Becoming a savvy consumer doesn’t have to be complicated. With the right strategies, you can take control of your money and make financial decisions you can feel good about.
Check Your Spending, Build a Budget
For many people, budgeting seems harder than it is. But it doesn't have to be. The truth is, creating a budget is the foundation of good financial management. A quick way to do this is to calculate your spending using our Household Cash Flow Tracker.
Whether you use an app, online tool or spreadsheet, knowing how much money you have and how you spend is key to helping you achieve your short- and long-term goals.
Cut Out Unnecessary Extras
Once you've figured out how much money you need for the basics, focus on your spending habits. Do you make too many impulse buys? Do you eat out a lot? Are those lattes adding up? Add up these expenses and determine a realistic amount you can put toward these extras and where you can cut back.
Next, review your subscriptions and memberships. Cancel any subscriptions you no longer use or find valuable. Entertainment costs can also be a significant drain on your finances. Instead of paying for traditional cable TV, consider opting for streaming services that offer a wider variety of content for a lower cost.
Pay Yourself First: Practice the 10% Rule
If you don't have a place for regular savings, that's a budget reality check. The "pay yourself first" rule means saving a portion of your income before spending it on other things. If you can afford it, take at least 10% of your income and set up automatic transfers to a high-yield savings account. Even if you can't start with 10%, pick a dollar amount you can manage and build from there.
Save for the Future
No matter your age, invest in your company's retirement plan. If your company sponsors a 401(k), your employer usually matches your contributions, which can range from 2% to 8%. Always try to contribute up to the equivalent of the maximum match, because it's free money you won't get otherwise.
If you don't have a company plan, consider a traditional or Roth Individual Retirement Account, or IRA. A traditional IRA is like a savings account with tax breaks because contributions and earnings grow tax-deferred until you start withdrawals after age 59½. Roth contributions are made with after-tax income, and they allow your earnings to grow tax-free if not withdrawn before you turn 59½ and the Roth has been funded for at least five years.
Get a Handle on High-Interest Debt
Once you've penciled in your budget, you may realize your debt needs some attention. If you are carrying a balance on a regular basis, it may be hurting your bottom line. According to the Federal Reserve, the average credit card rate sits at 22.63%. If you're only paying the minimum on your balance, you're only paying around 1% to 3% of the balance owed. The larger the balance, the further away you are from paying it off once and for all. And if you have more than one high-interest card, you can see how debt can quickly snowball.
Here are some ways to address it:
- Pay the minimum amounts on all your debts and increase your payment for the card with the highest interest rate. Once that's paid off, direct a larger payment toward the next debt.
- If you consistently carry a balance, look for a card with a lower interest rate.
- Take advantage of a balance transfer offer. Avoid cards with balance transfer fees, which typically are around 3%.
- Use a debt consolidation loan so you can depend on a consistent monthly payment.
Although these are all viable options for attacking debt, you probably need to change your relationship with it and how you manage it. If you're consistently using credit to get by, reexamine your budget, find ways to cut back or get help when you need it. For instance, GreenPath Financial Wellness offers confidential credit counseling and debt management planning services.
Negotiate Bills
Negotiating bills is an often-overlooked strategy that can reduce your monthly expenses. Many service providers, such as cable, internet, and phone companies, are open to negotiating rates to retain their customers. Research competitor prices, look for discounts based on your loyalty or specific situations like student status and be prepared to discuss your needs and switch if you find a better deal.
One effective approach is bundling services. Many companies offer discounts if you combine multiple services like internet, cable and phone into a single package. This simplifies your billing but can often result in lower overall costs.
Have Fun, Too.
Being financially responsible doesn't mean you have to eliminate all the fun from your life. In fact, finding a balance between saving and enjoying your money is key to maintaining long-term financial well-being. One effective strategy is to create a separate budget specifically for leisure activities.
And if you can't accomplish all these financial tips just get started. Over time, the changes you make can create lasting benefits.