Tag: financial habits

The 5 Best Financial New Year’s Resolutions

Change has to start somewhere, and for many people that change is easier to make if the starting point has some meaning. It can be a birthday, an anniversary, or any other date with some symbolic weight. Most commonly, people choose the beginning of the new year.

If you’re looking for some New Year’s resolutions that will truly change your life, consider adjusting your financial strategy. Here are five things you can do in 2021 to take your money game to the next level.

Refinance Loans

Interest rates are at near-historic lows, which makes this the perfect time to refinance your debt. Refinancing means switching your loans from your current lender to a new lender in order to take advantage of a lower interest rate. Refinancing can save you thousands of dollars, depending on the original interest rate and total balance.

 For example, let’s say you have a $200,000 30-year mortgage with a 5% interest rate, and you refinance to a 3% interest rate. Your monthly payment will be $244 lower, and you’ll save $31,173 in total interest over the life of the loan. 

You can refinance auto loans, personal loans, and even student loans. However, if you have federal student loans, you may want to hold off on refinancing. Refinancing a federal student loan converts it into a private student loan. This means you’ll give up extra perks and benefits like income-driven repayment plans and deferment and forbearance options.

Transfer Credit Card Debt

If you have credit card debt, you can pay less interest by transferring the balance to a new card with 0% APR on balance transfers. These special discounts usually last between 12 to 18 months, during which time you won’t be charged interest on the credit card balance.

For instance, let’s say you have a $5,000 balance on a card with a 17% APR. If you only make the minimum payments, you’ll pay $1,223.61 in total interest. If you transfer that balance to a card with 0% APR for 12 months and repay the balance in that time, you won’t pay any interest.

There is often a small fee associated with balance transfers, around 3% of balance transfers. For example, if you transfer $5,000, you’ll pay a $150 fee. That still leaves a net savings of $1,073.61 in the scenario outlined above.

Decrease Your Fixed Expenses

One of the best things to do for your budget in 2021 is to decrease fixed expenses like your car insurance, internet, cable, and cell phone. Call those providers and try to negotiate a lower rate.

 Go through your transactions for the past few months and write down all the recurring subscriptions like Netflix, Amazon Prime, and DoorDash. Then, group them into categories like “frequently use,” “sporadically use” and “rarely use”. Consider canceling anything you rarely use.

 See if you can get a better deal on your most popular subscriptions. For example, if you and your significant other both pay for Spotify Premium, get a Spotify Duo account instead, and save yourself $83.88 a year.

Open a Better Bank Account

Most people are missing out on an easy way to earn money through your bank account. You could be leaving hundreds of dollars on the table if you still have a traditional savings account.

According to the FDIC, the current average interest rate on a savings account is 0.05%. Many high-yield savings accounts offer rates between .40% and .60%. 

Let’s say you have $10,000 in a savings account with .05% interest. After one year, you’ll have earned $5.04 in interest. If you moved that amount to a high-yield savings account with .5% interest, you would earn $49.92 in interest over that same time period.

Start Investing

If you’re not investing for retirement yet, this might be the most important financial resolution you can make. Thanks to the power of compound interest, you can start investing now and see huge growth by the time you’re ready to retire.

IRAs and 401(k)s are the two main retirement accounts. Anyone can open an IRA, while only those who have access to an employer-sponsored 401(k) can open one.

 If you’re not sure how to invest in your retirement account, consider hiring a qualified financial planner through the National Association of Personal Financial Advisors (NAPFA).

If you’re not ready to work with a financial planner, you can use a robo advisor like Betterment or Wealthfront, which will create a portfolio based on your age, income, and expected retirement age. Robo advisors have low fees and are designed to help beginner investors.

How to Keep Financial Resolutions

First, start small. Pick one habit to change at a time. If you try to accomplish five goals at once, you’ll burn out quickly and give up. 

When you decide on a resolution, break it up into smaller, more manageable tasks. For example, if your goal is to talk to a financial planner about investing, break it down into the following steps:

1) Research financial planners through NAPFA

2) Send introductory emails to three financial planners

3) Choose the one that seems like the best fit

4) Schedule a consultation

Give yourself a deadline to accomplish each of these tasks, and ask a friend to hold you accountable.

