Wednesday, March 25, 2015

Improve Your Finances This Year

Tax season is always a good time to re-evaluate your financial situation.  There is always room for improvement.  Here are some simple actions to incorporate into your life that will help improve your financial situation.

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Change Your Attitude (Towards Money)

The attitude you have towards money can either make your life a whole lot better or a whole lot worse.  A thankful attitude will help you to see all that you do have instead of what you don't.   Consider this story from

"I have an espresso machine that pours a set amount of water into the cup. One day, I used a huge mug and it seemed like there was no coffee in there. The coffee obviously didn’t change, but the container (our expectation) did. It seems obvious that the only way to measure how much we have is by looking at the actual volume of coffee but like many, I looked at how empty the mug was. Counter-intuitive and counterproductive."

Create A Monthly Budget

A budget is really just a plan for what to do with your income and expenses.  First, look at your take-home pay (not your general salary).  Then consider your fixed expenses like mortgage, utilities, etc.  Setting a budget for these amounts is fairly straight forward.  Next consider your discretionary spending and set budgets for those accordingly.  Anticipate changes, but base it on current use and be realistic.

Remember, for a budget to work, your income needs to be higher than your expenses.  If you're expenses exceed your income, you are in financial trouble.  You either need to increase your income or slash your expenses.

A budget should allow for some flexibility.  It is supposed to work for you, not to constrain you.  A budget gives you a reality snapshot of how you're living your life and where to make changes.  

Look for some great apps for your phone that can help you keep track real-time and sync it with other family members.

Make Saving Money a Habit

 Spending money is always way more fun than saving it.  That's why you need to make it into a fun and challenging game.  Decide to have a saving money attitude for one month and see what the end result is.  Here are some ways to do it:

  • Direct deposit:  Most banks will let you set up an automatic transfer every pay period.  If you already are doing this, consider increasing it by 10%.  
  • Save the change:  Anytime you pay in cash, you likely get a bunch of coins back.  Make it a habit to clean out your pockets and your purse each day and put all the coins in a jar.
  • Pay yourself:  Whether you want to help stop a bad habit or want to reward yourself for doing something good, put a price tag on it.  For every swear word, add a dollar to the jar.  Or for every cookie you resist, put in some money.
Hopefully by the end of the month, you will have made a new habit for yourself and you will have saved more money than if you'd done nothing.

Tax Withholding

After your taxes are complete, take a look at how much you are withholding.  Did you get a refund?  Then you're giving the government an interest free loan, when you could have that interest making money for you.

Evaluate your tax situation and see if there are any changes that can be made.  And if you did get that refund, put it in the bank.

Max Out Your Retirement

Not investing any money into a retirement account?  Start now.  If you're already doing so, work towards maxing out what you can put into retirement.  This should be a no-brainer anytime you get a bump in pay.

Once you've maxed out your retirement savings, then you can look to invest additional money.  Find easy-to-use online options like that help you with investing.

Slash Your Expenses

You probably started this process when you made your budget.  But continue to look for ways to lower you expenses.  Negotiate with your cell phone provider and you cable provider.  Price shop on insurance.  Find ways to lower your food budget.  Find ways to do fun things cheaper.

Be a detective and work at finding ways to get things cheaper or free.  Don't be afraid to experiment.

Pay Down Your Debt

Don't spend that money you just slashed.  Use it to pay down your debt load.  Student loans, credit card debt, car loan, are paying interest on all of them.  Not to mention that there is a lot of stuff you could be doing with those monthly payments.

Determine how much money you are paying in interest on all of your debt.  Then figure out your debt free date for each loan.  By paying more than the minimum each month, you lower that total interest money, which is basically paying someone to let you loan money from them.  

Start with the highest interest loan and tackle that first.  Once that is paid off, use the money you were spending on that loan to tackle the next one.  Before you know it, you'll be debt free and feel really rich.

Increase Your Income

You've worked on one side of the money equation.  Now work on the other, the income side.  Making more money helps you achieve your financial goals faster.  Here are some things to consider:

  • Ask for a raise and have the backup to show why you deserve it.
  • Find a side job doing something you really enjoy like pet sitting, working at a coffee shop or freelance writing.  Remember, it doesn't have to be forever, unless you want it to be.
  • Sell unwanted items on ebay, craigslist or your local paper.
  • Sell things you make.  Salsa, woodworking, art, crocheted blankets...there are always people who are willing to buy.  Set up a shop on etsy, or use the avenues listed in the above bullet point.
  • Unsatisfied in your current position and feel you're worth more?  Consider changing careers but keep in mind the costs of getting up to speed and on work-life balance.

Donate To Charity

No matter how much or little you make most likely there is someone in this world who is way less fortunate than you.  Take some time to write down your values.  Do your values line up with your expenses?  Are you spending your money on what you think is important in life?  If not, consider changing how you spend your money.  Your spending should reflect your values.

More than just a tax benefit, the money you give to those who need it more will always have its own rewards.  Manage your money wisely so that you can spend lavishly on those things that matter most to you.

Source:  Michelle Schwake for Stafford Family Realtors, and

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