50 Ways to Improve Your Finances in 2013
Conquer the new year with these savvy money management strategies
December 20, 2012
Along with a fresh start, the new year brings uncertainty about
changing tax laws, growing concern over online privacy and security,
and challenges for almost every demographic group—even the wealthy, who
face steep tax increases. To help you get ready to tackle your own
money goals for 2013, we gathered our best advice from the past 12
months and organized it into 50 bite-size steps:
1.
Be a year-round discount shopper.
Specific holidays used to loom large in the world of coupon hunters,
who expected to see massive discounts on July Fourth, Labor Day, Black
Friday, and other big shopping days. But recently, that's been
shifting as retailers are offering sales all year long, and often at
unexpected times. In 2012, for example, retail experts noted that
Christmas sales started in October, and continued all season, partly in
response to customer demand. That means shoppers should always be on
the lookout for the best deals, regardless of the calendar date.
2.
Ask for what you want.
As the economy recovers, retailers are eager to pick up the biggest
share of consumers' spending what they can, and in some cases, that
means adopting more flexible pricing policies. Towards the end of 2012,
several big-box stores, including Target and Best Buy, launched
temporary price-matching policies. That trend could continue into 2013,
which means customers can be more assertive about asking stores to
match prices they find elsewhere.
3.
Coordinate budgeting with your partner.
Much stress can come from disagreeing with your spouse or partner
about how you should be spending shared income. Indeed, in author and
yoga teacher JoAnneh Nagler's case, it even contributed to divorce. But
she and her husband were able to reconcile (and remarry) when they
jointly agreed to a disciplined debt-free lifestyle. By scaling back on
restaurant meals and other splurges, they're able to invest in what
they really value, including their creative pursuits and romantic
weekend getaways.
4.
Pay off debt slowly.
When you've built up a sizable amount of debt, it's virtually
impossible to pay it off overnight, and attempting such a feat can be
frustrating. That's why Nagler, who had $80,000 in credit card debt at
one point, urges fellow debt-strugglers to go slowly. First, she
changed her spending habits and set up individual savings accounts for
each of her goals. Once she got those costs under control, she started
paying off her debt.
5.
Prepare for tax changes.
Tax rates are likely to rise for many Americans next year,
especially high-earning ones. To lessen the stress from those changes,
taxpayers should adjust their spending and saving habits as early as
possible to prepare to hand over more cash to Uncle Sam. Taking
advantage of any credits and deductions, as well as putting more money
into tax-advantaged retirement accounts, can help ease the impact.
6.
Calculate your retirement number.
Just 1 in 10 Americans have done the math to figure out how much
they need to save for retirement, but it's an essential step in making
sure there's enough cash for those much-deserved golden years.
Financial advisers generally recommend saving enough to replace 80
percent or more of your income; that means someone who earns $80,000
should probably save around $2.1 million.
Online retirement calculators can crunch the numbers for you.
[Read: 10 Questions That Will Help You Earn More Money.]
7.
Make better 401(k) choices.
Paying high fees, choosing portfolios that are overly conservative
(or overly risky), and failing to update or even check on those
investments on a regular basis are just a few of the common mistakes
people make with their retirement accounts. To avoid missteps,
employees can often rely on free services offered through their
company's human resources department or retirement services provider.
Fidelity, for example, offers free seminars and online information to
clients.
8.
Save a quarter of your income.
Alicia Munnell, director of Boston College's Center for Retirement
Research, cautions that putting aside 9 percent of your income into a
retirement account is "grossly inadequate." Someone who starts saving
at age 35, plans to retire at age 67, and expects a 4 percent return,
for example, needs to save double that, even after taking Social
Security into account. Other financial experts recommend saving as much
as
one-quarter of your income, in both retirement and after-tax accounts, to make sure you're fully covered.
9.
Make it automatic.
