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1. Pay yourself first. Try to put away at least 10% of your pre-tax
income into a savings account.
2. Spend less than you earn. While this seems obvious, Americans are
notorious for doing just the opposite. Stop spending and start saving.
3. Pay your bills on time. Avoid needless late fees and know how much
money you actually have.
4. Avoid debt to the extent possible. Student loans and mortgages can be
"good debt", but even then, make paying them off a priority.
5. Set a budget. And live by it. Use a computer program or just a paper
and pencil. Whatever works.
6. Set concrete goals. Know when you want to buy a new home, when you
want to retire, and how much you are expecting each to cost you.
7. Have an emergency fund. Have at least three months' income (some say
six) in a high-yield savings account that can be easily accessed.
Career and Education
8. Get educated. A college education always pays for itself and more. In
2004, bachelor's degree holders earned an average of $51,206 per year, while
high school graduates earned only $27,915, according to Census data compiled by
HighBeam Research
9. Your career is your most valuable asset. Manage it with a higher
priority than you would with any other investment. Remember that without this
asset, you couldn’t survive
10. Save enough. You should try to save enough to cover at least
one-third of your kids' total college costs.
11. Consider public schools. Especially for college, state schools. can
often times be just as prestigious, if not more, than private schools.
12. Consider community college or online college for your first year or two.
You can then transfer these credits to a more expensive (and prestigious)
school to finish your final two or three years.
13. Invest in a 529 college savings account. It's tax-free. What more
needs to be said?
14. Ask for a raise. Use the Salary Wizard Calculator to see if you're
making as much as you should. If not, consider asking for a raise, especially
if you've been at the company for more than a year.
15. Get a professional certificate. Some professions offer a certificate
that, if earned, will generally provide you with a higher salary.
16. Don't major in English. If you love studying English, there's
nothing wrong with that. Just be aware that English majors generally don't earn
very much. Six of the top ten list of majors with the highest salaries are
engineering majors, with chemical engineering topping the list.
Credit and Loans
17. Get a rewards card. If you need a credit card, the best type to get
is a no-fee rewards card that you pay in full every month.
18. Borrow no more than 30% of your available credit. Borrow any more,
and your credit score won't look too good.
19. Pay off your credit card debt. Credit card debt is usually the debt
with the most interest. So pay it off first. Better yet, don't accumulate it in
the first place.
20. Don't use your credit card for cash advances. It will harm your
credit score
21. Know your credit score. Order your credit score from Equifax,
Experian, and/or TransUnion.
22. Protect yourself from identity theft. Obtain your free credit report
at least once per year and follow these tips.
23. Pay all credit card balances in full each month. Leaving a balance
on a credit card account will leave you susceptible to a very high APR. You may
as well be throwing cash into the fireplace.
24. Consolidate your loans. Especially those student loans. With a
student consolidation loan you can lock in several loans at a fixed interest
rate and have just one lender to pay each month.
25. Avoid payday loans. Bottom line: they're scammy and they charge high
interest rates. If you do need an emergency cash loan, just be aware of the
risk of high interest rates.
26. Beware of scams. There are a lot of scams that deal with credit.
Debt suspension offers, paying fees in advance, buying credit protection, and
rebuilding credit usually sound too good to be true. There's a reason for this:
they are.
27. Be cautious with home equity loans. If you can't make a payment
toward a home equity loan, you could lose your house.
Frugality
28. Buy a used car. The most expensive miles on a car are the first
10,000. Let someone else drive those for you. Buying used can save a lot of
money considering how little value the car has actually lost.
29. Be patient. Don't buy that new gadget today. Wait a month or two and
the price will certainly go down.
30. Buy airline tickets as far in advance as possible. The cheapest
flights are the ones the are bought at least two months in advance. For holiday
travel especially, buy as soon as you can.
31. Get the most bang for your airline miles. Be sure each airline mile
you redeem is providing you with at least 1 cent toward the price of a ticket.
32. Never buy the extended warranty. Often times, your new product
already comes with a 90-day or 1-year warranty (when most "faulty" things will
break, anyway). There's a reason everyone wants to sell you an extended
warranty: they're hugely profitable (for the business, not for you).
33. Make your own meals. Eating out gets to be expensive if you do it
too often.
34. Make your home more energy efficient. Bankrate.com has a list of 17
ways to do so.
35. Get a better cell phone plan. If you've had the same cell phone plan
for a couple of years, chances are there's something better out there. Look
around or call your current provider and ask for a better deal.
