Foundations of Finance

One mistake that some couples make when they are thinking about the future is mixing their investments with their savings. This mistake is made because they think of their investments as a form of savings. However, your investments could go under or turn around at a moment’s notice. If you lose your investments, you will want to know exactly how much you have in savings. You do not want to put any of the money that you need for emergencies into your investments, you will want to put that into savings so that you have access to it. The general rule that you should follow is that the money you will not need for seven years can go into your investments, while everything else should go into savings and the two accounts should be kept separate.

TRICK #7: Save regularly for recurring expenses, too.

This is a trick that can help you break the habit of relying on  credit cards or raiding your savings account whenever a big annual or semi-annual expense comes up. Set up several high-yield savings accounts with one online bank and arrange for automatic deposits into those accounts on a regular basis.

If you automatically save a little money on a regular basis, it doesn’t take much to build up a good stash for when your big expenses come due. For example, if you arrange for a mere $25 a month to transfer from your checking account into your holiday gift fund each month, that’s much easier to manage than coming up with $300 all at once come December.

TRICK #8: Set long-term goals with a buddy.

One of our biggest enemies when it comes to making financial decisions is our short-term memory. We get impatient when our investment balances don’t grow as quickly as we’d like, or our friends seem to be having more financial success than we are. Or we just get tired of scrimping and saving and get the overwhelming urge for a splurge.

Getting a buddy for setting goals makes you responsible financially to more than yourself.

Keep your long-term goals in focus. Define your goals early on — such as saving for a down payment, starting a retirement fund or taking an annual vacation. Then set up plans to reach them and be sure to discuss your progress regularly. Having that accountability with someone (a spouse, best friend, family member, etc.) helps motivate you to stay on track.

TRICK #9: Ignore your annual raise or year-end bonus.

Expecting a raise this year? Pretend you’re not. By keeping your standard of living the same and not increasing your spending with each bump in pay, you can pocket the extra money and use it to reach your goals. The same goes for that year-end bonus or tax refund.

It only takes a few extra bucks to start your emergency savings, begin investing or pay extra toward your credit card debt. You could even use the money for something fun. Start stashing it in a vacation savings fund so you can afford to have a real travel adventure next year instead of the old crash-on-Mom’s-couch getaway.

TRICK #10: Give yourself a raise.

Not getting a raise this year? Take matters into your own hands. You could get hundreds of dollars added to your take-home pay each year simply by telling Uncle Sam not to take so many taxes out. Most of us give the government too much upfront — that’s why we get tax refunds in the spring.

Take back your money and use it throughout the year instead to help you make ends meet, boost your emergency savings or start investing for your future. All you need to do is file a new W-4 form with your employer to adjust your “withholding.”

TRICK #4: Pay your bills automatically.

You forgot to write the check. You couldn’t find postage. You lost the pre-printed envelope that came with your bill. There are a lot of excuses for forgetting to make a payment or paying a bill late, but they all result in the same negative effect on your credit rating.

Thankfully, many banks will allow you to sign up to have all your bills taken directly out of your checking account, including your credit card, cell phone, utility and cable bills. Some banks may charge a monthly fee for the service.
TRICK #5: Ask for a lower interest rate on your credit card.

Pay yourself first, and you won't notice the money being saved

It sounds almost too easy, but this little trick is amazingly effective. A five-minute call to your lender could save you hundreds of dollars on interest charges and help you pay off your debts sooner. In 2002, the U.S. Public Interest Research Group asked 50 consumers of varying credit backgrounds to call their lenders and ask for lower rates. The strategy worked for more than half the group, with the average rate reduction going from 16% to 10.5%.

That big of a rate chop on a $2,000 balance would save you nearly $200 over 2 1/2 years. Credit card companies spend hundreds of dollars trying to acquire new customers, so they may be willing to negotiate to keep your business, says Howard Dvorkin, founder of Consolidated Credit Counseling Services. It certainly doesn’t hurt to ask. Find out more tricks to get out of debt faster.

TRICK #6: Put your savings on autopilot.

What could be sweeter than always having enough money for your savings, never forgetting to make a contribution and eventually retiring a millionaire?

All you need to do is sign up to have a fixed amount automatically taken out of your paycheck to go directly into savings or investments. When you pay yourself first, you won’t even miss the money after it’s gone.