Another tip is to tie your resolutions to a bigger goal. Like dieting or starting a new exercise plan, changing your financial habits is hard. If you’re used to grabbing lunch with your co-workers every day, bringing leftovers from home instead will seem like a huge change.

The key is to imagine the future version of yourself who will benefit from the changes you make today. If your goal is to open and contribute to a retirement account, imagine yourself as a senior citizen living comfortably.

When you’re tempted to skip this month’s retirement contribution to buy concert tickets, think about your future self, what you’d want for them and how they would appreciate your sacrifice. It can also help to remember some of the financial mistakes you’ve made in the past, and how much easier your life would be right now if you had made a different choice.

The post The 5 Best Financial New Year’s Resolutions appeared first on MintLife Blog.

Source: mint.intuit.com

3 Reasons to Use Cash and 3 Reasons to Choose Credit

Cash vs credit

3 Reasons To Use Cash (and 3 Reasons To Choose Credit)

Credit and debit cards have become so ubiquitous, you’d be forgiven for thinking physical cash is just a couple years away from being declared obsolete and worthless by the government.

Well, as it turns out, the death of dead presidents is greatly exaggerated, as over $1.25 trillion still circulates around the United States alone.

Way too many people use cash for it to ever go away completely, regardless of how much plastic gets wiped every day.

So why in the world would anydiv still pay with Georges and Bens? Here are a few good reasons why:

Less Chance of Identity Theft

Few things are scarier than hearing that the store you regularly swipe your card at just had a security breach, and that some anonymous criminal may have your identity at their disposal.

Paying cash eliminates that issue — chunks of metal and pieces of paper stacked in a register tells fraudsters absolutely nothing, while the information sent to vulnerable computers via your bank card can reveal everything.

Easier to Watch and Control Your Spending

Actually seeing the cash you owe, as opposed to simply staring at a generic card with no monetary value of its own, can remind you to spend less overall, since all of a sudden the money is real, and real valuable at that.

Financial guru Ramit Sethi, for example, lost his credit card, and spent nothing but cash until a replacement came. He reported spending 18% less when forced to watch his green wad dwindle in real-time.

Some Places Still Don’t Take Plastic (or Require a Minimum Purchase Amount)

Amazingly, over half of all small businesses won’t take cards, likely because they can’t afford the fees.

It’s always good to keep at least some cash on you in case you need to make a purchase from one of these places.

Even if they accept cards, some of these businesses might only do so if you spend X amount, in order to override the fee.

If you entered the store to spend more than the minimum amount, then swipe away. But if you only want a loaf of bread, and they want you to spend $10 before they’ll accept your card, just pay for your bread with bread.

That all being said though, there are several cases where plastic owns cash. Here are a few of those:

Cash vs credit online purchases

Online Purchases

Increasing amounts of items can now only be purchased online and with a credit card, or at the very least are extremely difficult to cover with cash.

Plane tickets, while still technically available at a travel agent’s physical office, are usually much, much cheaper online, where you can’t obviously use cash. The same thing goes for e-books, MP3s, subscriptions to streaming sites, and the like.

The more you shop online, the more reliant you will become on cards in your everyday life.

ATM Fees Can Pile Up

Unless your bank’s ATM is everywhere, then you may often find yourself forced to withdraw your cash from the competition’s ATMs, which will cost you anywhere from $2-4 per pop.

This adds up to a ridiculously high amount, as it’s estimated that the use of cash costs Americans over $200 billion per year.

While not all of that amount is ATM-related, a large chunk of it is, and could easily be saved with the use of cards.

Smart Card Use Can Help You Build Your Credit Score

Finally, while cash is great, it does absolutely nothing to improve how companies and lenders look at you. Responsible credit card use, on the other hand, not only helps you purchase what you want and need, but helps build up your credit score.

There’s a good chance that not having using a card could negatively affect your credit score or nullify it altogether, since you’re not giving the credit agencies any information about your financial habits.

