Take Control of your Finances
Ricke Emerson -- author of "Zombie Economics" -- stopped by to share easy ways for us to take control of our finances for 2013.
"Dollars and Change": Tips for getting your finances under control in 2013:
1) Don’t make your payments too late...or too early
Automatic payments can be a great thing, but sometimes the schedules can undermine your own efforts. For example, if your credit-card payment comes directly out of your checking account on the 1st of the month, but your paycheck doesn’t go in until the 5th, you might be risking an overdraft, or a missed payment, which can mean all kinds of late fees and penalties. If you find this happening, you can ask your credit-card company to adjust the date when they apply the bill. It might take a month or two before it goes into effect, but if it helps you avoid unnecessary charges, it’s definitely worth it. This also goes for things like rent: as long as you can make the payments on a regular schedule, many companies will work with you to make the actual payment date one that’s more convenient.
2) High-Tech Savings
We typically think of cell phones as being expensive – and they certainly can be. They can also help you save money, though. One of the biggest cell phone expenses is texting – and if you’re a parent, you know how fast kids can go over their monthly limit. There are a lot of services –apps like Google Voice and Skype– which are totally free, work on most smartphones, and allow unlimited texting that doesn’t count against your carrier’s limit. As a bonus, a lot of these apps make it easier to regulate your kids’ texting behavior.
If you find yourself buying a lot of music online, you might consider switching to a music-subscription service. If you’ve used the online version of Netflix, it’s the same general concept: companies like Rhapsody and Rdio offer legal, on-demand music, streamed right to your phone or your computer. It works just like iTunes, but it’s a flat monthly fee – less than the cost of buying one album. I made the switch to a subscription service a few years back, and it’s one of the best moves I ever made.
3) Fill the tires, empty the trunk
It may sound minor, but keeping your car’s tires at the right pressure can increase your gas mileage by as much as five percent. On the other hand, if you’ve got a million things piled in the back seat or the trunk, that can cost you five percent in gas mileage. Every household has one member with OCD. My advice: put them to work checking the tire pressure and cleaning out the back seat. You’ll be ten percent more fuel-efficient, and it will keep them from driving you crazy alphabetizing the soup.
4) Remove one item from your “menu”
We’ve all had the feeling of money leaving our pockets in drips and drabs – little payments here and there that ultimately shrink what’s left in the bank. Some of these minor expenses are unavoidable, but there are ways to help balance things out. One of the easiest is to take a single food or drink category –something that isn’t crucial, that costs more than it’s probably worth– and just remove it from your personal “menu”. My wife and I made the decision a few years back to no longer buy food at the movies, period. This way, we don’t have to stick to a dollar amount, or a monthly limit; we just made a clean break. Another example: ordering one size smaller in the drive-thru. (For years, I ordered the largest possible size of everything when I bought fast food. My wife finally said, “why don’t you try a medium sometime?” Making that switch not only saved us money, but it helped me lose weight.)
5) Add one more bill: your own
A lot of us tell ourselves, “At the end of the month, I’ll put whatever’s left in savings”, but when the end of the month arrives, we find ourselves back zero. This is because our brain often views what’s left after paying our bills as “reward money”, and fails to engage the “saving” mode.
The key is to make it view it differently, and move it upfront, where it’s more manageable. Instead of biting off more than you can chew, start small, and treat your savings as another monthly payment. It can be as little as $20 a month, but make it non-negotiable: set up an automatic monthly transfer which moves this amount into a separate savings account (preferably one which doesn’t even have a debit card or checkbook attached to it.) This way, you’ve put something into savings right out of the gate, and you’ve circumvented your own bad habits. As time goes on, slowly increase the amount, and the savings will add up faster than you think.