2018 – a new financial start
Happy New Year! I hope you had a great holiday.
New Year means a new financial start. Now it’s the time to take a fresh look at your finances, and see what can be done better in 2018.
You might ask: why do I have to do that? It’s because money can’t take care of itself. You have to be on the driver seat, and take actions to manage the money. The purpose is to let the money work for you, not the other way around.
Everyone has a lot of responsibilities daily: working on one or two jobs, taking care of the kids and other loved ones, running errands, cooking, cleaning up the house, on and on. You might feel exhausted at the end of the day, and barely have any time left to work on your finances.
This is a challenge faced by many. People are too busy, and put their own finances to the back burner for too long. Now let’s pull it to the front burner, and work on it. It’s the time to take care of ourselves first. When you are in a great shape financially, you’ll have better means to help your loved ones. This is a win-win situation.
Let’s get started.
- Emergency fund
Do you have an emergency fund saved?
If yes, that’s great. How many months can the fund last to cover your expenses? 3 months? 6 months? Or longer? More money in the emergency fund gives you a better cushion. How nice it is to feel being protected!
If no, it’s not the end of world. But, you got to take the action today: start saving for the emergency fund. Believe me, emergency happens: job loss, unexpected medical bills, a leaking roof, etc. Those stressful things always catch people off guard. Emergency fund empowers you to go through the emergent situations.
How to save? The principle is very simple: increase the income, and/or decrease the expenses. Do whatever works, and put aside the money each month. Don’t touch it, unless a real emergency happens.
Where to put the money? The simple way is to put it into the bank, FDIC insured. Saving account or money market account would do it. In this way, it’s safe and sound. It’s also liquid, and can be withdrawn anytime when really needed.
I feel the emergency fund helps me sleep better.
- Tackle credit card debts
Do you have any credit card debts? If yes, what’s the interest rate you are paying now? If you don’t know, pull the last month’s statement and find out.
15%? 18%? That’s a lot of money you are paying to the banks, my friend. Stop the money bleeding. You can do it. Cut your expenses as hard as you can, and pay off the credit card balance, period.
Once the card is paid off, don’t carry the balance anymore. It’s too expensive, and hurts your finances a lot. Pay the full amount for each credit card statement, no excuses.
Treat credit card purchase the same as cash purchase. If you have any problem in doing that, please don’t use credit card. Use cash or debit card. For debit card, you got to know your account balance, and don’t overdraft.
- Run the annual free credit report
When was the last time you checked the credit report? Do you know you can get a free credit report once a year from the 3 bureaus: Equifax, Experian, and TransUnion?
Why run the annual free credit report? The purpose is to make sure that, nobody stole your ID and opened accounts under your name without your knowledge. Another reason is to verify the information, make sure your creditors reported correctly. Errors should be corrected. Otherwise it could affect your credit score in a negative way.
- The 401K contribution percentage
What’s your current 401K contribution percentage of your pay? Are you contributing enough to get the company match? If not, increase your percentage, and get all the matched amount. It’s free and sweet money, and you’ll love it.
When was the last time you made the percentage change? I hope you increased the percentage last time. Don’t decrease it unless you have a very good reason.
Talk to your spouse or partner, and see if you could afford to increase the percentage this year. Even 1% higher is a good move, 3% higher is even better, and 5% higher makes you a champion. Take the new federal tax bill into account. If your tax goes down in 2018, save the extra amount and invest them. 401K is one option.
- Reduce the banking fees
How much did you pay the fees to the banks in 2017? Examples of the banking fees: late payment fee (for credit card, mortgage, equity line of credit, car loan, etc), overdraft fees, monthly maintenance fees of bank accounts, ATM fees, fees for bounced checks, etc.
Those fees were pulled from your pocket, and went quietly to the hands of the banks. How do you feel when seeing your hard-earned money flowing to the banks? Mad, right? I’m with you. I hate those fees, too.
I have been banking for 21 years in US, and have not paid a penny on the banking fees so far. Do you want to know the secret? Get to know the fee structure for all the accounts you have, and make sure you meet those fee-waiving requirements. Here are some examples.
Many checking accounts have minimum balance requirement in order to waive the monthly fee. I wrote down the required amount. And make sure my account balance is way above that number on every single day. Don’t take any chance.
Having enough money in the checking account helps me to avoid several fees. Overdraft never happened to me, as I know my account balance. The checks I wrote never bounced back. I still maintain a paper register for checking account. The minute a check is written, the dollar amount is taken out of the balance. I would rather be cautious than be sorry.
ATM fees are easy to avoid. I only go to my bank ATM for cash, period.
In summary, if you have already done the 5 items listed above, that’s wonderful. Congratulations! Try to help your loved ones to follow your suit, and get their finances in good shape as well.
For other folks, I highly recommend you take some actions items. Pick the one that is the most important to you, and start working on it. Once the first item is done, try the second one. Step by step, your finances will be in a better shape at the end of the 2018. I look forward to your good news.
Take a look at my eBook, a mini-memoir on Amazon: “DAD’S BICYCLE: Journey of A Chinese Family”.