Money Saving Tips To Financial Wellness
Clearing out financial clutter
I know you are anxious to get started, but it is hard to get motivated when you
are knee-deep in paperwork. Getting your financial house organized is a great
way to begin on your path toward financial wellness. But before you bulldoze
that pile, you should know that some things are worth hanging on to. The key is
to know what to keep and what to toss.
• Grocery receipts and other nondeductible expense receipts and statements
can be destroyed after they have been recorded for budgeting purposes.
• Paycheck stubs should be checked against your W-2. If it’s a match, you
can toss them. If not, request a revised W-2, called a W-2c.
• Generally, canceled checks should be saved for three years. Keep those
related to your taxes and business expenses permanently.
• Utility bill stubs may be destroyed after recording, however, you may wish
to hold onto these for a year to compare monthly costs.
• Documents pertaining to buying, selling or improving your home should be
kept as long as you own the home.
• Receipts from major purchases should be kept as long as you have the item.
• Credit card receipts can be destroyed once you have reconciled with your
monthly statement. Additionally, credit card monthly statements can be
destroyed on an annual basis.
• According to the Internal Revenue Service (IRS) you should keep your
individual tax return documents for seven years. The IRS has three years
from your filing date to audit your return if it suspects good faith errors.
However, the IRS has six years to challenge your return if it thinks you
underreported your gross income by 25 percent or more.
• Finally, before taking out the trash, be sure that all identifying information
has been destroyed to avoid any threat of fraud.
Appoint a family CFO
While all members should be aware of the family’s overall financial situation, choosing one person to conduct the day-to-day financial tasks is a good way to stay on top of things. The appointed individual should be organized and a good communicator.
They should be given uninterrupted time to do their tasks effectively. Consider making the job of CFO easier by establishing an online bill payment service (offered free-of-charge by many banks and credit unions). Even better, check with your creditors about setting up automatic bill payments.
Designate a spot in your home for organizing paperwork. Used office supply stores offer great bargains on filing cabinets, or consider small plastic filing cabinets instead of metal or wood. If your goal is to have a paperless filing system, make sure that you back-up your computer regularly and invest in a good security program to prevent criminals from obtaining sensitive information. To keep your most valuable documents safe, consider opening a safety-deposit box at your local bank or credit union.
Get copies of your credit reports
Your credit reports can provide a snapshot of your overall financial situation. Reviewing your credit reports for accuracy can also help you to identify errors or fraudulent activity. Fortunately, it is easier than ever to obtain copies of your reports.
The FACT Act gives every consumer the right to a free credit report every year from each of the three major credit bureaus: Equifax, Experian and TransUnion. To get your free report, simply fill out the request form. You can also visit www.annualcreditreport.com or call 877-322-8228. The three major credit bureaus are separate entities. It is important to know this because the information in their reports may vary slightly. Different creditors use different reports (or a combination of them) to determine whether or not you are creditworthy.
Your creditworthiness matters most when you are trying to obtain credit. If your credit report indicates that you have maintained your credit well, you should have a good chance of receiving additional credit when needed, provided you have enough income to qualify for additional credit.
Credit reports might also matter when renting an apartment, obtaining insurance or securing some types of employment. The Fair Credit Reporting Act (FCRA) dictates that credit information is accessible to others only for certain permissible purposes. For your protection, you are entitled by law to know who has received a copy of your report or inquired about it.
your report or inquired about it.
Clean up your credit report
If you find an error on your credit reports, you’ll need to know your rights. Your most
effective weapon in dealing with the credit bureaus is the Fair Credit Reporting Act
(FCRA). Legally, the FCRA protects you by requiring credit bureaus to furnish correct and
complete information to companies requesting credit histories for evaluation. If you find
an error on your report, simply follow these steps:
• Write to the credit reporting agency disputing the item and include any supporting
documents. Keep a copy of all documents for your files.
• When the credit reporting agency receives your letter disputing the item, they must
investigate the item in dispute (usually within 30 days) by presenting the information you submit to the creditor.
• By law, the creditor must review your evidence and report its findings to the credit
• The credit bureau must then give you a written report of its investigation and a
copy of your report if the report results in a change.
