13 Ways to Take Luck Out of the Equation
Friday the 13th conjures up a whole host of superstitions. Black cat crosses your path? Absentmindedly walk under a ladder? Some people believe both of these will send bad luck your way.
When it comes to your finances, we're not superstitious. Because with the proper planning, you can take bad luck out of the equation. So put down that lucky rabbit's foot, and read up on some helpful tips for your financial future.
1. Automate your savings
Think about setting up an automatic transfer to your savings account in Online & Mobile Banking. Depending on your pay cycle, you might want to schedule this transfer once or twice a month. It's a good idea to schedule it to transfer after your paycheck has been deposited.
If you're paid twice a month, and you transfer $250 per paycheck, you will save $6,000 a year, without having to do anything.
Be sure to check your budget to see how much you can afford to set aside each pay period for savings.
Which leads us to...
2. Set up a budget
Setting up a budget is a smart way to ensure that you know exactly how much of your money is going where each month. This could help you avoid overdraft fees on your checking account, missed bill payments, or charging too much on your credit cards.
One simple strategy is the 50/30/20 budget. This is where you set aside 50% of your monthly income for needs (such as food, rent, utilities), 30% for wants (entertainment, dining, home decor), and 20% for savings (vacation, retirement).
The 50/30/20 strategy is just one strategy and may not fit your individual goals. Some people, for example, may need to set aside more than 20% for savings, or more than 50% for needs.
There are many ways to set up a budget, so be sure to do some research to find out which way best fits your personality, your specific situation, and your financial goals.
If you need a place to start, you can use our easy Monthly Budget tool.
3. Invest in your 401k
Investing in a 401K is one of the smartest things you can do to save for retirement. If your employer offers any sort of matching program, you should consider investing a portion of your monthly income. An employer matching program is essentially free money for your future.
And, if you have direct deposit set up, most employers allow you to divert a portion of your paycheck automatically to your 401K each pay period.
If your employer doesn't offer a 401K, you can always consider setting up a Traditional or Roth IRA.
4. Track your spending
Even if you've already set up a budget, it's important to track your spending to make sure that you're sticking to it.
Keep track of where your money's going. How much are you actually spending on needs, wants, and savings? Are you sticking to your budget? Is there anything you could reduce or cut out entirely?
Tracking your spending not only lets you know if you're sticking to your budget, it might also let you know if you need to rethink your budget strategy.
5. Build an emergency fund
While your savings account could be used for vacations, a large purchase, or holiday expenses, an emergency fund prepares you for unexpected circumstances or life events.
Most financial advisors suggest stockpiling anywhere from 3 to 6 months-worth of expenses so you can stay afloat should something happen.
Remember: the money in an emergency fund should not be touched unless you find yourself in dire need. This fund is your worst-case-scenario safety net, and should be treated as such.
6. Start Saving Early
You should start saving for retirement whenever it's feasible for you. But the earlier you start, the better the chance you have to earn a higher return on your investment, largely due to the principle of compounding interest. Essentially, compounding interest means that you earn interest on both your principal investment, and on any interest that investment has accrued.
For example, let's say you have an initial investment of $10,000 that gains 5% interest annually. After the first year, the account will have risen to $10,500, because of the gained 5% interest. The following year, however, the account will grow by $525, because it is now earning interest on the principal balance and the interest from the first year. So, after 10 years, assuming there are no withdrawals and the interest rate is fixed, the account will be worth $16,288.95.
In short, the sooner you can start investing, the more compounded interest you will earn on your accounts.
7. Pay off high-interest debt
Because credit card debt has some of the highest interest rates, paying it down should be a priority.
Let's say you have a debt of $5,000 at 18%, and you receive $5,000 for your tax return. What should you do? Common advice is to split that money equally, half towards paying off debt and half towards savings.
But that $2,500 remaining credit card debt will cost you $450 a year in interest, which is significantly more than what that $2,500 will earn in a savings account.
In short, you will save more by paying off high-interest debt first than you will earn in a savings account.
8. Automate bill payments
If you have a budget in place, and are sticking to it, automating your bill payments could be a smart move.
Automating bill payments means that you'll make the payments on time each month and will avoid late fees and other penalties.
This is especially important with credit card balance payments, because payment history is 35% of your credit score.
Again, only automate payments if you have a sound budget in place and are sticking to it. Otherwise, you could run the risk of overdrawing your account and incurring fees.
9. Be mindful of social media pressure
Our current culture revolves around social media, and for some people there's a temptation to try to keep up with a certain lifestyle. If the people you follow are posting pictures of expensive dinners and designer wardrobes, you might feel like you should be doing so too.
Sometimes referred to as "Lifestyle Inflation" or "Lifestyle Creep," this understandable temptation could limit your ability to save for retirement. Every dollar you spend trying to keep up with the Joneses is a dollar you're not saving.
10. Improve your financial literacy
These days, it's easy to educate yourself on just about any topic. And financial health is no different. Learning about financial planning and best practices can help you make smart decisions on your own.
And it can be fun, too! Find a few (trusted) financial websites that have a writing style or approach that fits your personality. Follow financial advisors with good industry reputations and sharp wit on social media. Long work commute? Why not listen to a financial advice podcast with hosts you find engaging and informative?
We also offer two free resources for our members. Our Financial Education Center offers online tools and short video courses you can take from the comfort of your home.
Or, if you are in need of confidential, one-on-one financial counseling, check out BALANCE.
One of the smartest ways to take luck out of your financial future is to become smarter about finances in general.
11. Invest in yourself
Unexpected events, like a sharp economic downturn, can have a negative impact on your finances. The job market is no different.
Consider building your skills through workshops, certificate programs, or continuing education, especially if your employer offers a tuition reimbursement program.
Expanding your skill-set, staying current with your industry's trends, learning how technology changes the game, all of these things make you a valuable, and marketable, employee.
In short: job security means financial security.
12. Define your goals
Creating a budget, saving for retirement, paying down debt, these things are all smart financial strategies to take luck out of the equation.
But it's also easy to lose sight of why you're sticking to a budget, why you're not just spending your hard-earned money and living it up in the moment.
It's a good idea to remind yourself from time-to-time. Determine your short-term, medium-term, and long-term goals. Write them down somewhere: a note on your phone or laptop, a post-it note at your desk or bathroom mirror. Anywhere you'll see it.
Reminding yourself of the reasons why you decided to get serious about your finances will help you stay on track.
13. Evaluate trends
Trends pop up everywhere. Some of them are here to stay, and some of them fade fairly quickly. Financial trends are no different.
These trends get traction online and off, through ads, commercials, recommendations. They usually promise new ways to help you save, reduce expenses, or live more simply.
Think of tiny houses and cryptocurrency.
This is not to say that all trends are bad, or that all trends are good. It's just to say that you should be wary of them. Do your research. Find out if this new financial or lifestyle trend is viable and legitimate. Will it stand the test of time, or is it just a new fad?
Most importantly, ask yourself, is it right for my financial future? Will it help me achieve my goals, or is it too risky?
Finances Don't Have to be Frightening
Managing your finances can seem scary, but it doesn't have to. These 13 tips can at least give you a good starting point on your journey to financial security.
And, as mentioned above, we offer two free financial resources with our self-directed Financial Education Center, or no-cost, confidential counseling through BALANCE.
When it comes to your finances, you don't need to get spooked.
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