Learning to manage your finances isn't something most people would put at the very top of their “most fun thing to do” list, but we all know that we ignore money and budgets at our peril. Having a strong handle on what money is going in and what money is going out is an essential first step. But you don't have to be overwhelmed. By setting aside between five and 30 minutes each day, you can transform your finances dramatically in 30 days. Here's one such plan:
Day 1: Compile all your expenses and income. Bucket them by categories such as Savings (retirement accounts, emergency fund), Mortgage/Rent, Household Expenses (food, utilities, heating oil, etc.), Commuting (tolls, commuter rail cards), Debt Repayment (student loans), Entertainment. It doesn't have to be perfect, just complete. Use a service like Mint, software like Excel or even just good old pen and paper — whatever you are comfortable with. Yearly budgets are more accurate because you will see irregular expenses like property taxes or gifts.
Related >> Building a budget on variable income
Day 2: Continue to compile your expenses and income. You may need a second day to get all of your expenses and income in one place, so use this day to do that and then review everything to make sure it is all correct.
Day 3: Make a spending plan using the data compiled on Day 1. Is your spending in line with what you want it to be? Do you want to save more or are you happy with the way things are going? Pick one area of your budget (just one area) where you want to reduce spending.
Day 4: Plan to save money in that one area of your budget. If, for example, it is to cut back on eating out, look through Pinterest and make a meal plan for the next month. If it will help you stick to the process, $5 Meal Plan might be worthwhile.
Day 5: Reduce your fixed expenses. In my experience, instead of trying to penny pinch, take a hard look at your fixed, recurring expenses and determine where you can save money without sacrificing your quality of life. For example, if you can spend 10 minutes on the phone and cut your cell phone bill by $10 a month, that is an easy $120 for the rest of the year without any effort. Here are more ideas on where to easily and quickly reduce fixed expenses:
- Hitch a ride and you will save on gas, wear-and-tear and help reduce congestion on our roads to boot.
- If you make it a family project to keep the thermostat in check and wash your clothes in cold water, your monthly utility bill will go down. Better still, install a programmable thermostat and swap out your lightbulbs for CFLs or LEDs.
- Check if your company has a preferred cell phone provider who offers discounts on all the employee's personal plans. In some cases this can be as high as 15%.
- Check your data usage. If you aren't coming close to your limit each month, jump down to the lower — and cheaper — data plan. You can do this online in minutes.
- If you find you are only watching one or two shows on cable and the rest on streaming, cut ties with your cable company. Not worth it.
- Unless you love your current service or are locked into a contract, it might pay to take advantage of a new customer offer — especially now that you are un-tethered from your cable provider. Shop around.
- Review your deductibles and discounts. You can raise your deductibles for a cheaper bill — just be aware of something does happen you will have to pay more out of pocket. Another easy fix is to audit the yearly mileage you shared with your carrier. Car insurance carriers base your premiums on on how much you drive each year and this can change. This is especially common if you have changed jobs or commuting patterns. Don't forget good student discounts.
- Refinancing your mortgage or consolidating student loans can lower your monthly costs considerably, just make sure you aren't adding to the life of the loan without a detailed cost-benefit analysis.
Related >> Guide to Repaying Student Loans
Private Mortgage Insurance
- If you put down less than 20% on your home you are probably paying private mortgage insurance. But what most people don't know is that they can cancel it early if certain conditions are met. Two common scenarios that make this possible is if your equity rises higher than expected or you are more aggressive in paying down your principal balance and you can get the mortgage balance to below 80% of original value. To confirm your current PMI “end date” you can find it in writing on your PMI disclosure form or call your lender. Note you typically have to be in your home for at least two years. According to Freddie Mac, the government-sponsored player in the secondary mortgage market, the average PMI payment is between $30 and $70 per month for every $100,000 borrowed.
- If you have to pay for private garbage service, check and see if they offer a compost bin or a larger recycling bin. If they do go for it. Then ask for a discount in exchange for a smaller garbage container. By focusing on only throwing away non-food and non-recyclables, you can reduce your actual garbage by a surprising amount.
Day 6: Manage your credit card debt. If you have credit card debt, call and ask to negotiate the APR down. See if there are any zero-percent APR offers (check the transfer fee) that you can take advantage of.
For those with good to excellent credit, we recommend Chase Slate® because you can save with a $0 introductory balance transfer fee, a 0% introductory APR for 15 months on purchases and balance transfers within 60 days of account-opening, and a $0 annual fee. This can provide some much-needed breathing room if you are paying a high interest on the credit card balances you roll over month to month. (Check your statement to see how much you are paying. It could easily be in the hundreds, depending on your balances.)
Make a plan to pay that down before the promotional period runs out, but most importantly don't use this time to build new debt. That would defeat the purpose. If you don't have credit card debt, you can take the day off or move ahead!
Day 7: OK! It's time to call that cable/internet company. Don't pay for what you don't use.
Day 8: Pull your credit report. You can get a free credit report from each of the three credit reporting agencies. I usually space them out once every four months, so I keep current on my report throughout the year. For example, you can get the Experian credit report on Day 8. Schedule a reminder to get the Transunion credit report in May and the Equifax report in September. The ONLY website you can get truly free credit reports from is Annualcreditreport.com. Do you see any discrepancies? Report them immediately. Mistakes on your credit cost you money by making borrowing more expensive.