You can also fill out an online dispute form provided by the credit bureaus. The Web sites for the three major credit bureaus are:
If an item on your report is found to be an error and is corrected, you can request that
the credit bureau send corrected copies of your report to any creditor who received
your report in the previous six months or any employer who received your report in the
previous two years.
If you are not satisfied with the results of a formal dispute, you can also seek resolution
with the source of the information. To do this, write to the creditor disputing the incorrect
entry. After receiving your letter, the creditor may not report the information without
including a notice of your dispute. In addition, once you have notified the source of the
error in writing, it may not continue to report the information if it is an error.
Make your money count
To develop an accurate picture of the amount of money you will have in the future, take a look back. Decide if your income will be from the same or from different sources and the amount of income you can expect to earn in the future. Use the Income worksheet to help you determine the amount of income you can realistically count on.
Do you pass the debt test?
Yes No Is an increasing percentage of your income going towards paying down debts?
Yes No Is your savings cushion inadequate or nonexistent? Yes No Are you near or at the limit of your lines of credit?
Yes No Can you only make the minimum payments on your revolving charge accounts?
Yes No Are you often late with bill payments?
Yes No Are you paying bills with money earmarked for something else?
Yes No Are you using credit to pay for items you used to buy with cash?
Yes No If you lost your job, would you be under immediate financial strain?
Yes No Are you unsure about how much you owe?
Yes No Are you being threatened by collectors with possible legal action?
A ‘yes’ to any of these questions is a sign that you may need to make debt payoff a priority.
Set your priorities
Creating a list of needs and wants can help you establish your financial priorities.
When completing the Financial Priorities Worksheet, consider the list of expenses to help you get started. There are also blank fields to record your family’s needs and wants. Check whether the item is a “need” or “want.” Then, rank the item’s priority based on importance. When finished, put this worksheet in a safe place, it will be very helpful when setting financial goals!
Paying off unsecured debt
Paying all secured debt on time
Saving for a down payment on a home
Buying a car
Taking a vacation
Having money for entertainment
Starting/maintaining a savings account
Set SMART financial goals.
Before you think about setting goals, review the five parts of SMART goals.
S- A smart goal is specific. It pinpoints something you want to change or achieve.
M- A smart goal is measurable. You can measure or count a SMART goal.
A - A smart goal is achievable. Setting goals too high can lead to frustration.
R - A smart goal is rewarding. Reaching the goal should be a reward for your hard work.
T -A smart goal is trackable. Set milestones and schedules for your goals.
Set short-, mid-, and long-term goals
Short-term goals are priorities that can be accomplished within two years.
Be sure every goal has a specific purpose, a dollar
amount that it will cost, and a realistic target date.
Mid-term goals are priorities that can be accomplished within two to five years. Make sure your goals are realistic and flexible. If you set your goals too high, frustration will keep you from keeping them.
Long-term financial goals are priorities that may take more than five years to accomplish.
Most long-term goals require 12 regular savings.
Goals will differ in the length of time needed to achieve them.
Paying down 13 debt is a smart financial move
There are two popular methods that people use to tackle debt.
One is to concentrate on paying off the debt with the smallest balance first (never forgetting to make required payments to all debts, of course). After that balance is repaid, you can then apply that payment to the card with the next smallest balance and continue the process until all debts are satisfied. This method can be very rewarding because you see progress quickly.
rewarding because you see progress quickly.
The other popular method is to first concentrate on repaying the debt with the highest interest rate. This method will save you the most in interest charges over time. Regardless of the method you choose, be patient and persistent.
Try using this easy calculator to determine what it will take to pay off your credit cards. For this, it might be helpful to refer back to your debt load worksheet.
If you ever find that you are unable meet your basic financial obligations, contact your creditors immediately to advise them of your situation. Most will offer an individual short term solution; however, you probably will benefit from a long-term payoff strategy.
Expect the unexpected
Unfortunately, bad things sometimes happen to good people. In fact, bankruptcy filers often site an “unforeseen” event as the cause of their financial demise. In addition to long-term savings, financial experts agree that consumers should aim to have three to six months living expenses saved for emergencies.
By learning to expect the unexpected, you can keep a minor financial setback from turning into a major financial crisis.
