Savings on autopilot
If you haven't maximized your 401k or other retirement plans at work, add $50 or $100 a month. A little addition may bring you a great difference. If you add $100 a month when you are 25, you will have an extra $330,000 in your 401k when you are 65 if your investments return 8 percent annually that is below the average long-term return for stocks. Since the investments are pretax, a $100 monthly investment will bring down your paycheck by $75 if you are in the 25 percent bracket. If your contribution is matched by your employer, you will have more money to help you save more; this is the easiest way of saving since it is invested immediately. If you have maximized your 401k, invest $333 automatically every month in IRA. Contact your IRA administrator and ask him to arrange for automatic payments.
Expert's help
Instead of managing your investments yourself ask experts do it for you. Many mutual funds and a few 401k plans now offer target funds to match your investments to your savings timeframe. For instance, if you are in your mid 30's, you can invest your retirement money in a 2040 target date fund. These funds are diversified so that you needn't investment your retirement money anywhere else.
Automatic bill payment
Let your bank account automatically pay your bills, so that you needn't face the hassles of writing checks and mail delivery worries. You can also avoid missing costly deadlines. Credit card companies hike interest rates by 31 percent after one late payment and charge $40 as late fees. Some credit card companies raise their rate if you miss a deadline on other cards, though your record with them is clean.
Keep your files up to date
Take a look at your financial files and throw away that aren't needed. But you should keep your tax returns files for ever; supporting documents can be discarded after three years (six years if you are self-employed). You can throw away monthly investment statements after they are tallied with the year-end summaries and ATM receipts as soon as they are shown in your monthly bank statement.
Protect your identity
Don't sign up for expensive services that monitor your credit records of identity theft. You are entitled to get a free copy of credit reports from each of the three bureaus - Equifax, Experian, and TransUnion every 12 months. Stagger your requests in such a way that you get one report every four months. Scan for errors or unauthorized charges.
Eliminate high interest debt
Avoid high interest debt to improve your financial health. To pay off your credit cards in full, use any bonus, raise or tax refund. Add a few hundred dollars to your payments, and you can make a big difference, especially when you can make your credit card company to reduce your rate. If your minimum payment is 4 percent of your debt, a $5,000 balance with an 18 percent interest rate would start with a $200 monthly payment, which would take 32 months to pay off and cost $1,314 in interest. If your payment is $500 a month on a 5 percent card, your interest charges come down to $118 and the balance can be paid off in 11 months.
You may wonder how this arrangement simplifies your life. If you are out of debt, you don't bother about minimum payments and save good amount of interest; you have extra cash to reach your other financial goals.