If manually shifting money into savings and investment accounts is
too time-consuming or too painful, consider setting up automatic
deposits. Many banks make it easy for customers to do that, and, in
fact, might even offer rewards for doing so. Wells Fargo, for example,
waives monthly service fees on some of its accounts when customers set
up recurring automatic transfers.
10.
Leverage your credit card.
If you pay off your credit card bill each month and earn rewards for
your spending, don't forget to cash in on them. The biggest
bang-for-buck often comes from purchasing retailer-specific gift cards,
which have been pre-negotiated by card companies. Farnoosh Torabi,
financial expert and television personality, recently picked up an
Apple Macbook Air with her points, which she also uses to buy gift
cards for family members.
11.
Find your perfect piece of plastic.
If your credit card isn't meeting all your needs, it might be time
to find one that does. Comparison websites such as nerdwallet.com,
indexcreditcards.com, and creditcards.com make it easy to compare the
benefits of different cards to figure out which one suits your needs. If
you carry any sort of balance, there's only one factor to focus on:
finding the lowest interest rate.
12.
Upgrade your bank.
Bank policies can vary widely, from offering above-average interest
rates on savings accounts to making it easy to budget online with extra
tools. Consider your own lifestyle and then find the bank that best
matches it. If you travel a lot, you probably want a large bank with
thousands of ATMs throughout the country (and beyond). If you're trying
to save more, then you might want to focus on the savings rates.
13.
Demand more from the one you have.
Customers are increasingly voting with their feet and switching
banks when they're not happy with their current one. That also means
customers have more leverage to ask for the changes they want from
their current bank, as banks struggle to retain loyal customers. If you
want lower fees or a higher interest rate on your savings account, ask
your bank what they can do for you—they might be able to offer you a
better deal than the one you're currently getting.
14.
Consider a credit union.
Frustration with banks' policies, such as new fees, has motivated
thousands of customers to jump ship and join credit unions, according
to the Credit Union National Association. It can be a good decision,
especially considering that credit unions often offer higher interest
rates on savings accounts as well as lower fees and lower rates on auto
loans and mortgages. They also prioritize spreading financial literacy
to their customers.
15.
Get a raise.
Just because the economy's struggling to make its big comeback
doesn't mean you have to delay asking for a raise. Certified financial
planner Lauren Lyons Cole suggests first checking out salary-comparison
sites, such as Payscale.com and Salary.com, to see if your own income
is out of whack with that of your peers. If it's lower than it should
be, review your accomplishments and present them to your boss, along
with a request for a raise.
16.
Earn more money on the side.
The lack of job security these days has inspired many Americans to
pick up a second stream of income by moonlighting. According to the
website Payscale.com, the highest-paid moonlighting gigs are in law,
clinical psychology, senior copywriting, and information technology
security. Freelance website Elance.com predicts that the trend toward
freelancing, especially in the creative-services sector of the economy,
will only grow throughout 2013.
17.
Manage your time better.
When people juggle more than one job, they can quickly feel
overwhelmed with responsibilities. Veteran job-jugglers say they
survive by staying organized, waking up early, and avoiding time-wastes
such as television. Many also work on the weekends and some even take a
sabbatical from their day jobs to focus exclusively on their second
job for a few months.
18.
Take advantage of your HR department.
When you land a new job, the human resources department can help you
sign up for all of the new benefits, from flex spending accounts to
health insurance to retirement accounts. Signing up for retirement
benefits as soon as possible can pay off later: The earlier you start
putting money away, the sooner it can start growing. TD Ameritrade
calculates that saving $100 a month between ages 21 and 41 will create a
nest egg of $471,358 by age 67, assuming a return of 8 percent per
year. Waiting until age 41, however, will generate just under $60,000.
19.
Prepare to earn less after 40.
If you want more motivation to ramp up that side income in 2013,
here it is: In most professions, income stops rising around age 40.
Payscale.com reports that in many professions, you earn quickly in your
twenties and thirties as you become more valuable. Then around
mid-career, you plateau, and as a result, salary increases slow down.
