Do you know how you eat an elephant? As the old joke says, one bite at a time. Well, the same thing applies when we are trying to make lasting, permanent changes to our finances. Do it one bite at a time.
The least painful, and most long-lasting, way to make a dramatic change is to break it down into many simple, easy changes. Dramatic results come from easy changes.
We’re going to make 2017 the year that we make significant advances in our personal finances. One bite at a time.
I write about money a lot! If you enjoy this post, you’ll want to check out these other related posts:
Start the New Year with a New Family Budget (free printable for subscribers)
Small changes can bring big results.
Compare insurance rates
Unless you have a really excellent relationship with your insurance company, one is probably as good as another – other than price.
Compare your insurance rates to the other options available. That includes your auto, home, extended health coverage, etc. Check them all. It’s quite likely that you can find a company that offers coverage that’s as good or better but at a lower rate.
Don’t be too quick to jump on the lowest rate, though, because that’s not always the entire story.
A good relationship with your insurance company can make all the difference in a stressful situation. In 2016, while my son and I were sitting in a parking lot discussing what we were going to do inside the store, another driver struck us twice. Our car sustained some body damage and I got a bad case of whiplash in my neck and right shoulder. My insurance company was absolutely marvelous. At no time did they demand unreasonable work from me and they quickly agreed to everything that my doctor, physiotherapist and repair shop asked. They even provided a rental vehicle for the week that my car was being repaired, and they called regularly to check on the progress of my healing.
But what if your relationship with your insurance company is more typical or it is, in fact, antagonistic? You do not owe them anything – shop around for a better rate and preferably better customer service.
Review your cable and internet service
Cable bills can quickly get out of hand. I’m often shocked at how many people take for granted that they’re paying $200 or more every month, especially when they’re really only interested in two or three programs.
Take a look at the channels and services you use and need. Could you perhaps lower your package to one that costs a bit less? If you have the option of multiple cable providers, compare their packages.
And don’t forget to look into alternatives like Netflix. There’s less selection but the cost is dramatically less. And no advertising – as a parent, I love that.
Review your credit report
Up to 30% of credit reports contain errors.
A number of years ago, we sat in the bank and checked the mister’s credit reports. What a shock – even though he has a very unusual name, there was someone else with the same name and some of the records were mixed up. It was an amusing and easily fixed mistake because we could prove that he had not lived in any of the places where this other man had lived. You do keep proof of past addresses in your lockbox, right?
No matter how unique your name is, you likely have your own John Jacob Jingleheimer Schmidt. It’s even worse if you have a common name.
Of course there are other ways that mistakes happen. Creditors can forget to remove paid debts, for example.
It is wise to check your credit report every year. In Canada, contact either Equifax or TransUnion Canada. We can check our credit report as often as we like, as long as it is in writing and by mail. This does not affect the credit report, although the requests are noted.
Americans can receive one free credit report from each bureau once a year. In addition, if you have been turned down for credit in the past sixty days, you can get a free report. Contact the central service at Annual Credit Report.
Review your cellphone usage and bill
Are you paying too much for data that you never use? Downsize your plan. Have you had your phone for over two years? You might be able to move to a prepaid plan that costs much less. There are even some providers who will buy out your cellphone contract and give you a much better plan.
There are many different ways to save money on your cellphone, so it can really pay to do your research on this one.
Build an emergency account
If you’re spending all of your money each month, you don’t have a cushion to deal with the unexpected. Three months’ worth of expenses is the standard advice. That’s not the same as three months’ income. Aim to have enough so that you can pay the vital expenses for three months.
Get started today.
The first step is to sit down with the entire family (well, anyone who is old enough to keep money out of their mouths) and work out a functioning family budget. Start funneling that saved money into paying off debt first and then into building up an emergency account.
Why pay off debt first? Well, it does no good to have $5000 sitting in your bank account, earning absolutely no interest or at best saving you a $10 bank service fee, while you owe $15,000 on credit cards that are incurring interest at 19%.
Get rid of the debt, especially credit card debt, first.
Spend less on food
Food is a significant monthly expense. Shopping with cost in mind can yield significant savings.
Make this the year that you get that deep pantry set up and the year that you start creating a price book to understand the actual cost of the food you buy.
Stockpiling food that is bought at “the best possible price” comes before savings or even debt repayment. It might seem strange to put that extra $25 into buying a case of half-price pasta when you know you owe money, but the long-term savings will help you pay off the debt even faster.
