If you’ve ever tried a juice cleanse or a clean-eating challenge the benefits are almost immediately noticeable in how you look and how you feel. So if you want to add a little swagger to your step and have more confidence in your personal finance skills, grab a calendar and follow the steps below. They say it takes 21 days to form a habit so it you can follow this for the next three weeks (and maybe even possibly form some habits out of it), you’re going to notice the benefits right away!
Week 1 (Time Commitment: 2-3 hours)
- Lay It All Out There – List all of your financial institutions with your usernames and passwords. This allows you to not only be on the same page with your spouse, it also lets you begin to get a handle on everything that is out there. From checking accounts, debts, and retirement accounts, you need to know your starting point before you can plan where you’re going.
- Use Aggregation Software – There are a few websites out there that will aggregate all of your accounts automatically for free such as Personal Capital or Mint. It can be a little scary to add all of your accounts, usernames and passwords to one of these sites but rest assured, these websites use multi-factor authentication and other secure measures to transfer sensitive data. My favorite is Personal Capital as they offer more details regarding your cash flow and investment information. It’s a great way to get a holistic view of your finances in one place and keep an eye on everything.
- Look At Your Income & Expenses – Also known as a budget, you simply write down all of your income sources and all of your bills. Where things can get kind of fuzzy is all of those other discretionary purchases we make every month. Follow this 50/20/30 budget rule so you can get a good grasp on what you should be spending in certain areas of your life. If you don’t have at least 20% of a cushion to dedicate to things like saving or paying down debt, it’s time to buckle down and look at ways to decrease expenses or increase your income.
- Set Financial Goals – Now that you know about EVERYTHING you have out there, you can now figure out where you want to be. This is so important because by setting goals from a known starting point, you can measure your progress going forward. Make sure you’re setting realistic and obtainable goals. That can be anything from paying down debt to reaching a certain savings goals. Whatever it is, make sure it is feasible and you are growing your net worth every year. To find out where you measure up, read my post Savings By Your Age.
- Automate and Accomplish – Now that you know what you want to accomplish, get a system in place so these things happen automatically! Set up recurring deposits, automate loan payments, and when it comes to discretionary spending (you should already know what your budget allows you to spend), take that out in cash and limit yourself to that amount. No more worrying about overspending or what your spouse is spending and you’re staying on track with what you said you were going to do because it all is happening automatically. If you are military or have a military background I would highly recommend looking into USAA. This has been my one and only bank for over 10 years because well … THEY ARE THE BEST! Free checking, free bill pay, future expense tracker (so I can see what my account balance looks like 1 month from today), and they reimburse ATM fees. I automate everything from USAA and I cannot say enough good things about them!
- Relax – Now that everything is out in the open, I get how overwhelmed you must feel but know that this is a learning process. You are not terrible with finances, you are learning. You’re not a lost cause, you are now mission-focused and you are starting a journey where you get to watch your finances improve week-by-week, month-by-month, and year-by-year. You should feel excited that you are stepping up and taking control. Wealth is built methodically and overtime; you get to start on your wealth-building path today!
Week 2 (Time Commitment: 1 -2 hours)
- Understand the Details – This is the part where you get to dig in to understand the details of what you own. First you want to pull your credit report so you can double-check there is nothing out there outstanding you forgot about and to understand your loans a bit better. I recommend AnnualCreditReport.com since they allow you to pull a credit report from each of the three credit bureaus once a year for free (no worries as this does not affect your credit score). To keep tabs year-round I’ll pull one report from Experian, four months later one from TransUnion, and in another four months from Equifax. Write down the interest rates you’re receiving from savings, as well as interest rates you’re paying on loans. Also take a closer look at any fees you’re paying on investment accounts or bank accounts.