Securing your financial future
Don’t despair if you are behind on your retirement goals. If it is any consolation, you
aren’t alone; studies show many households are not adequately prepared for retirement. Here are some things to consider when assessing your retirement savings.
• Take advantage of available resources. Participate in your company’s retirement plan, particularly if they have a “matching funds” program. Not participating in this type of program is literally leaving money on the table and passing up significant tax advantages. If a company program is not available to you, consider establishing an Independent Retirement Account (IRA).
• Seek professional guidance. A trusted financial planner can help you determine the amount to withhold. They can also help you determine your tolerance for risk and map out a comprehensive strategy that will bring you closer to your financial goals.
• Take an active role. When you enroll in a retirement plan, you spend time researching your investment options in order to make informed decisions. Yet most people fail to actively manage their accounts by rebalancing their allocation of assets when market conditions change. Rebalancing your portfolio every year to keep the percentages where you want them is the key to maximizing returns and minimizing risk. Also, if you have experienced a raise in compensation, consider increasing your retirement savings.
• Finally, avoid cashing out early. Remember, if you withdraw money from your 401(k), you will have to pay tax plus a 10 percent penalty on any money with -drawn. This total tax bill will probably come to about 37 percent of the money you withdraw. Even your credit card companies don’t charge an interest rate that high. As an example, if you withdraw $10,000, you will probably realize only $6,300. You will have to pay the other $3,700 in taxes.
Save for your goals
Most likely, reaching your financial goals will require you to commit to saving. That is one reason saving is an essential part of any money management plan. Set money aside each month to save for your short-, mid-, and long-term goals. If you are having trouble stablishing a nest-egg, don’t despair. Following are some simple ways to boost your savings:
• Make it automatic. Having money automatically deducted from your
checking account into a savings account helps to ensure that you meet
your savings’ goal. Even better, if your employer has the capability to
automatically deposit your paycheck, have some of the funds directed into a
• Turn a hobby into income. Many people have untapped talents. Whether
you enjoy photography, painting, knitting, or metal work, consider possible
ways to earn money by doing what you love best. Babysitting and lawn
work are also good ways to earn additional money.
• Downsize. Most people have garages, basements, and attics full of items
they no longer want or need. Holding a garage sale or advertising some of
your things online could result in a boost to your savings account.
• Use gifts wisely. If you receive unexpected funds, do not be tempted to
spend them frivolously. Instead, put all money received from tax refunds,
inheritances and gifts into an interest-bearing savings account.
Where does all the money go?
For most people, financial health doesn’t depend on how much they earn, but how much they spend. To help you find out where your money is going, the next three steps involve tracking expenses. You will start with identifying variable expenses. Variable expenses are those that vary from month to month, such as clothing and food. You have the most control over these types of expenses.
Remember to track every expense, even if it’s only a soft drink from the convenience store or a trip to the drive-thru at a fast food restaurant.
While tracking variable expenses is only one of the 30 steps, you are encouraged to continue tracking expenses well beyond the time it takes to complete the 30 step plan. The longer you track expenses, the better your chances of success.
Identify and document your FIXED MONTHLY EXPENSES
Fixed expenses are those that do not vary from month to month. Examples of fixed expenses include car payments and mortgage or rent payments. Fixed expenses are the most difficult to manipulate. Use this simple worksheet to determine how much money per month you must dedicate to cover your fixed expenses.
Identify and plan for PERIODICS
You may have a good idea of where the money is going on a day to day basis, but before you start working on a spending plan or budget, it is important to call attention to the number one budget breaker: periodic expenses. Periodic expenses are those that are not paid on a regular monthly basis. For example, both holiday and tax debts are periodic, meaning they are not part of regular monthly expenditures. In that regard, they join the ranks of other expenses such as auto registrations and vacations. Often, we know when these events will occur, but still fail to plan for them. Unfortunately, when these expenses arise, many people rely upon credit to extend their monthly incomes; using credit this way is one sign of pending financial trouble. To avoid this scenario, follow these tips when planning for periodics:
• Determine what you spent last year for periodic expenses. Assume that you will spend at least this amount again this year
• Don’t hide expenses! Just because you don’t list an expense doesn’t mean you won’t have to spend money on it. Don’t forget things like back-to-school expenses, auto repairs, and birthday gifts.