Why? Well, you could almost consider groceries to be your highest interest debt.
With a well-stocked pantry, I feed my family without worries about what is on sale. The only sales I care about are the very best ones, especially when items we use often are half price or better, and then I buy in large amounts.
Now with all things, this must be done in moderation. You want enough stockpiled – at rock bottom prices – so that you can always buy sales and avoid paying full price. The money that you save each month must be funneled into your debt. You do not want a small warehouse of hoarded food in your basement that never gets used.
When you have that stockpile, use it. Start eating at home more.
Use a cash back credit card
This can be a controversial suggestion because it is almost always best to use cash. But since not everyone is going to – if you use a credit card, make sure it’s a no-annual-fee, cash back card.
That 1% cash back bonus can add up to a considerable amount.
The first time I ever heard of a cash back credit card was from my younger brother. He had set up his accounting so that every single expense went through his credit card, with the balance being paid in full every month. From rent to food to gasoline, he was getting a small rebate on everything.
It’s not for everyone, though, so don’t try this unless you have your spending under control and have paid off all of your debt.
If you use your card to get the cash back bonuses, be sure to pay off the balance each month, or the interest charges will cost you more than you’re getting back in bonuses.
Create financial goals
What financial goals are reasonable for you to achieve during this calendar year? Your goals could deal with debt repayment, net worth, income, savings, taxes or anything else that you consider important.
Sometimes we forget to include finances in our goals list.
Like all other goals, get it in writing and break it down into small steps.
Read a book
Don’t restrict yourself, though. Read a book on a money-saving skill that you’ve been wanting to learn, for example.
Transfer your credit card balances to a card with no interest
Debt happens, unfortunately. But watch for the offers from the credit card companies. If you transfer a balance to a card with no interest for six months, you can save a lot of money.
Well, let’s say that the card charges you 1% of the balance in order to make the transfer. You move $5000 over and pay $50. Over the next six months, pull in your belt and put $845 on the debt repayment each month. Instead of paying 18-22% in compound interest, you’ve paid just $50 and saved as much as $520, depending on your interest rate!
Be sure to read the fine print and understand all of the details. If you are going to take advantage of a plan like this, you absolutely must pay the full amount by the end of the six month term otherwise you will be hit with the entire six months worth of interest all at once. Ouch.
And once you get that card paid off, get rid of it and use your cash-back card or cash!
Set up your paycheque or account to ensure that you save money automatically. You will need to talk to your bank to find out what options they have, but I think most banks now offer some type of automatic savings plan. If you think you’ll forget to set aside the money or just want to guarantee that you have no excuse for saving, look into this.
But – and I can’t repeat this often enough – don’t save until you have paid down your debt.
So you’ve started saving. That’s great!
Now increase the amount you’re currently saving by a small amount.
Next month, increase it by a little more. You won’t notice the change in your take-home pay, but you’ll certainly notice the increase in your savings.
When we did this years ago, we started with two dollar coins. (Yes, my American friends, we have $1 and $2 coins in Canada, not bills) After all, they’re everywhere and they weigh a lot if you have to carry them around. Not only that, but even people on a very restricted income can find $2 to tuck into a savings jar. We increased the amount slowly, every time we realized that the savings weren’t feeling too onerous.
The amount of money we saved in a year was astonishing, even though we had an income that was considered “low income”.
Keep tabs on your net worth
Once a month, calculate your net worth and track the changes. This can either be an eye-opener or a confidence booster.
Don’t get too hung up on it emotionally, though. There are people – and I am certainly not one of them – who believe that your net worth defines your value. It does no such thing. It’s a tool to help you assess your financial health.
Start an account to save for your child’s education
In Canada, that means opening up an RESP – a Registered Education Savings Plan.
In the United States, look into a 529 plan.
In either case, these are tax-free savings plans that allow parents or other subscribers to put aside money on a regular basis to pay for a child’s secondary education in the future.
Anticipate your future expenses and plan ahead
Does your car have over 200,000 miles? Is your central A/C over 10 years old? It’s only a matter of time before a major expense is headed your way. Begin planning today. Long-term savings are good and necessary, but remember that some of it has to set aside for those large expenses that we should anticipate.
If you picked one of these each week and worked on making it happen, imagine how much better your financial situation would be in just four months.
Each of these recommendations will only take a few minutes of your time. Focus on making small changes that make a difference. It’s a lot easier than figuring out how to triple your income, and it will put you in a good place if your income does suddenly triple!