Welcome to Frugal Fridays where we share money saving tips, discuss living frugally and generally talk about personal finance issues. I filled in last week for your regular host, the wise and frugal Sarahnity, while she was off enjoying a visit with family. Because of low readership over the holidays, Sarahnity has asked me to repost last week’s diary. Apparently, she feels there are some good suggestions here, so who am I to say no?
There are lots of reasons to make financial New Year’s Resolutions. The holiday bills will be arriving shortly. Heating bills for us in the frozen north are taking a bigger bite this year. Gas prices are hurting everyone who drives or eats. Economists are talking recession, and you may just want to be in the best financial shape possible to weather a tough year.
Here are some ideas for one-time resolutions, ongoing activities, as well as hints on being a smarter financial consumer. Whatever you do, do not set yourself up for failure by trying to do all of these in one year!
Managing Debt
Meet the devil. Make a list of all your debts, and the interest rates you’re paying. Knowing where you stand is a huge first step on the road to financial strength. It may not be as bad as you thought, or it might be worse. But how are you going to take control if you don’t know what you’re up against?
Keep a spending diary for two weeks. Or a full month if you’re motivated. It’s the only way to really know where your money goes. Keep every receipt. Write down all cash purchases. Watch the patterns that emerge. You’ll learn a lot and have the chance to do some soul searching.
Figure out how to not spend more than you make. In today’s economy, with everything suddenly costing more, this can be a tough resolution. This involves making a spending plan (some people call it a budget) so you can see if there are things you can cut back on. I use a cash flow spreadsheet; Mr. 1864 and I get paid on opposite weeks, so I have a week by week Excel spreadsheet of what’s coming in and what bills have to be paid that week. I’ll share it if you email me.
Get creative. If you’ve already cut out all the extras and need to catch up, think about selling something or getting a second job or renting out a spare room. I’ve done all of those in lean times.
Make a plan to reduce or eliminate credit card debt. You did step one, so you know what you owe and what interest rates you’re paying. Now find a card that will let you transfer your existing balance at a lower rate; preferably one that has a "life of the balance" offer. We all have good intentions, and want to pay the balance before the six months at 0% is up, but it rarely happens. You can review balance transfer offers online and then call to ask the criteria and whether there is a balance transfer fee.
Lowest rate or lowest balance? You know yourself best. Some people are more motivated by paying off small balances first; others prefer to pay off the highest interest rate first. Either one is a step in the right direction.
Transfer smart. If you transfer a balance to a card for a low rate, don’t charge anything else on that card! Payments are always applied to the balance with the lowest interest rate first, so while you’re paying off that 0% transfer, the 17% purchases are waiting at the back of the line and growing bigger and bigger.
Set up automatic credit card payments for just the minimum payment. You have to pay that anyway, so automate it. Schedule it far enough in advance to make sure you aren’t ever late. You can (and ideally, should) make other payments during the month, but having that minimum paid on time will mean you avoid late fees and penalty rates and protect (or improve) your credit score.
Join the Marines. Online, that is. Use the USMC Financial Fitness Online Resource Center. If you can get past the military language, this is absolutely one of the best online tools available for making a financial plan, saving, budgeting, and paying down debt.
Go whole hog. Buy and use Quicken or MS Money. It’s easiest if you start at the beginning of a year. I use Quicken, and download my checking account activity weekly. Since I am missing the checkbook balancing gene, this allows me to actually know what I have in my account. I started with checking one year, and then added my loans and 401k. I now update it regularly by clicking on an Update button. Pretty easy and I can see where I stand at a glance. Oh, if you love charts and graphs, this is for you.
Consider credit counseling. If you’re in over your head, get help. But beware of those places that advertise on television – there is no quick and easy way out of debt. The FTC has good advice on choosing a reputable credit counseling agency.
Back to Basics
Start an emergency fund. Start small with $5 or $10 per paycheck if that’s all you can afford. My credit union lets me "hide" accounts on the home banking system by unchecking them. I can have a small amount of my paycheck deposited into a special savings account and never see it when I check my balances online.
Be prepared. Make a list of all your credit card numbers, expiration dates, and the phone number to call if it’s lost or stolen (they’re on the back of the card). Keep the list in a safe place and if you travel often, give a copy to a trusted friend or family member.
Set up overdraft protection. Either transfer from savings, or open a small line of credit. If you need it, you’ll be glad you did it.
Decide whether you need/want overdraft privilege on your checking account. That’s the "we pay your check but charge a fee" service. It can be a blessing or a curse depending on your circumstances. You can ask to have this turned off. I did, but I have my home equity line of credit set up as overdraft protection so I know I will never bounce a check.