- Negotiate Better Rates – Now that you have a better understanding of that rates you’re paying on any debts, don’t be afraid to reach out to negotiate better rates. Especially if you have been consistent in making your payments, there is no harm in asking. The best way to accomplish this is to research, reach out, and negotiate. For instance with an auto loan, go to a website such as BankRate.com and find out what kind of rates are being offered by other banks. Once you’re armed with this information go to your lender and say “I’ve noticed that other institutions are offering xx% on used auto loans and since I’m looking for ways to lower my interest rate, I thought I’d check with you all first to see if there was anyway you could offer me a better rate?” You can do this with auto loans, mortgages, private student loans, as well as credit cards. Just know that when refinancing anything they will do a hard-pull of your credit report so if you’re about to apply for a mortgage or any other large credit purchase, this could affect your score.
- Re-examine Memberships – When you begin looking at ways to cut expenses, first look at all of your recurring membership fees. Is there a gym membership you don’t fully utilize or a magazine subscription that has you drowning in too many magazines?! It’s amazing how those many tiny expenses can add up to every month.
- Other Money Saving Tips – So this is only for my fellow Texans but I have to talk about Energy Ogre! I feel like I had really zeroed in on our spending but after signing up with Energy Ogre this past year they have saved me soooo much money!! Like over $1,200 this year! Because Texas is a de-regulated state for energy providers, consumers are free to choose who they use to provide electricity. It doesn’t matter if you own a home or live in an apartment, if you pay an electric bill you can choose your electricity provider. For $10 a month, Energy Ogre looks at your energy usage, determines who has the best rates on electricity, and automatically switches you between providers at different times. For 3 months I may be with StarTex, the next couple of months with TriEagle, and so on and so forth. The best part is you can cancel anytime!! Be sure to use my promo code faithandfunds to receive 1 free month of their services.
Week 3 (Time Commitment: 2 hours)
- Know Your Investments – Whether you invest in your employer’s retirement plan, invest with an advisor, or do things on your own, it is important to understand how you’re paying for those investments. The basic investment options out there is to invest in a mutual fund, an ETF, or a stock. When you purchase a stock you typically pay a one-time commission so there really isn’t any worry about ongoing expenses for that particular investment. When you purchase a mutual fund or an ETF, they have what is called an expense ratio. This is what you need to keep an eye on. Expense ratios can be as low as 0.05% to sometimes around 2.0%. It doesn’t sound like a lot but over many years it adds up. If you are working with an advisor, never be afraid to ask what the investments cost and how the advisor is compensated.
- Consolidate Accounts – If you have several retirement accounts out there or old 401(k) accounts laying around, consolidate them with one custodian. Having more than one investment strategy going on is like having too many cooks in the kitchen and duplicating efforts.
- Set Up Your Investment Strategy – This is going to be a little different for everyone and is where hiring an advisor comes in handy. Just remember to keep fees low and diversify. At the highest level this is the allocation between stocks and bonds but is drilled down to different sectors and different styles. There are so many strategies out there, no particular one is consistently the best hence the reason to stay diversified and to hang on for the ride. I have been pretty pleased with the investment management services of Betterment. This is a digital investment service that invests on your behalf for a flat 0.25% management fee no matter how much you’ve invested.
By spending a couple of hours every week for the next three weeks you can accomplish so much on your own! I promise when you’re done with this process you are going to feel so much better about your situation because you are going to understand where you stand with your finances and you are going to be armed with a plan to get you where you want to be. If you have any questions or if you get stuck on a particular task please feel free to leave a comment. If your question is a bit more sensitive, I’m happy to answer it one-on-one if you email me at firstname.lastname@example.org.
Disclaimer: I am a CERTIFIED FINANCIAL PLANNER TM (CFP®), but I am not your CFP® or financial advisor. The information in this article is for general informational and entertainment purposes only and does not constitute financial advice. This article does not create a financial planner-client relationship. The author is not liable for any losses or damages related to actions or failure to act related to the content in this article. If you need specific financial advice, consult with a licensed financial advisor, CFP®, or tax professional who can tailor advice regarding your specific circumstances. Additionally, sometimes I use affiliate links to support my website. This means I may earn a small commission, which is no additional cost to you, for referring and discussing products and services that I personally use, or have used and trust. Thanks for your support!