• Remember that some items, like auto insurance premiums, may occur more than once a year.
• When you have a realistic idea of what you will need to spend on periodic expenses during the year, divide the total amount by 12 and save that amount each month. Designating a savings account for this purpose may help to organize this process. Check with your financial institution, you may even be able to have the amount automatically transferred.
Here is an example of how a periodic expense can impact your monthly budget:
Annual Auto Registrations
Assume your annual auto registrations
cost $800/year. How much should
you budget each month to cover this
expense (even if you don’t have to
pay it monthly)?
$800 / 12 = $67/month
So, to be prepared for the annual
$800 expense, you must put $67
each month into a savings account or
into an “auto registration” envelope.
That way, you will not have to rely on
credit when the bill comes due.
Use this simple calculator to
determine how much money you
need to save per month to cover other
Document your SPENDING
It is time to record your fixed, variable, and periodic expenses in the first column of the Expense Worksheet; do not worry about the other columns at this time.
The process may be time consuming, but it is vital to gaining control of your finances. After you have calculated the total of your existing expenditures, add your income information.
For this, it might be helpful to refer to your Income Worksheet. Subtract the amount of your total monthly expenses from the amount of your monthly net income.
If your expenses exceed your income, rest assured that there are ways to balance the budget. Keep your Expense Worksheet handy, it will soon become your roadmap to financial wellness.
Identify ways to REDUCE SPENDING
To create a balanced budget or increase savings, most people will have to find a way to earn more or spend less. If the idea of spending less sounds challenging, try starting small. It’s important to understand that every purchase we make —excluding such absolute necessities as food, rent, and gas for the car — is a choice.
Finally, in addition to making small changes, resolve to boost your savings by including all of your “windfall” money. This “free money” includes increased income from a pay increase, birthday gifts, insurance settlements, escrow overages, tax refunds, and inheritances
Save money on Groceries
Saving money on groceries doesn’t have to be hard work. Making just some small changes can net big rewards to your pocketbook. Simple changes in the way you plan and shop can help you reduce the amount you’re spending on groceries. Preparing a weekly menu of what you would like to eat is the first step in effective grocery buying.
You will want to list entrees as well as any side dishes, salads or deserts you are planning to prepare. This meal plan can be simple.
After you have your menus planned, make a list of ingredients you will need to prepare each meal. There is no right or wrong way to make a list. It is mainly a listing of all the foods you will need to cook the meals you have planned for the week. You may want to group them in the order they appear in the store or by category such as meats, fruits and vegetables, canned items, frozen foods, cleaning supplies and miscellaneous items.
Share a Tip for CHANGE
When you identify ways to reduce spending, you are being honest with yourself about your finances. Being honest with yourself and others about your finances will ensure your success. Share at least one of your financial tips with other consumers looking for new and exciting ways to manage their finances.
Tips submitted may be used to fuel financial tip widgets and gadgets, which may be downloaded to desktops and social networking profiles everywhere. Tips may also be used in an upcoming eBook designed to assist consumers in reaching their personal financial goals.
Document your DESIRED SPENDING
Now that you have identified some areas where you would like to make some changes.
In the second column titled “adjusted,” indicate how you would like to change your spending. For example, if you are currently spending $80 per month on the Dry Cleaning/Laundry category and you wish to spend only $30 per month, write -$50 in the “adjusted” column. If you are saving only $50 per month, but would like to save $100, write +50 in the “adjusted” column.
Remember, this is not about sacrifice; it is about making choices to help you achieve your goals.
After you have made adjustments, you can move forward using this spending plan as a road map for achieving your goals.
Protect yourself by performing FINANCIAL CHECK-UPS
Being in charge of the family’s finances is an awesome responsibility. In addition to providing your family with the basic necessities of life, you may feel responsible for their overall financial well-being. One of the best ways to care for your family is to be sure that you are prepared if something were to happen to you or another member of your family.
