might be thinking about money the same way you did back then even though you’re now earning a lot more. You could be having a problem handling money because you’ve just become used to having more and spending more and don’t feel that you’re actually making any headway. If you find you have more money in the bank than in those previous years, there’s the temptation to spend it. That $10,000 you have in the bank should stay there as an emergency fund and not be used as a deposit on a new car you don’t really need.
#4. Be smart about your spending. Before you make any purchase consider whether it’s a need or a want. You might want a new car but do you really need one? You need food, gasoline, shelter, some clothes and you might need a cartridge for your inkjet printer. On the other hand, you could want that expensive piece of jewelry, a new computer or a saber saw. You can save a lot of money if you look at purchases this way with the goal of spending money only on those things you need and not the things you want. The money you save by buying only the things you need will eventually add up to the point where you will be able to easily afford one of those things you want without busting your budget.
#5. Be smart by always looking for ways to earn more money. There are a myriad of ways to earn more money besides asking your manager for a raise. We recently sold enough items on Craigslist and eBay to buy a new computer and without taking a cent out of our budget. Spend a few minutes thinking about what you could do that saves other people time and money and start a side business. One way to determine what a good part-time business would be is to think in terms of three things and where they meet – what you’re very good at, what you could do for other people and what they would be willing to pay you for.
#6. Never stop learning. There are numerous places where you can get information free on personal finance. The websites Yahoo Finance, CNN Money, Microsoft Money and Mint.com all have good articles daily on various aspects of personal finance. Our government has a very good website dedicated to personal finance with information on everything from money management to credit and debit and from home ownership to how to get your credit reports free. And if you haven’t done this already you should invest in at least a couple of books on personal finance. Two of the most popular of these are Rich Dad, Poor Dad and Dave Ramsey’s Total Money Makeover.
#7. Schedule a weekly “money date.” We understand that sitting down and going over your finances is not the most exciting thing you will do this week. But it’s an important part of being smart about your money. If you set a day and time to pay your bills, review and update your budget and take care of any other financial concerns and call it your “money date” this could bring some fun and exciting elements into your personal finances and help you stay committed. There’s a strategy that could help where you couple the tasks you really don’t like with rewards. This can really work for tasks that take a lot of time but don’t require a lot of concentration like updating your budget for the month or working through the backlog in your email inbox. You could do this on your laptop at your favorite restaurant or coffee shop or while watching TV at home. Some people have found it’s much easier to get through these kind of mindless tasks by doing them with a friend that needs to do the same sort of thing. These are generally called concurrent rewards because they are things you do to reward yourself concurrent with doing tasks you really don’t enjoy.
#8. Look for smarter places to put your money. If you’re keeping your money in a bank savings account, the interest your earning is probably best termed abysmal. We’ve seen ads bragging about interest rates of less than 1%. on savings, These rates are costing you money because they’re lower than the current rate of inflation. If you have money in a bank savings account get it out and put it at least in a money market account. These accounts offer better interest rates and usually include free check writing privileges. There are also online banks where you could put your money. Most of these have the same FDIC insurance as a brick-and-mortar bank. Also, have you looked at the interest rate on your credit cards recently? If you’re paying 17% or more, you need to do a balance transfer to a card with a lower interest rate. Or better yet transfer those balances to a 0% interest balance transfer card where you would have anywhere from 12 to 18 months interest free. If you shop around you should be able to not only find one of these cards but one that offers good rewards, which could save you even more money. For example, as of this writing the Chase Freedom Card was not only offering 15 months’ interest-free on purchases and balance transfers but also a $100 bonus just for signing up.