(Certain careers, including those in law and high-tech, are
exceptions.) One way to make up for that loss is to earn more money
outside your full-time job.
[Read: How to Improve Your Finances at Every Age.]
20.
Burnish your entrepreneurial skills.
According to a survey by Generation Y research and consulting firm
Millennial Branding, 1 in 3 employers want their employees to have
entrepreneurial experience. Knowing how to conceive, build, and promote
a business idea is increasingly valuable in the new economy, even for
those seeking more traditional jobs.
21.
Learn to cook.
Replacing take-out and restaurant meals with home-cooked goodness
can save you hundreds of dollars throughout the year. If you feel
hesitant in the kitchen, a few hours with the Food Network or browsing
foodie blogs will help get you in the mood. Investments in certain
tools, such as cookbooks, immersion blenders, or quality pots and pans
can also make the kitchen more enticing after a long day.
22.
Invest in your home entertainment system.
If you're a movie buff, you have a lot of new choices that are
cheaper than seeing movies in the theater. Hulu Plus, Apple TV, and
Roku are among your relatively affordable options, especially when you
consider how much you'll save by skipping weekly trips to the theater.
23.
Focus on home improvements that pay off.
Leaky windows and attics can drive up heating bills in the winter
and cooling bills in the summer. Consider investing in insulation as
well as a programmable thermostat, which can cut energy costs by 30
percent over the year. Smart power strips, which cut power to
electronics when they're off, can also help reduce electricity costs.
LED lights are another smart option.
24.
Give better gifts.
Do you know what people really want for holidays and their
birthdays? Money or gift cards. It might sound impersonal, but a survey
by Discover found that such fungible items top wish lists for both men
and women. In fact, the National Retail Federation went so far as to
name gift cards as the hottest gift of 2012, because they've grown so
much in popularity. The fact that fewer cards come with fees and many
offer extra loss protection has also contributed to that trend.
25.
Get to know the holes in your homeowners' insurance policy.
The worst time to discover that your homeowners' insurance policy
doesn't include reimbursement for water damage is right after a flood.
Yet many homeowners don't understand the ins and outs of their
policies, which can lead to nasty surprises. In fact, most standard
policies don't cover earthquake damage, flood damage, or water damage
from sump pump backups. (Homeowners have the option of adding
supplemental coverage to handle these scenarios.)
26.
Protect your online identity.
The past 12 months have seen a series of high-profile security
breaches, including at Zappos and Barnes & Noble. To make sure
you're as protected as possible, consider changing your passwords
regularly, reviewing bank account statements each month to check for
errors, and being especially wary of hyperlinks to deals promoted over
social networking sites. Hyperlinks embedded within emails should also
be treated with suspicion.
27.
Stop before you shop.
When you're surrounded by advertisements and material temptations,
it's easy to buy without thinking. But one organization, Jews United
for Justice, urges people to first ask themselves a series of questions
about the purchase. The questions include: "Is this something I need?"
"Can I borrow, find one used, or make one instead of buying new?" and
"Will this purchase enhance the meaning and joy in my life?" The group
distributes credit card sleeves with the questions to encourage more
thoughtful spending habits.
28.
Ignore official-looking (but dubious) solicitations.
It's one of the most common scams around: A company poses as an
official government agency in order to solicit your attention (and
funds). It might send out mail that's covered in intimidating warnings,
such as "$2,000 fine, 5 years imprisonment, or both for any personal
interfering or obstructing with delivery of this letter." But they're
really just trying to sell you something you probably don't need. The
Federal Trade Commission calls the practice outrageous and says it's
illegal to falsely suggest something bad will happen unless the
recipient asks quickly. The bottom line: Ignore such solicitations.
29.
Donate for free.
You don't have to be rich to be charitable. Consider donating your
blood, gently used books and CDs, and your time this year. For extra
power, get together with friends to form a giving circle, so you can
leverage your dollars and give to causes together.
30.
Learn how to talk about money with your kids.