36. Banking fees are for suckers. A lot of banks will charge you
checking fees or minimum account balance fees. Find a bank that does not.
37. Keep track of your spending. At least for a month, keep a journal of
everything you purchase. At the end of the month, review your spending
priorities and make adjustments.
38. Ditch your car. Walk, bicycle, or take public transportation. You'll
save on car payments, gasoline, parking, and speeding tickets.
39. Use your frequent flier miles often. They may expire before you know
it. There's no sense in stockpiling them. If you have enough for a free flight,
use them.
40. Buy through your favorite airline's partners merchant store. AA.com,
for instance, has multiple retail partners from whom you can earn frequent
flier miles with each purchase.
41. Negotiate fees. For example, ask a bank to waive late fees. Often
enough, they will.
42. Get your free money. Money might be owed to you. Get it.
Home Ownership
43. Upgrade your old bathrooms and kitchens. These are often selling
points on a house. A modernized bathroom can provide over a 100% return, while
a modernized kitchen can return about 90%.
44. Refinance your mortgage if you can cut at least one point. The costs
of refinancing are considerable, so it should only be done if you can trim your
interest rate by at least 1%.
45. Never spend more than 2 1/2 times your income on a home. Know what
you can afford and what you cannot.
46. Put at least 20% down on a home. Making a down payment of less than
20% will usually result in a private mortgage insurance (PMI) fee being added.
This is usually 0.5%, meaning it could cost you about $1,000 a year on a
$200,000 principal.
47. Use a mortgage broker. The better your mortgage, the more you'll
save. Shop around.
48. Investigate different types of mortgages. There are dozens of
mortgage options out there. Find the one that suits you best.
49. Buy a house that needs repairs. Buy for cheap and then add to the
value with repairs. You'll save money
50. Deal directly with the seller. Avoiding agents' fees is a good
thing. If you do decide to hire an agent, do your homework and get one who will
be on the same page as you. You should be the one calling the shots.
51. Find out about homeowner taxes. Know what the property tax is in
your area and be prepared to have enough to pay it.
52. Find out about secondary costs. In addition to monthly payments, be
prepared to incur some secondary costs, including repairs, notary, escrow fees,
and title insurance.
53. Get the house inspected by a professional. Have the house thoroughly
inspected before making an offer.
54. Negotiate the selling price. Home prices are almost always
negotiable. Never offer the asking price, but rather a few percentage points
below it.
Insurance
55. Insure yourself against financial ruin. There should be no higher
financial priority in your life than health insurance. Without it, if your
health takes a turn for the worst, hospital bills could easily bankrupt you and
your family.
56. High deductible is your friend. Keep those monthly premiums as low
as you can.
57. Don't use insurance as an investment vehicle. Liquidity and
certainty are not on your side.
58. Have enough. Have enough life insurance to replace at least five
years of your salary, ten years if you have kids or significant debts.
59. Don't have too much. You need health insurance. If you're single and
have no dependents, you don't need life insurance.
60. Think about insurance before you buy a car. Typically, the more
expensive your car, the higher your insurance cost will be. Take this into
account when buying a car.
61. Choose the right car insurance. Don't assume you should get the
cheapest auto insurance or the one with the most protection. Find out exactly
how much coverage you need.
62. Consider dropping collision coverage. Especially if you have an
older car, there's not much sense in protecting it against getting wrecked if
it's already a wreck.
63. Buy homeowner and auto coverage from the same insurer. You'll
usually get a better deal than you would if you bought the two separately.
64. Write a will. If you have any dependents, you need a will. Write one
and protect your loved ones.
Investing
65. Be wary of mutual funds. Few mutual fund managers can beat both the
market and the expense fee that they charge.
66. Don't try to pick stocks. Picking stocks can be a very dangerous
game, unless you know what you're doing.
67. Avoid fees. With long term investing, fees are a primary factor in
total return. Avoid brokers who take high commissions and avoid funds with high
management costs.
68. Stocks are high risk, high reward. Over the long term, stocks have
historically outperformed all other investments. But over the short term, they
can be risky if they lose a lot of value in a short period of time. So, do
invest with stocks, but only with funds you won't need to withdraw over the
short term.
69. Stocks first, bonds later. Invest in stocks when you're young, and
then move into bonds are you grow older. Stocks are a good long-term investment
strategy. If you're still young when the market turns south, you'll have plenty
of years left ahead of you to make it up. As you get older, invest in bonds.
