According to a 2015 survey by the National Foundation for Credit Counseling, less than half of Americans keep close track of their spending, and nearly 30% aren’t saving for retirement.
Clearly, there’s room for improvement.
On the heels of our #BIBetter program, #BIBetterMoney is a 14-day self-improvement plan designed for the busy professional, featuring a simple task a day for two weeks to help you take control of your money.
We recommend participating with at least one other person, so you have more fun and keep each other in check. You can start on any Monday and should complete actions on their specified day when possible.
The following slides go through the days and the thought behind them in detail, and you can also reference our infographic calendar.
Let's dive right in.
In his book 'Cold Hard Truth on Men, Women & Money,' 'Shark Tank' investor Kevin O'Leary recommends that before you take any steps to improve the way you manage your money, you get what he calls your 90-day number: A sum of every dollar you've spent and earned in the past three months.
'It's going to be a positive or negative number,' he writes, 'because money is black or white. There is no grey. You either have it or you don't.'
You'll do this in two steps: First, add up your income, and next, add up your expenses.
Income number - expenses number = 90-day number
If it's positive, you're starting off on the right foot. If it's negative, we have some work to do. And if it's hovering around zero, you're playing a dangerous game.
What do you want over the next five years? 10? 30? And how many of those have a price tag?
This isn't a scientific exercise. It's an exercise in prioritising what you want, and starting to plan ahead to achieve it.
Common goals include buying a house, taking a trip, building an emergency fund, buying a car, having a baby, sending your child to college, and retiring comfortably.
The daydreaming is a good start, but now it's time to make it a little more real by assigning a price to your goal. A little research can help you with this, and keep in mind that prices for things like homes vary widely depending on your area.
Now, time to work backwards. Let's say you want to save $US50,000 for a 20% down payment on a home, plus broker and other fees, in eight years. If you're saving in a regular savings account with insignificant interest, $US50,000 divided by eight years is $US6,250 a year -- $US521 a month, $US130 a week.
Better build a line for these savings into your budget.
Where will this money come from? We'll get to that next.
You're halfway there!
Today's task is pretty simple: You're going to set up a system to make saving money automatic. You're going to pay yourself first.
Instead of waiting to see how much money you have at the end of the month and funelling that into savings -- unless there's none left because you accidentally spent it -- you're going to make a point of having money available to save.
How? By having your chosen amount deposited directly into your savings account before you ever get the chance to spend it.
It's a simple matter of logging online or calling up your bank and arranging for a regular transfer of a portion of every paycheck from your checking account into your savings.
Psychologically, automatic transfers will give you a leg up, because it's much easier to keep from spending money you hardly remember you have.
Today, you're going to take a critical eye to your investments.
It's important that you select investments that are both low-fee and diversified, with an appropriate level of risk for your goals. You can read more about the fees that lessen your returns and how to find them, and how to diversify properly.
The flashy kind of investing that makes people billionaires tends to be putting all your cash in a single corporate basket, but that approach doesn't work for most people -- even Warren Buffett advises a more conservative approach. Specifically, he recommends investing in index funds.
One way to put your money in index funds is to use an automated investment service like Wealthfront or Betterment, which manages your investments for you with minimal or no fees, depending on how much money you put in.
For the most part, a solid investment portfolio is best served by being left alone to weather the market. The notable exception to this is rebalancing, which adjusts the makeup of your portfolio to a level of risk that best suits your age and goals. Read a guide to conducting a quarterly portfolio checkup.
If you haven't started investing yet, now is the time. The chart above is a good illustration of why time is your greatest asset when it comes to investing.
Today's task is a simple one: You're going to get your credit score.
Your credit score is a three-digit number between 301 and 850, and the higher, the better. Generally, you don't want your credit score to dip below 650, and you never want it below 600.
It exists to help give lenders an idea of your trustworthiness, and can affect whether you get approved for and the interest rates you receive for major loans like a mortgage. The number is based on your past behaviour -- things like whether you pay your bills on time, how much of your total credit limit you use (maxing out your cards is bad!), and how many accounts you have (generally, the more the better). You can see the full breakdown above.
Technically, there are three credit bureaus that generate credit scores for you and each of the above sites chooses (and clearly discloses) which bureau it pulls from. One score is usually enough to give you a good idea how you're doing, since they tend to be very similar.
Optional: Get your credit report.
If you're shocked by your score -- in a good or bad way -- you might want to go a step further and get your credit report, which is also free. AnnualCreditReport.com is the only free place to get it, and you're permitted one report from each bureau per year. You can get them all at once to compare, or request one every four months to keep tabs throughout the year on any errors or misrepresentations.
Some banks make over $US1 million a year in fees from their customers, and you probably don't want to contribute.
If you're paying unnecessary bank fees for basics like holding a checking account, or withdrawing cash from an ATM, you're getting a raw deal.
One of the smartest things you can do is read the disclosures before opening an account at a bank, where they will tell you exactly what you're expected to pay and how to avoid the cost, in the case of something like a minimum balance fee for your checking account. Between getting your 90-day number and establishing your budget, it should be clear to you if your bank is charging you fees for services you could otherwise get for free.
You have two options to deal with that:
1. Get clear on the requirements to avoid fees, and set up a system to make sure you always meet them. If it's keeping your checking account at a certain balance, set up a text alert if you balance gets dangerously close. If it's using your debit card five times a month, make a practice of always using it at the dry cleaner. If it's withdrawing money from an ATM, swear off out-of-network machines.
2. Change banks. Your options are no longer limited to the biggest banks in the country. Now, online banks such as Ally, Simple, and BankMobile pride themselves on their lack of fees to the consumer, a privilege they can afford because they don't maintain brick-and-mortar storefronts.
The next time you're charged a surprise fee, take a few minutes to call -- you never know, they might just go ahead and refund you.