Review your will, living will, medical power of attorney and insurance benficiaries. Do they still reflect your wishes? If you don’t have anything to review, you know what you should do. If you’re in a relationship that is not a legal spousal relationship, you and your partner should be doubly sure everything you want is in writing and copies are kept in your medical files and with trusted family or friends.
Review your insurance. Can you save money by increasing auto or homeowner deductibles? Can you decrease your auto and homeowner coverage amounts by adding a personal liability umbrella policy? (We were able to and saved about $300 a year.) Do you have enough life insurance to provide for dependents and/or your partner? Shop around for coverage prices, too.
Plan for retirement. Take one of the online tests to see what you need for retirement and whether you’re on track. Again, not knowing won’t make it better. Fidelity and Ameriprisehave good retirement planning tests/guides. Please note – I am not endorsing either of these companies – just their online guides.
Take advantage of your 401k. If you have one available, make sure you are contributing enough to get the full match.
Consider a credit union. I work at a credit union, but I was a CU member before I was an employee. Credit unions are member-owned cooperatives and the average consumer can save hundreds of dollars due to lower loan rates, higher savings rates and fewer fees. Don’t be stuck paying fees and enriching large corporations because it’s a hassle to move your account; the end result is worth it. You can easily find a credit union near you; don’t assume because it says something like "Teachers" or "Government" in the name that you can’t join. Call and ask. Or ask family members if they belong to a credit union – you may be able to join, too.
Stop getting credit card convenience checks. These are a ticking time bomb for theft. Call your credit card company and ask them to stop sending you convenience checks. It’s that simple.
Buy a shredder. Keep it where you open your mail to make it easy to shred pre-approved credit card offers, paid medical bills, and anything else that has bits of personal info someone could use to steal your identity.
Stop getting pre-approved credit card offers. Opt out of pre-approved credit card offers. They tempt you to get more cards and spend more money, and the offers themselves are a common way for identity thieves to tap your credit.
Switch to online banking and bill pay. It takes a little time to enter the account numbers and addresses into a bill pay system, but once it’s all there, paying bills is a breeze. You’ll save money on stamps and your account information will actually be more secure. Use your credit union’s or bank’s bill pay system rather than the vendor; you have less exposure to possible data theft.
Sign up for eBills and eStatements for all accounts. No more lost or late mail. No more risk of mailbox theft. If you really need paper, you can print it yourself.
Check your credit report for accuracy. Visit AnnualCreditReport.com to get a free copy of your credit report from all three major credit bureaus (Equifax, TransUnion, and Experian). Be prepared – the reports can be very different based on where you live and what types of credit you have. Get one today, one three months from now, and the last one a few months later to monitor whether accounts are being opened without your knowledge.
Decide if you really need to know your credit score. If you’re applying for a loan, or denied credit, ask what your score is. If you are just curious, you will have to pay. Don’t sign up for a year’s worth of scores and don’t pay more than $5-$7 for a one-time score. Just know that each of the three bureaus calculates your score differently and they will not match. There are also scores that weigh credit card debt or consumer loans more heavily, so the score your financial is using to set your rate might not be the some one you’re getting.
There’s always more...
Stop telemarketing calls. Register at the National Do Not Call List..
Stop getting unwanted catalogs. Two benefits to this - you can remove temptation and save some trees by spending a couple of minutes clicking here. You choose which catalogs to stop or keep receiving.
Explore one new financial topic this year. Read a book about personal finance, or attend a free seminar about investing (don’t sign up for anything afterwards!). Remind yourself that you are someone who can be smart about money. Since I’m in my early 50s and planning for retirement, my goal this year is to learn the basics about annuities so I’ll know whether or not one would be a good idea for me later.
Make a treasure map. What would happen if you got hit by a bus tomorrow? Would your family know where to find info about your accounts, insurance, retirement? Write it down and tell them where the list is. Make sure the list includes account numbers, passwords, and contact info for financials, brokers, and insurance agents.
Use the resources at your fingertips. There are lots and lots of resources put there on the tubes. For instance, I get the Simple Living Newsletter.
Make little changes. There are little things we all know we should do, but don’t get around to. Pick one or two and do them now, when you’re motivated, or set up reminders to do one a month.
For instance: Buy compact fluorescent bulbs to replace incandescent bulbs. Install flow restrictors on your shower heads. Replace the air filter on your car. Check your tire pressure. Turn your thermostat down one or two degrees (or up in the summer). Make regular visits to the public library. Make a fire evacuation plan and practice it with your family. Buy a little extra food each time you go to the store for an emergency supply.
You get the idea... C’mon... share your ideas for little changes. Share your resolutions, thoughts and favorite websites and helpful hints.
Disclaimer: Like Sarahnity, I am not a financial professional. I do work at a credit union and write a lot of consumer education articles, but please take what I say with a grain of salt.