Over the years that we’ve covered the money beat, we’ve learned a lot, from the dozens of “I got out of debt” success stories to the dozens of psychological studies that show how better money decisions can lead to behavior changes and you can the these 20 money tips will change your life
Since April is Financial Literacy Month, we thought there was no better time than now to put together a list of our 20 best money tips. From how to make a budget like a pro to how to make more money like a pro, these pieces of financial advice are as good as the day they were written.
First Things First: A Few Financial Basics
1. Create a Financial Calendar
If you don’t think you’ll remember to pay your quarterly taxes or pull your credit report every few months, you might want to set an appointment reminder for these important money tasks, just like you would for an annual doctor’s visit or car tune-up.
2. Check Your Interest Rate
Pay off which loan first? A: Highest rate. How should you save? A: Best rate. Why is credit card debt so stressful? A: Compound interest. Overall: Interest rates might help you prioritize debt or savings.
3. Monitor net worth
Your net worth—the difference between assets and debt—shows where you stand financially. It might help you track your financial progress or notify you if you’re backsliding.
How to Budget Like a Pro
4. Set a Budget, Period
This serves as the foundation around which all of the other goals in your life are built.
5. Think about a cash-only diet
If you always spend more than you have, this will get you out of that habit. Don’t believe us? These three people’s lives were changed by the cash diet. And when this woman went all cash, she realized it wasn’t as scary as she thought. Really.
6. Spend a Money Minute a Day
Alexa von Tobel, the founder and CEO of LearnVest, swears by taking one minute every day to look over her financial transactions. This 60-second step helps you figure out problems right away, keep track of your progress toward goals, and set the tone for how you’ll spend the rest of the day.
7. Spend at least 20% of your income on your financial goals.
When we talk about priorities, we’re referring to things like putting away money for unexpected expenses, paying off debt, and increasing the size of your nest egg for retirement.
8. Plan to spend about 30% of what you earn on your way of life.
This includes going to the movies, eating out, and going to happy hours—basically anything that isn’t a basic need. You can save money and treat yourself at the same time if you follow the 30% rule.
How to Get Money Motivated
9. Make a plan for your money.
You need the motivation to start better money habits, and making a vision board can help remind you to stay on track with your financial goals.
10. Set Specific Financial Goals
Don’t just use words to describe what you want to do with your money. Instead, use numbers and dates. How much and when do you want to pay off your debt? How much do you want to save, and when do you want it?
11. Make Bite-Size Money Goals
The further away a goal seems and the less certain we are about when it will happen, the more likely we are to give up. In addition to big goals (like buying a home), set smaller, short-term goals that will yield quicker results, like saving money each week for a trip in six months.
12. Get in shape with your money and your body
One study found that more exercise leads to higher pay because people are more productive after working up a sweat. Taking up running could help you make more money. Also, all the habits and discipline you need to run a marathon are the same ones you need to manage your money well.
Also Read: Is R&D a cost or an investment? How a value investor should look at R&D
How to stay away from debt
13. The FAFSA should be filled out by every student.
Even if you don’t think you’ll get help, filling out the form won’t hurt. Because 1.3 million students didn’t fill out the form last year, they missed out on a Pell Grant, which doesn’t have to be paid back.
14. Choose mortgage payments that are less than 28% of your monthly income.
When trying to figure out how much house you can afford, that’s a good rule of thumb.
How to Save Right for Retirement
15. Do Everything Possible Not to Cash Out Your Retirement Account Early
Early withdrawals will cost you dearly. First, you’re undoing all the hard work you’ve put into saving and investing. Second, early withdrawals carry a substantial penalty. Your withdrawals will be taxed. These circumstances make early withdrawals a last resort.
16. When You Get a Raise, Raise Your Retirement Savings, Too
You’ve always said you’d save more when you had more. That’s unacceptable. When you get a raise, increase your automatic savings and retirement contributions.
How to Prepare for Rainy (Financial) Days
17. Make Savings Part of Your Monthly Budget
If you wait to save money until you always have enough money left over at the end of the month, you’ll never have any money to save. Instead, put money aside each month into your budget right now.
18. Direct Deposit is (Almost) Magic
Why? Because it makes you feel that the money you save each month comes from thin air, even though it comes from your paycheck. You won’t miss the savings money in your checking account, and you may be surprised by how much it grows over time.
How to Approach Investing
19. Pay Attention to Fees
Cost-to-income ratios, which are another name for the fees you pay for your funds, can cut into your returns. Even a fee that seems small, like 1%, will add up in the long run. In general, we say to stick with index funds with low fees.
20. Rebalance Your Portfolio Once a Year
We don’t think it’s a good idea to play the market, but you should check in on your brokerage account every so often to make sure that your investments still align with your long-term goals.
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