Day 9: This is the day to shop for better car insurance. In addition to the discounts above, if you have not taken an online safe driver course, check how much you can save if you take it now. Most of the time, spending a couple of hours and $25 to take the course can save a lot more on your insurance.
Day 10: Automate your finances. Set up an auto transfer of all the money you saved during the last few days. To stretch it a little, try adding a little bit more to your retirement fund. If you got a raise recently, can you channel that into savings? Most of the time, you will never miss the money as you have been living with the pre-raise income. If you have not received a raise in recent months, can you sit down with your manager for an appraisal and ask for a raise? If you can accomplish that, it is another big win for you!
Day 11: Declutter. It is such a great feeling to be organized, so spending a day to declutter and put things in order can be very productive time, especially if you can clean out a space (or a room) and find something you can sell.
Day 12: Profit from decluttering. Continue decluttering and find two more things you can get rid of, donate, or sell.
Day 13: Post those items and things for sale. As soon as you sell them, take 25 percent of the proceeds for fun and transfer the rest to savings. Schedule a day every month for the rest of the year and challenge yourself to sell one thing every month. You might end up with a good holiday fund by just doing this!
Day 14: While you are in a decluttering mode, declutter your finances. Do you still get paper bills? Can you sign up for e-bills? Make sure to schedule a time every month to get the .pdf files and save them if you want to keep the bills. If you are comfortable with the idea, can you auto-pay some bills? Shred documents that are no longer needed.
Related >> Spring clean your financial house
Day 15: Organize your financial file. Make a few folders (virtual or physical). Make one for tax-related receipts to save throughout the year, one for documents you have to keep for future reference (like a cancelled check for a security deposit until you get the deposit back), and one for monthly rotating documents (receipts that you can get rid of after reconciling with the credit card statements, bills that you can get rid of after paying them off, etc.)
Day 16: Have a financial date with your partner (if applicable). Are you and your partner financially on the same page? If one of you manage the finances, talk about your budget, goals and spending plans with your partner and bring him/her into the game plan.
Day 17: Based on your talk, create a master financial document that your partner can look up anytime. This should have your current net worth, budget and a list of all your accounts with passwords. Make sure you encrypt this and keep a copy in a very safe place. The Big Book of Everything has an excellent template to finish this task easily. You don't have to fill everything in and you don't have to do it all today. Start it today and keep working on it until it is done.
Day 18: Take one more day to work on your master file.
Day 19: Take a household inventory. For homeowners and renters insurance to be accurate, you need to know what you own and exactly how much it will cost to replace. Now is a good time to take an inventory of things of value. Collect all the warranty information and put them in one place. If you have any expensive items, make an appointment to have them appraised. Based on your inventory, do you have enough insurance or enough of an emergency fund to self-insure? If not, update your insurance or make a plan to save money to replace them yourself in case of a disaster.
Day 20: Do a bank audit. Are you paying for your checking account or credit card? If you are, it is time to change your bank. Look for a free checking account. Check your local credit union or ask the bank for ways you can avoid paying a fee.
Day 21: Do an interest rate audit. Are you getting the best interest rate possible? Personally, I don't chase interest rates very often because the current interest rates are so low. But once a year to make sure my money works as best as it can? I will do it! I would keep on it more frequently if I had certificates of deposit, though!
Day 22: Do an investment audit. How much are you paying in expense ratio? Are there ways you can reduce this and improve your return?
Day 23: Do an energy audit. Do you have any energy vampires? Check your local library for a “Kill-a-watt” device. Our library has a kit that we can borrow to check energy consumption. Check your utilities company to see if they will do a free audit. A lot of them do, and they also provide a discount if you use a preferred company to fix the problems.
Day 24: Fix some of the items in your energy audit. Is there anything that popped up in your energy audit that you can fix yourself easily; for example, adding some simple insulation to the windows?
Day 25: Do a subscription audit. Do you have any subscriptions — magazines, online entertainment like Hulu or Netflix? Check your library's online services to see if they can be replaced for free. While you are at it, check all the services your library provides. You could save plenty of money by using your library more (cheap tickets to local attractions, magazine subscriptions, museum passes, state park passes, notary public services to name a few).
Day 26: Find more ways to save. Look at your employer's HR page, your credit card company's benefits page, your insurance company's discount page and any other subscription's (like AAA) pages to see what discounts you are eligible to receive. At my previous job, we were provided a free gym membership. However, most of my colleagues were completely unaware of this benefit. VISA, Master card, American Express and Discover all provide many benefits to their card holders that can save money with discounted tickets, extended warranties, etc. Make a list of these discounts and keep it handy.
Day 27: Compute your real hourly wage. This is very empowering. If you know how many hours each of your purchases is costing you, you will see everything with a new perspective that will help you save a lot more in the coming months.
Day 28: Take someone out to lunch. Yes, I asked you to spend money! Take someone you admire and want to learn from, out to lunch. Ask questions and listen more. This is probably the best money you can spend for your career.
Day 29: Update your information. Make sure your beneficiary information for all your accounts is updated.
Day 30: Update your will if there has been any change to your assets or life situation since the last time it was updated (or make an appointment with the lawyer to do that as soon as you can).
Whew! Hopefully tackling one task at a time, one day-at-a-time will be motivating and satisfying. Even if you aren't able to complete the task for one specific day, don't chide yourself or give up. Just continue on the next day. At the end of the 30 days, you will have a much better handle on your finances!
What concrete but smaller steps have you taken recently to better manage your finances?