Only the rich need to worry about having people manage their money, right?
With a handful of credit cards, checking, savings and retirement accounts and lots of different bills to pay we all need money managers. The difference is if we aren’t wealthy, the money management responsibility usually falls on our own shoulders, rather than someone else’s.
While most of us think money management is just paying the bills and staying one step ahead, there are actually nine key components to managing money well.
Follow these steps and you’ll be right up there with the pros!
#1 Read Your Statements
When you get your bank or credit card statements, do you read them? Or do you just look at the bottom line to see how much you have or owe? You should be reading them carefully to make sure you’ve actually made all the charges listed.
Credit and debit card fraud costs us all billions of dollars each year. Unfortunately, some people pay for fraudulent charges without even realizing it.
One company, for example, placed small charges of just $19.95 on people’s accounts for merchandise they never ordered or received. Many people didn’t even notice and the company made millions before it was caught.
Double billing, incorrect charges or altered checks can cost you a small fortune if you are not careful.
Check your bank statement and compare it with the checks you’ve written to make sure it is accurate. If you find any mistakes on your credit card or bank statements, dispute them immediately and put your complaint in writing.
#2 Pay Your Bills on Time
It wasn’t too long ago that late fees on credit card payments were rare. Those few banks that did charge them usually gave people at least 10 days after the due date before a fee would be assessed.
Boy, have times changed!
Now, you can get hit with a significant late fee if you’re just one hour late with a payment. You may also pay expensive fees if your mortgage, car payment or utility bills are late.
Even worse, your late payments may be reported to a credit reporting agency and stay on your credit report for up to seven years! These days, most credit card companies monitor their customers’ credit reports and a history of late payments can trigger many of your unsecured creditors to raise the interest rates they are currently charging you.
Many of us lead busy lives, however, and it’s easy to fall behind a few days no matter how good your intentions are. When it comes to paying your bills on time, it’s the date your payment is received that counts, not the postmark date.
Be on the safe side and mail bills as soon as possible at least six days before they are due to make sure they arrive on time. Better safe than sorry.
#3 Make Sure You Have Funds Available
Bounced checks can cost a small fortune by the time you pay the merchant a bounced check fee and your bank another fee. And you will still have to come up with the amount of the check.
If you bounce a payment to a lender, such as a credit card issuer, you will have to pay the interest that continues to build up as well as the bounced check fee and, probably, a late charge.
Even overdraft lines of credit, designed to protect against overdrafts, can be expensive at interest rates of 18 percent or more.
Make sure you have the funds available to cover your checks and enough to pay your bills. That means keeping track of your bills, your spending and your available funds.
And simply checking your balance at the ATM or online doesn’t cut it: it may not reflect checks or withdrawals that haven’t cleared yet.
#4 Balance Your Checkbook
When it comes to checking accounts,I have heard all kinds of creative ways to manage them from rounding up every check to the nearest dollar, to closing and starting a new account every year. Some people never record any check they write because they think the bank will contact them if they run out of money!
Unless you take the time to reconcile your checking account, you’ll never know exactly where you stand and you risk bounced checks or even fraud on your account.
The good news is that online banking has made it much easier for people to balance their accounts. An up-to-date statement can be available at the click of the mouse, making it easier to reconcile your account when you want or need to, not just when the bank sends you a statement.
#5 Plan Your Spending
The biggest trap people fall into is not knowing how much they can spend after all the bills are paid.
To figure this out, take the time to create a realistic spending plan one that takes into account all your usual monthly expenses plus expenses that occur occasionally, like semiannual insurance premiums or annual property taxes.
Your plan will work best if you approach it as something that gives you the opportunity to decide how to spend your money and not something that restricts or limits your life. To be accurate, you need to keep track of how much you spend and what you spend it on, so you don’t leave out important items or categories when you create your plan.
One way is to simply keep a notepad handy and use that to jot down purchases as you make them. Categorize your spending at the end of the day or week and use that to help create your spending plan.
The best part of creating and sticking to a plan is that once you’ve taken into account all the bills and regular expenses, plus some savings (see Step #8), you don’t have to feel guilty about spending whatever is left over.
#6 Handle Your Banking
Does your paycheck stay in your wallet or purse until you can get to the bank, sometimes a couple of days later?
When you need cash, do you just go to the nearest ATM, even if it costs you $3 in fees?
Banking fees have risen dramatically over the past few years and you may be paying more than you realize as much as hundreds of dollars a year in some cases.
Find out if your employer will allow you to have your paycheck deposited directly into your checking or savings account. Not only will this save you a trip to the bank, but as a bonus, some financial institutions will give you a break on checking account fees if you use direct deposit.
Many banks are now paying interest on checking accounts, so the sooner you get your paycheck deposited, the sooner it can start earning you interest.
When it comes to ATM fees, be careful. If you take out $20 and pay a $1.50 fee, that’s the equivalent of a 7.5 percent cut for the bank ouch!
You can minimize ATM fees by using your own bank’s ATM whenever possible or choosing a free ATM (though your own financial institution may still charge you for using a “foreign ATM”). When you do withdraw cash, withdraw more so you’ll have to stop at the ATM less often.
Also, be careful when using your debit card to pay for groceries, gas or other purchases where you swipe the card yourself. If you select “debit card” you might get charged a “foreign ATM” fee. If your card has a VISA, MasterCard or other credit card symbol on it, always select “credit card” when you swipe it. The money still comes out of your account in the same way as using your debit card normally, but you won’t have to pay any fees.
Also watch out for other “nuisance fees,” including fees for using a live teller, low balance fees, fees for using the bank’s deposit slips instead of the ones that come with your checking account, etc. These little fees can easily add up to big bucks.
Shop carefully for a financial institution, and don’t hesitate to speak to the branch manager about fees you don’t think are appropriate.
#7 Pay Off Debt
It’s easy to get into debt, but tough to get out.
The hardest part about paying off debt is trying to fit payments into your budget. When money seems tight, it’s easy to just fall back onto the minimum payment and let things slide for another month.
If you have a clear plan for paying back your debt, however, you’re much more likely to be able to stick with it and succeed.
You’ll be more motivated if you have a specific date by which you’ll be debt-free and know exactly what you have to do to achieve that.
Even tougher than getting out of debt is saving money!
You’ve heard the old adage about paying yourself first. But actually doing it is much easier said than done.
If you want a secure financial future, you’re going to have to bite the bullet and start saving now, though it doesn’t have to be too painful.
Look for ways to make saving automatic. Does your employer offer payroll deduction for savings?
Can you have your bank or credit union transfer a fixed amount (even if it’s small) to a savings account each month? Just make sure the account isn’t easy to access. If you can withdraw the money using your ATM card, it might not stay there very long!
Start saving even a few dollars every month and the habit will become addictive. It’s a great feeling knowing that you have some money put away to cover things like emergency car repairs, unexpected medical costs or even holiday and birthday presents. Not having to turn to your credit cards for these unexpected but inevitable expenses will keep you out of trouble.
And to help increase the amount you put away each month, take a look at some of your regular expenses, like your electric and gas bills or your telephone bill.
Thanks to competition in these industries you can save a small fortune every month just by switching suppliers. Shop around for the best deal.
#9 Check Your Credit Report
Your credit report is a key component of your financial life.
A good credit report can help you get better rates on insurance, credit cards, mortgages and other loans. Make sure yours is accurate and up-to-date by obtaining a copy each year.
You can order a copy through any of the major credit reporting agencies.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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