Parents are famously awkward when it comes to talking about money. A
T. Rowe Price survey found that just half of parents talk to their
kids about savings goals and spending and savings trade-offs, and even
fewer discuss higher-level concepts such as inflation and investing.
But research routinely suggests that parents play a powerful role in
how kids handle money as adults, so if you have children, try to get
over your awkwardness to share some important life lessons this year.
31.
Protect your money from your children.
Baby boomers have been generous toward their adult children,
inviting them to move back home and offering them direct financial
support. But often, that kind of generosity hurts parents' own
retirement nest egg. In fact, even the parents of two Olympic gold
medalists, Gabby Douglas and Ryan Lochte, revealed major financial
troubles of their own. Before putting their own financial security at
risk, parents should consider whether they can really afford the help
they're offering.
32.
Use technology to ease those conversations.
If you're struggling to explain the concept of limits to your
children, there's an app that can help: "Can I Buy?" designed by the
husband-and-wife team behind the Massachusetts-based developer Sqube.
After crunching some numbers for you, the app tells you whether or not
you can afford that purchase that you're considering. The creators
themselves got the idea when they were trying to explain to their young
daughter why she could not buy a new toy.
33.
Take advantage of other new online money tools.
A new website, SmartAsset.com, hit the Web this year, and it's a
useful one: It helps users make complicated personal-finance decisions,
such as whether they should buy or rent, or which mortgage to take
out. If you're looking for some help with number-crunching, the site
could be the one for you. Mint.com is another useful site for budgeting
and getting organized.
34.
Check your Social Security benefits.
Since the Social Security Administration stopped sending out paper
statements via snail mail each year, you might be missing your annual
estimate of just how much Social Security income you're likely to
receive in retirement. But there's an easy way to get that information:
Visit socialsecurity.gov/mystatement to see your earnings history and
projected future benefits. More than one million people have already
done so.
35.
Be an alpha consumer.
Jon Yates, the official problem-solver at the
Chicago Tribune and author of
What's Your Problem? Cut Through Red Tape, Challenge the System, and Get Your Money Back,
says persistence is often the most important factor when seeking a
response from a company. That might include threatening to take your
business elsewhere, or asking to speak to a manager or executive until
you get the answer you want.
36.
Start a social media account.
Airing grievances about specific companies on a blog, Facebook, or
Twitter can also be an effective way of getting their attention. Just
be sure you don't sacrifice your own privacy and security in the
process. Many banks, for example, run active Twitter accounts, but they
caution customers to take specific questions off the public venue and
onto a phone line or email account. Talking over social media, after
all, means talking in front of an audience.
37.
Pay less for gas.
In addition to seeking out the lowest-priced gas station in town,
you can also stretch your gas dollars through more creative means.
Those include lightening your car by unloading any heavy items stored
in the trunk, carpooling, making sure tires are properly inflated, and
replacing clogged air filters. An even safer bet is replacing some of
your car time with public transportation or biking.
[See: 50 Smart Money Moves.]
38.
Refinance, or not.
When interest rates are low, refinancing to lock in a lower rate on
your mortgage is tempting. But doing so also comes with costs,
including closing costs and your own time. (Completing the paperwork
can take hours.) Before jumping on the refinancing bandwagon, crunch
some numbers with an online refinance calculator to help you figure out
if it will really save you money.
39.
Improve your credit score.
Credit scores can hold a lot of power over your life; they influence
your loan rates and the ability to rent apartments, and they can even
play a role on job applications. According to money expert Liz Weston,
author of
Your Credit Score, the most important steps you can
take to improve your score include removing any errors and making
regular, on-time payments to all revolving accounts, including credit
cards. Paying down debt helps, too.
40.
Get your credit report.
You're entitled to a free credit report every year, which you can
access through annualcreditreport.com. Reviewing it regularly makes it
possible to check for (and correct) any mistakes, as well as catch
potential problems, such as identity theft, before they escalate. The
Consumer Financial Protection Bureau also announced this year that it
will start supervising the credit bureaus as part of an attempt to make
the world of credit scores and credit reports more transparent to
consumers.
