1. Be Informed About Your Debt
Want to get really pissed? Are you ready?
Figure out how much you are paying
daily in interesT.
Then let it ignite a bonfire of rage within you.
[Total Debt] * [Interest Rate] / 365 Days =
Approximately How Much You Are Accruing In Interest Every Day.*
[$200,000 Total Debt] * [6.5%] / 365 Days =
$35.61 of interest per day
At the end of the year, if you don’t pay off the interest, it will capitalize, meaning it will get added onto your loan. Then your interest will accrue as a percentage of an even larger amount.
Once you're sufficiently pissed off, GO AFTER your debt, especially high interest debt. Every extra dollar you throw at it will save you money in the long run.
2. Get a Side Hustle (or a few)
One of the best ways to increase your financial stability is to increase your income! There are a ton of ways to hustle your way to a second income. Check out Side Hustle School for some ideas and inspiration. Other lucrative options include:
Tutoring (Math tutoring pays especially well)
Babysitting (via Care.com)
Dog sitting (via DogVacay.com)
Freelance Writing (here's an article in 'Entrepreneur' about where to find the best gigs)
Consider putting all of your Side Hustle Money towards one cause
(such as paying down debt or saving for a home).
3. Insure Yourself Against Loss
Nothing could devastate your finances more than an unexpected emergency or expense. Take the small and inexpensive steps necessary to protect your assets from major loss by securing insurance. Don’t overpay for insurance either. Evaluate what you need to protect before deciding what to buy. And shop around!
Now is the time to make sure you have:
Renters Insurance: in case your home is destroyed by fire or robbed by burglars. Could you replace everything in there? Do you want to? If not, consider Renters Insurance. Check out Lemonade, a new insurance start up.
Life Insurance: in case you die unexpectedly and can’t support your loved ones. Be sure to designate beneficiaries (your child, partner, etc).
Personal Liability Insurance: in case you accidentally injure someone or someone is injured in your home or on your watch
Pet Insurance: in case your pet is injured or becomes ill and runs up a significant vet bill. If you don’t have thousands set aside in case of emergency, you might be in for a surprise. Get pet insurance such as Healthy Paws so you don’t have to make a terrible decision to treat or not to treat if something bad happens to your fur baby.
4. Open a Roth IRA and Max It Out ($5,500) Every Year – Unless You Are Invincible or Immortal
One day you will retire and you’ll wish you had started saving sooner.
A Roth IRA is a great way to save if you are young and have a lower income.
What is a Roth IRA? Who's Roth?
A Roth IRA is a form of retirement savings account. You can put in $5,500 per year ($6,500 if you're over 50). Only people with incomes below $117,000 a year are eligible.** Once you put the money in, you will need to select investments (or if you use a Robo Tool, such as Betterment, investments may be selected for you). The balance will grow (and may go down too) with the stock market.
Fun fact: The Roth IRA was named after Senator William Roth, who was the chief legislative sponsor to the Taxpayer Relief Act of 1997 that established the Roth IRA.
When you retire, you can take out the money and pay no taxes on the gains.
Did you hear that?
NO TAXES ON THE GAINS.
5. Max Out your Employer 401K Up to the Annual Limit
There's some confusion around what people mean when they say "max out your 401K." To me, there are two versions of maxing it out:
Mini-Max Out Your 401K: Contribute what you need to contribute for your employer to “match your contribution”
Super-Max Out Your 401K: Contribute the full legal amount per year, up to $18,000
+ Remember to choose wisely between a Roth 401K and a Regular 401K, if offered the option. If your income and tax bracket are likely to go up later, you might want to pay taxes on the money now (Roth 401K) rather than pay taxes later (Regular 401K)
6. Use the Heck Out of Your Employee Benefits
Flexible Spending Account: Put away pre-tax money for healthcare expenses. Get reimbursed when you spend money on qualified healthcare expenses. Caution: money does not roll over! Use it or lose it!
Health Savings Account: Put away pre-tax money for healthcare expenses. Get reimbursed when you spend money on qualified healthcare expenses. Unlike an FSA, the money does roll over (and you can take it with you when you leave an employer)
Dependent Care Account: Put away pre-tax money for daycare, babysitting, or adult-care expenses.
Cash Wellness Incentive: Does your employer give you $150 to take a survey about your healthcare choices? Do it!
Legal Insurance: Does your employer offer legal insurance? It might be buried in there when you sign up for benefits. Legal insurance can cover you if you need to create your will, close on your home, or even if you are sued. And it is usually DIRT CHEAP.
Pre-Tax Commuter Benefits: Put away pre-tax money for qualified commuting expenses (such as public transit).
If your employer offers any of the items above, use them, or
7. Tighten Your Belt
Take an honest look at everything you spend money on.
Reduce your bills: Use the BillFixers to negotiate down your bills.
Catch Sneaky Charges: Use Trim to alert you to and watch for (and cancel if you want) recurring charges on your statements.
No Amazon: Cancel your Amazon Prime account. You’re buying shit you don’t need.
No Professional Tax Preparers: This is 2017. Stop paying someone to do your taxes when you can use a robot. We recommend and use TaxAct because it is the cheapest of the bunch and has the functionalities that most taxpayers need.
Save Money on Food: Check out our article about using meal subscription services to save money on groceries and to learn how to cook in the process!
Stop buying coffee: I used to spend $5+ a day on coffee - comprised of espresso shots at Starbucks and trips to the coffee shop for an afternoon latte. I took a hard look at how much this was costing me (>$150/mo) and decided it was time to invest in an at-home solution. It would need to make really good lattes, but I was not in the market for an espresso machine with a wand and extensive cleaning requirements.
I opted for a Nespresso and milk frother combo. You'd never know the difference between the lattes I make at home and the ones I can buy at the coffee shop next door.
So before you cancel your Amazon Prime account, get a Nespresso machine and a milk frother and make picture perfect lattes at home or at your desk. Like this 2-for-1 package that will pay for itself in 2 months:
+ get generic pods instead of brand name Nespresso pods to save extra money!
My favorite are these:
8. Stop Paying to Travel
Use RewardStock to get step-by-step instructions for how to accrue enough points and cashback to travel wherever you want in the world for free.
*If you want the true $ amount, you have to do the weighted interest rate across all of your loans or do each of your loans separately and add up the amounts. But use this equation for a basic idea.
**If you have an income over $117,000 a year, consider a Back Door Roth IRA. Just one extra step.
The owner of this site is not an investment advisor, financial planner, nor legal or tax professional and articles here are an opinion. The content on this site is intended to be educational and used for general informational purposes only. It is not intended to provide specific advice or recommendations for any individual. Some links to products on this website will earn an affiliate commission.