The following post is by MPFJ staff writer, Melissa Batai. Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food. She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.
The new year is often a time for renewal; people frequently vow to get healthier and be more responsible with money. However, there’s no need to wait until the calendar turns to January 1st. There is plenty you can do now to help your finances as you head into the new year.
Reduce the Interest You Pay
If you owe money, there are many ways you can cut the amount of interest that you’re paying so you can get out of debt more quickly.
Transfer credit card balances to a 0% APR card. If you have a credit card balance and are paying high interest, take the time to stop that now. If you have good credit, there are many 0% APR offers available. Just do a simple Google search. You’ll likely have to pay a transfer fee of 2 to 3% of the balance you’re transferring. Crunch the numbers to make sure that the transfer fee is lower than the interest you would pay on the card you’re currently using. Also, try to get an offer for 0% rate that lasts 15 to 18 months, giving you time to pay off the card.
Negotiate your interest rates. If you don’t want to transfer your credit card balance, another option is to call your credit card company and ask them for a lower interest rate. Really, it’s that easy. This strategy works about 50% of the time, so it’s worth the time. If the person you speak with tells you the company can’t change your interest rate, ask to speak to the supervisor who may be more likely to negotiate with you.
I did this about a year ago, and I was originally refused. I asked to speak to a supervisor, and I was again refused. I called back a few days later and again worked my way up to a supervisor. This time, the supervisor not only reduced my rate by 3%, but he also gave me enough rewards points to cover the cost of my annual fee and additional to give me $50 cashback. Persistence is key with this strategy.
If you try to call several times and don’t make any progress, tell them that you plan to move your balance to another card. This is a last resort option and may provide the incentive the company needs to reduce your interest rate.
Be Mindful of Your Money
Money has a way of leaking out if we’re not careful. There are several steps you can take to stop the leaks and keep more of your hard-earned dollars in your pocket!
Set up a budget. If you have not done so already, take the time to set up a budget. For years I did our budget with paper and pencil, but as our finances grew more complex as our family grew, I found this method increasingly frustrating. A few months ago, I switched over to You Need a Budget! (YNAB), and I love it. It’s made budgeting so much easier!
There are other budgeting tools available, too, like PearBudget, EveryDollar, Mint, CalendarBudget, Mvelopes, and many others. Just find the tool that works best for you.
Delete ghost accounts. Most of us have accounts that we’re still paying for regularly, but we no longer use. Are you paying for a magazine subscription for a magazine you no longer read? Do you still pay $40 to the gym, but you quit going months ago? Take an afternoon to go through your checking and credit card accounts to see if you have any ghost accounts—things you’re paying for that you no longer use, need, or want. You may be surprised to see that you have several!
Set up auto pay. If you have trouble remembering to pay your bills on time or you don’t want to set reminders for yourself, consider setting up auto pay. By utilizing auto pay, you can reduce the chance of having a late payment and suffering the accompanying late fee.
Check your tax withholding. If you routinely get a tax refund, check your tax withholding. You may want to claim more dependents so that you don’t get a big refund each tax season. It’s far better if you put that money to work for you throughout the year rather than getting back a large lump sum in the spring. Your accountant can help you determine the appropriate tax withholding.
Increase Your Savings & Retirement Contributions
Once you’ve lowered your interest rates and set up a budget, it’s time to look at your savings and retirement contributions.
Set aside money for Christmas. Do you routinely put all of your Christmas shopping on credit card and then find yourself unable to pay it off quickly? If so, you’re paying even more for the presents than you realize.
“You can figure out just how much your Christmas debt is costing you to carry by using calculators on the internet. Plug in $1,000 at 17 percent (the prevailing credit card rate) in the calculator at www.bankrate.com, and you’ll find that your interest totals $94 over one year and $187 over two” (ABC News).
Rather than paying interest, take steps now so you’re prepared for next year. If you spend $600 on presents, set aside either $11.50 a week or $50 a month. When the 2017 shopping begins, you’ll have the cash to pay for your gifts.
Set up automatic savings withdrawal from your paycheck. Most of us have trouble saving money. One easy way to save more is to set up an automatic withdrawal from your paycheck to your savings account. When I worked full-time, I did this. At first, I missed the money from my paycheck. But after a few paychecks, I forgot all about the money that was being deducted, and I learned to live on the paycheck I was getting instead of counting on the money that was being funneled into savings.
I truly forgot about this, so I was always in for a pleasant surprise when I checked my savings account balance. It was growing steadily, with no help from me.
Simply go to the payroll department and fill out the form to have whatever amount of money you would like transferred to your savings account every paycheck. You can likely also do this online. A perfect time to make this adjustment is when you receive a raise. You won’t yet be depending on the additional income, so you won’t miss it when it goes to savings.
Put money in your retirement savings. If your employer offers a retirement savings match, make sure to allocate money for a retirement contribution, at least to the point that your employer matches.
If you’re in a better financial situation, consider adding to your Roth IRA or your regular IRA. Remember that you have the first several months in 2017 to add to your account for 2016, which can help lessen your tax burden when you file your taxes.
Financial changes don’t happen overnight. However, as we head into the new year, you can slowly make these changes so that you’re in a much better financial position in 2017.
How about you all? What financial changes do you plan to make for the new year? What strategies would you recommend others implement?
Share your experiences by commenting below!
***Photo courtesy of https://www.flickr.com/photos/scruch/2304897733/in/
