Are your finances on auto-pilot? Three things you can fix right now
I recently heard a speaker at an event talk about living an active life vs. a passive life. He concluded his speech by admitting he wound up yelling at someone in a Wal-Mart — which cracked me up — but it did make me wonder exactly how many of my clients and friends are not taking an active role in some aspects of their lives.
Personally, I won’t be able to help you with many of your life’s challenges, but there is one place I CAN help…. like your FINANCIAL life. Everyone I know is too busy to deal with any of these issues, and we all love everything to be set up automatically so we don’t have to think about it. But, is that really helping us get to where we want to be financially? Here are three tips that you can use to help take an active role in your financial future, and switch from “auto-pilot” to “I-am-totally-in-control.”
#1 – How to Enroll in and Organize Your Retirement Plans
This is a topic I’m really good at — I mean really good at — so listen up. 😊 Did you actively take time to enroll in your company’s retirement plan? If not, you may be missing out on some important benefits — especially if the plan has a match or profit sharing contribution.
A 401(k) match, retirement plan match, or profit sharing is basically FREE money that your company is contributing on your behalf, as recognition of your hard work! Over the course of many years, you could miss out on thousands of dollars, or even more!
Also, some retirement plans have an auto-enroll feature; you may be contributing to the plan at a minimum already. Usually those contributions are very small and probably not the amount you could or should be contributing. (Remember, last month I showed you how you could buy STUFF and SAVE money at the same time – another great financial tip on how to balance saving vs. spending.)
So, if you are enrolled, now is the time to check what investments they placed you in if you didn’t choose one yourself. The default investments are usually a little more conservative and might not mirror your current risk tolerance. Yes, the market may go down at some point, but you are in this for the long haul.
You may also want to check your beneficiaries. You left the retirement plan and insurance forms blank when you enrolled, didn’t you? If so, depending on what state you live in, your spouse may receive the funds. Guess what happens if you are not married? Your hard-earned money could go to your estate. This has some negative ramifications, and your financial advisor or attorney should explain what is involved when money and property flow into to your estate. Don’t forget you can name a charity as your beneficiary if you like!
#2 – Saving Money on your Bills and App Payments
This is a topic that can be a struggle for ALL of us. We are in this together! Did you sign up to pay all of your bills online and automatically? If you did, awesome! However, we may not be paying as much as we should each month. If we can make an extra car payment or mortgage payment every now and then, it could dramatically cut down the length of time and interest we would be paying, right? The first part of this tip then is to check the amount you are paying on certain monthly bills to maximize your savings.
You should also check your light and water bill (if you have one or talk to your roommates even if they are your parents) and cellphone bill occasionally. Fluctuations in those bills can point to problems you don’t want to drag out. Plus, mobile data and cell providers are constantly changing plans because of the competitive nature of their industry. You might actually score a cheaper plan with the same benefits by just shopping around. Yet another benefit of taking the pilot’s seat and flying your plans yourself!
Pay attention to those credit card bills, too! They can sneak up on you, and there’s always credit card fraud to be aware of. Look for unauthorized purchases (fraud) or memberships you don’t use anymore (money you can save). Remember that gym you signed up for in 2011 and you’ve gone twice? Maybe three times? Ok, it never happened (Netflix binge instead). Boom, you saved money.
How about subscription services or magazines that you forgot about? Or ones you never even intended to sign up for? Get rid of ‘em.
Speaking of forgetting about things… apps have made it super convenient to spend money. Like the Starbucks App, PayPal, Uber and so many more. We don’t have to think about paying for these kinds of items until the bill comes. Maybe we prefer not to! The bill gets paid automatically of course, which is cool. Plus, your significant other won’t see how many times you went to Starbucks (sometimes multiple times a day, sorry honey but deal with it) In all seriousness, despite the coolness and convenience — we really aren’t monitoring where our money goes… and it adds up over time.
#3 – Build a savings plan by buckets: “Short Term,” “Emergency Fund,” and “Long Term”
Buckets are a good way to think of how you distribute your hard-earned coin. Consider always having three “buckets” of resources:
• Emergency cash at the bank that you can pull out at any time,
• Moderately invested savings that you may need in 3-10 years,
• and long-term investments that you won’t touch until retirement
I find with most of my clients and friends, that the middle “bucket” of moderate funds is the most difficult to build up, especially while in auto-pilot mode. Talk to your financial advisor about how to get started on building these buckets and getting your savings and investment plans put together for both the short term and the long haul.
So — these three issues are things you can fix RIGHT NOW, and are the backbone to any well designed long term financial plan. Stop letting your financial life be on auto-pilot and take charge. You got this.