I was a senior in college the first time I ran across this thing called “personal finance.” Personal finance was a weird concept because at the time the only type of finance I knew consisted of ratios and analysis of balance sheets. If you were lucky enough to learn about personal finance while growing up then you are ahead of the game, as for the rest of us, we just kind of learn as we go along this thing called life.
Personal finance is important because it keeps you grounded and if done right, it can lead you towards financial independence with a nice secure retirement. The end result is a dream for many, but the journey to financial independence can seem long and tedious. Getting started is indeed the hardest part. Today I want to share three things you can do to improve your finances.
Create a Budget
If you’ve read any of my previous posts then you know I am a huge proponent of the budget, specifically the zero-based budget. This is how you tell your money (to the cent) where it needs to go. Do you have an upcoming trip? Stick it in the budget. What about those annual bills like property tax or home insurance? Start saving up now and stick it in the budget. Seriously, anything and everything I spend money on goes in the budget. You know that trip you’ve been talking about all year? Yeah, that expensive, awesome, may not happen again for a while epic trip. Unless you are able to cash flow your entire trip up front (not me) then you need to budget for it.
Budgeting is a game. You always want to strive to beat your previous score. Why would you want to flat line and stay constant? Seeing these expenses on paper (or screen) will show you where you are overspending. Creating a budget is not an easy task but it is vital for your finances.
Review Recurring Bills
About 4 years ago I went paperless and automated all of my recurring payments. At the time most of my providers were giving discounts for going paperless which was great because it helped lower my expenses, the only issue was I never bothered to look at the statements. In an effort to level up my budgeting score, I carefully reviewed my recurring expenses and the monthly statements, this is what happened.
First, I found out the electric company was overpriced and I was being charged a variable rate. It took me about 20 minutes to find and transfer my service to a different provider and lock in a fixed rate.
Second, the cell phone was ridiculously high. I had been a loyal AT&T customer for about 10 years before I left. Metro PCS, Virgin Mobile, Cricket and Republic Wireless all have plans that are reasonably priced and do not require contracts. I made the switch to Cricket and now save $60 a month.
Use your budget to identify these recurring expenses and see what you can cut back on.
Sign Up for Personal Capital
A couple years ago someone got a hold of my credit card number and spent $1,200 on Mary Kay products. It’s because of this incident that I now check my credit card and bank activity on a daily basis. This is cumbersome because I have several accounts with different institutions and it takes a while to log into these accounts individually. Enter Personal Capital.
With Personal Capital you can link all your accounts and get live updates everytime you log in. It is essentially a convenient way to track your transactions, net worth, investments, and much more. My favorite features are the net worth tracker and the 401k fee analyzer. It’s because of this analyzer that I decided to switch my IRA investments from T. Rowe Price mutual funds over to a Vanguard index fund.
Oh, and did I mention it’s free? If you read other personal finance blogs they will probably mention Personal Capital, seriously, just about everyone uses it.
So here you have it, 3 things you can do today to improve your finances. Try these out and let me know what you think.