Sweat the Small Stuff: Change Your Financial Future

 

My son likes the TV show “Breaking Bad”. The title makes me think about breaking bad financial habits and replacing “bad” ones with better choices. Here are some simple steps to a new financial future.

·         Avoid Instant Gratification

It’s about time you learned to resist impulse buying. When you can’t afford to pay cash, using credits cards will simply allow your debt to spiral and increase poor money management. Learn the value of saying “no”. If you aren’t paying with cash or check, use your debit card. It takes the money out of your checking account immediately and provides a useful record of all your monthly expenditures.

·         Don’t confuse “wants” with “needs”.
Before you charge anything, be sure it’s something that you absolutely can’t do without. Cute shoes and purses or $200 gym shoes don’t count as “needs”.  Be sure that you can pay the full amount of the item when you get your monthly credit card bill. If you really need the item, you should be prepared to pay for it. Items that won’t be paid for when the credit card bill comes should be scheduled into your long term financial game plan and won’t be spur of the minute purchases.

·         Put the important finances on automatic payments
Will power is often not enough. To improve your finances, you must make timely payments and contribute regularly to your emergency and retirement funds. Automatic payments get the bills paid on time and ensure savings don’t get skipped. Use online bill pay to get things done.

·         Pay more than the minimum amount due
Reduce your credit card balance quickly; avoid fees and penalties; stop adding debt to your balance. If you can only pay the minimum amount due, you probably purchased things you couldn’t afford in the first place. The vacation to the islands, the seven day cruise, the notebook or new computer, Netflix, cable, etc.-maybe these things that are sitting on your credit card awaiting monthly payments were  “wants” not “needs”.

·         Pay off your debts ASAP
There are different thoughts about how to pay off bills.  One thought encourages paying off the debt with the highest interest rate.  So, payoff a credit card charging 16% interest before paying off one charging 7%.  Increase payments to the 16% interest card, while paying only the amount due to the 7% interest rate card. When you’ve finished paying off the card at 16%, move those payments to your card with the next highest interest rate. Continue the process until you are debt free.

The other method encourages you to pay as much as you can on the card with the lowest balance until the debt is repaid. Add the amount that you paid on that card to your next lowest balance until it’s paid and continue until you are debt free.

·         Make a monthly contribution to savings and retirement

Some folks say they don’t have enough to save anything at all, so they do nothing. I’ll make it simple. Start small, if you must, but start.  Set up an automatic deposit no matter how small. Take your dollars for Starbucks Lattes, cigarettes, getting your nails done, eating out and binge shopping.  Save the money instead of spending it. Pay yourself first. When savings come directly from your paycheck to your savings account, you won’t miss it.

Sweat the small stuff. It will make a difference.

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