Perform a health insurance check-up. Find out exactly what services are covered and learn what preventive services are offered. Ask if there limits on medical tests, out-of-hospital care, mental health care and prescription drugs. Research your premiums and co-payments. Explore the difference in cost between using doctors in the network and those outside it. Find out if there is a limit to the maximum you would pay out-of-pocket. If you do not have health insurance, seek assistance from Medicaid or your local state-sponsored plan.
Perform an auto insurance check-up. Auto insurance pays for damages, injuries and other losses specifically covered by your policy. Most states require vehicle owners to purchase liability insurance, which covers bodily injury and property damage. Read your policy are fully to know exactly what it covers. Pay special attention to the exclusions section, which lists the things your policy does not cover.
Obtain adequate life insurance. The life insurance coverage offered by your employer may not be enough. Realistically determine how much life insurance you need and then shop around. Term insurance is the most affordable type of life insurance, just be sure that the term lasts until your children are financially self-sufficient.
Don’t skimp on disability insurance. At any given age, your chances of becoming
disabled are higher than your chances of dying. If your employer does not offer
group disability insurance, seek an individual policy.
Understand the cost of CREDIT
It is important to carefully weigh your options before making a credit decision. When you sign or cosign an application for credit, you are agreeing to all its terms. Moving forward, commit to understand everything to which you are agreeing. At the very least, you will want to compare the following terms before making a borrowing decision:
Interest rate or APR
APR is the annual interest rate you will be charged on a loan or the unpaid balance of a
Length of the loan
As the length of the loan increases, the monthly payment will decrease, but the total interest charged will increase.
Total cost of the loan stated in dollars.
The maximum amount you can borrow at any time.
Minimum monthly payment
The smallest payment your creditor will accept.
Number of days you have to pay your bill in full before interest is charged.
Over the limit and late fees
The amount you will be charged if you are late with a payment or go over your credit limit.
Assemble a FINANCIAL TEAM
Managing your finances can be like putting together a puzzle; all the pieces need to fit in order to be rewarded with the “big picture.” Working with one or more of these financial professionals can help put the pieces in place.
Tax advisor. Tax advisors provide tax advice and assistance to consumers. Tax advisors can help you to navigate tax laws, prepare complete and accurate returns, and develop a strategic tax plan.
Credit counselor. If you are struggling with debt payments, credit counseling can help. You should contact a credit counseling agency at the first sign that your debts are becoming unmanageable. Things to look for in a quality agency include history, quality, accessibility, knowledge and good customer service. Money Management International (MMI) has all of these important qualities and more.
Financial planner. Whether you are just out of college or entering retirement, most everyone can benefit from the help of a trusted financial advisor. Professional financial planners do more than offer investment advice. A financial planner may also be able to help by analyzing employee benefits, discovering insurance needs, and developing a system to manage cash flow. Financial planners can also help with estate planning and may have relationships with other professionals, such as accountants or attorneys.
Lawyer. Lawyers can help consumers by preparing important legal documents such as a living trust. An attorney can also be very helpful if you need to consider bankruptcy or want to challenge a wage garnishment. Lawyers can also assist consumers when a violation of the law has occurred. For example, if you feel that a creditor has violated the Fair Debt Collection Practices Act, you may be able to sue for harassment. Working with an attorney can help you understand your rights. Before working with any financial professional, be sure to check their credentials. Ask specific questions about their history and areas of expertise.
Finally, be sure that you are comfortable with the advisors you choose; ideally, you will be financial partners for life.
Appreciate the benefits
Change may be hard, but the payoff can be priceless. In addition to improving your financial situation, you may also find your money management skills can benefit other aspects of your life. Consider the following benefits. Place a check next to those you will enjoy as a result of taking ownership of your finances.
Feel free to add others - the possibilities are endless. 29 Appreciate the benefits
If I stick to my plan, I will:
Feel a sense of accomplishment
Have less anxiety
Feel like I am setting a good example for my family
Build a secure financial future
Improve my creditworthiness
Appreciate the things I have purchased.
Avoid legal problems
Be prepared for financial emergencies
Feel more in control of my financial situation
CONGRATULATIONS! You have given a great deal of thought to your financial situation, your spending habits, and the change process. You now have the knowledge necessary to make positive decisions that will ensure a successful financial future.