So get a card or two, use it when necessary, use cash every other time, and you should achieve a pleasant balance between the two that can only bode well for your fortune going forward.

Whether you use cash or plastic, Mint.com can help you budget every penny of your finances. Click here to find out how!

The post 3 Reasons to Use Cash and 3 Reasons to Choose Credit appeared first on MintLife Blog.

Source: mint.intuit.com

5 Financial Goals to Start in 2021

 

Although many people start New Year’s resolutions in January, there’s nothing magical about January with regards to self-improvement. Still, the best time to make a change or set a goal is today, so if you’re ready to level up in your life, there’s no time like the present. Here are five financial habits that you might consider starting this year. 

Commit to a written budget (and review it often)

The very first thing that you’ll want to do is commit to a budget. Having a budget is the cornerstone and foundation for financial success. Knowing where your money is going (and not going) can help you understand where you’re at. If you’ve had trouble making or keeping a budget, resolve to start a budget this year. A tool like Mint can be a great way to put your budget on autopilot.

Remember that a budget is just a tool to help you to not spend money on the things you don’t find important so that you have money to spend on the things that you do find important. If you already have a budget, make it a habit to review your budget, at least monthly. That can help you identify where you might be able to make improvements.

As you start or recommit to your budget, make sure that it is written down. Budgets that are not written down, like goals, tend to fall by the wayside easily.

Start (or build) your emergency fund

Another great habit to get into in 2021 is starting an emergency fund. An emergency fund should be one of the very first things you do with any extra money you have in your budget. Even before working on eliminating your debt or saving for retirement, it makes a lot of sense to set aside money for emergencies.

A good rule of thumb is to start with a $1,000 emergency fund. It may not cover catastrophic emergencies, but it can help you to avoid having to spend on your credit cards when the unexpected happens. After you’ve started that basic emergency fund, then you can continue to build it up while also starting to pay off debt or invest for the future. If you can, it’s a good idea to have a couple of months of expenses in your emergency fund. That way you’re covered for a while in case you lose an income source or have a major emergency.

Make a plan to eliminate your debt

The next habit to start or continue this year is to eliminate your debt. Depending on how much debt you currently have, it may not be realistic to pay off all of your debt in 2021. But no matter what, you should have a plan in place. There are a variety of different debt repayment strategies – the debt snowball and the debt avalanche among many. It’s important to pick a debt payoff approach that works for you, and that you can stick to. Make it a habit to spend less than you earn and work towards becoming debt-free.

Spend with a purpose

Another great habit that can help you live within your means is to spend with a purpose. Spending with a purpose means that you are conscious with your spending. If you ever find yourself wondering where all your money has gone, you may benefit from being more deliberate with your spending.

Many people find success by setting a rule about any non-essential spending. For example, before you make any purchases besides essentials like rent, utilities, and debt payments, you must write it down. Just the act of writing it down (or taking a picture of it) is enough for many people to be more deliberate and conscious about what they choose to spend their money on.

Pay yourself first, and make sure to give yourself a raise

If you’re like many people, you may have good intentions of saving money each month, but at the end of the month, you find there’s nothing left over after all the bills are paid. One habit that people who are successful financially have is to pay themselves first. Put your savings money aside at the BEGINNING of the month. It’s a bit of a mental trick, but many people find that having that money out of sight helps them to save more.

Another financial habit to start is to always give yourself a raise. Whenever you get a raise at work or come across any “extra” money, IMMEDIATELY put it either in your emergency fund or use it to pay down your debt. Putting any raise or extra money towards your savings (instead of increasing your standard of living) is a great habit to start. 

This is a great habit to start, especially if you are young or just starting out in your professional life.  Of course, paying yourself first and giving yourself a raise, doesn’t mean that you have to only eat ramen or can’t have nice things. But thanks to the magic of compound interest, the sooner you start to save and invest, the better off you’ll be.

The post 5 Financial Goals to Start in 2021 appeared first on MintLife Blog.

Source: mint.intuit.com