They're less risky.
70. Past performance is not a guarantee of future success. Just because
a stock has been up for the last six months does not mean it will continue to
go up tomorrow.
71. Diversify your portfolio. Never invest more than 10% of your
portfolio in any one company. Even if it's a "sure thing".
72. Build a nest egg that is 25 times the annual investment income you need.
Don't think you can rely solely on social security.
73. If you don't understand how an investment works, don't buy it. Research
an investment vehicle thoroughly before you get into it.
74. Don't borrow from your 401(k). Think of it as robbing yourself.
You'll get hit with high fees and taxes, too.
75. Invest for the long term. There is no such thing as a guaranteed get
rich quick scheme. And in investing, there is no high reward without a high
risk. Use caution and diversify your portfolio for the long run.
76. Seek professional help. Don't feel the need to turn yourself into a
day trader. Hire a personal financial advisor if you can afford to.
77. "Fee-only" is your friend. Go with a fee-only financial advisor, not
a fee-based or a commission-based. Only fee-only advisors are legally obligated
to act in your best interests.
78. Index funds are your friend. Index funds are passively managed and
are generally cheaper and more tax-efficient than actively managed funds.
Retirement
79. Optimize your 401(k). If your employer offers employer match, you
must set your 401(k) contribution to at least that amount.
80. Play the IRA game smart. Max out your 401(k) first, your Roth IRA
second, then your traditional IRA.
81. Increase your 401(k) contribution. Especially when you get a raise.
Some employers even give you the option of having your contribution
automatically taken out of your paycheck.
82. Don't buy stock in the company you work for. This is the opposite of
diversification. What happens if the stock tanks, and you lose your job and
pension because of downsizing?
83. Don't be afraid of stocks. More than two-thirds of 401(k) money is
in low-yielding bonds. Especially if you're still young, invest in stocks. Over
the long-run, they perform the best.
84. Sign up for Medicare. Don't forget to sign up for Medicare before
you turn 65, even if you haven't retired yet.
85. Plan. Use the Social Security Retirement Planner to ensure that your
retirement goes smoothly.
Saving
86. Save now. It doesn't matter if you're six or 60. You should be
saving a little bit every month, aside from retirement savings. The sooner you
start, the better.
87. Pay off high interest debts before you start saving. Earning 5% in
your savings account isn't going to do much good if you're accruing 17%
interest on your credit card debt.
88. Save at least 10% of your annual salary for retirement. This should
help to provide a nice retirement fund when you need it.
89. Keep at least three months' worth of living expenses in a savings account or
high-yield money market account.
90. Open an online savings account. Online savings accounts, such as
Emigrant Direct or HSBC Direct, offer yields of greater than 5%.
91. Set up an automatic savings plan. You should be able to set up your
checking account so that a certain amount is automatically transferred to a
savings account each month. It's a good way to force yourself to save.
Taxes
92. Know when to file your taxes. If you expect a refund, file your
taxes as early as you can. If you owe money, file as close to the due date
(usually April 15) as possible.
93. Consider itemizing your deductions. If all of those tax breaks
receipts you keep add up to more than your standard deduction, it is definitely
worth filling out all of the extra paperwork to itemize.
94. Be aware of other tax deductions. Contributions to a traditional
IRA, student loan interest payments, alimony payments.
95. Save money on tax credits. Some tax credits to look out for include
the Hope Scholarship Credit, Lifetime Learning Credit, Child Tax Credit, Earned
Income Credit, and Child Care Credit.
96. Bunch your deductions into one year. If you're taking the standard
deduction this year, consider making charitable contributions and
office-related purchases after January 1, so you can possibly itemize your
deductions next year.
97. Recheck your withholding every year. If you get married, have kids,
or become the head of a household, you'll want to add these allowances on your
W-4 so you can have fewer taxes withheld.
98. Keep your receipts (especially on big ticket items). You'll want
them if you plan to itemize, or in case you get audited.
99. Concentrate on tax-free investments. Tax-free investments, like
bonds, allow you to earn interest without being taxed.
100. Buy a hybrid vehicle. Hybrids tend to be more expensive than their
traditional counterparts, but you can save money on gasoline and possibly
receive a tax credit of up to $3,400.
Lastly
101. Take a deep breath. Even if you're only able to follow the first
seven tips, which are the real basics, you will have already succeeded in
making a huge positive difference in your financial life.
102. Money isn't everything. Health, family, and happiness are
important, too. And remember, money can't buy you love.
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