41.
Learn patience.
Research co-authored by Columbia Business School professor Stephan
Meier found that impatient people tend to have lower credit scores,
which means they pay more for loans. Study participants who were most
willing to wait for their cash rewards had, on average, scores that
were 30 points higher than those who were the least patient. The
suggestion? Learning to wait for rewards can pay off in the form of
lower loan rates.
42.
Check your insurance policies.
According to MetLife, just 3 in 4 married couples with young
children have life insurance. That means 1 in 4 do not. Given the high
cost of raising children (the Agriculture Department estimates $234,900
per child before age 18), that leaves families in a vulnerable
position if one or both parents were to die. While there's some hassle
involved, the cost of taking out life insurance is relatively low (a
half-million dollar policy on a healthy 35-year-old might be one dollar
a day, says MetLife), so consider signing up if you haven't already.
43.
Organize your financial paperwork.
When Superstorm Sandy hit in 2012, thousands of people on the East
Coast had to quickly leave their homes. If your paperwork is in order,
it will be easy to know what to grab if you suddenly have to do the
same thing. Essential papers to carry with you include identification,
insurance information, and family documents, such as birth and marriage
certificates and wills.
44.
Create photographic evidence.
Just in case you ever have to file an insurance claim, take photos
of your most valuable possessions, including furniture, jewelry, and
televisions. Creating a paper trail of those goods, any damage they
sustained, and subsequent claim filings can make it easier to follow up
with the insurance company and collect reimbursements.
45.
Prepare for emergencies.
In the spirit of always being ready, consider coming up with a plan
for an alternative place for your family to stay in an evacuation
scenario. When the power goes out, it's harder to find the closest
available hotel, or to talk to friends about staying with them. It's
also a good idea to get an emergency kit together, so if you have to
hunker down in your basement for a few days without power or running
water, you know you could survive. The kit should include batteries,
flashlights, water, changes of clothes, cash, non-perishable food, and a
first-aid kit.
46.
Beef up your emergency savings account.
No matter how prepared you are, emergencies can end up costing a lot
of money. Consider funding an emergency savings account that could
cover you in the event of weather disasters, car breakdowns, and other
unexpected calamities. Financial advisers generally recommend putting
away three to six months' worth of expenses.
47.
Plan to work well past retirement age.
Older Americans are increasingly working into their 70s, for
financial as well as psychological reasons. In other words, many of
them enjoy their work. A Charles Schwab survey found that one in three
60-something middle-income workers don't want to retire. To prepare for
a long career beyond age 65, career experts recommend making sure
you're doing work you love. That might mean launching a second career,
unrelated to your primary one.
48.
Change your habits.
In his book
The Power of Habit,
New York Times
reporter Charles Duhigg explains how we can change our habits by
focusing on the cue and reward. If you want to start exercising every
day, for example, "cue" it up by putting on your running shoes before
breakfast, and then reward yourself afterward with a piece of chocolate.
Eventually, the new habit will become a natural part of your day.
49.
Check out your older self.
Here's an easy way to motivate yourself to commit to big changes in
2013: Focus on your future self. Research by Hal Hershfield, assistant
professor of marketing at New York University's Stern School of
Business, has found that showing people aged photos of themselves makes
them more likely to put money away for later. You can get in touch with
your future self by writing a letter or even downloading an aging app,
such as AgingBooth, for a sense of what you'll look like in 30 years.
Spending more time with your grandparents can also help.
50.
Think about where you want to be (financially) in a year.
When you're brainstorming for your big money goals for the year, try
to focus on specific steps, instead of big, overwhelming dreams. For
example, if you want to build financial security, goals might include
spending less on food or developing a second stream of income. BJ Fogg,
director of Stanford's Persuasive Technology Lab, suggests breaking big
goals into small baby steps.