1. Look to municipal bonds. High quality munis, at 2 1.2% tax free versus nothing in the bank. Bonus! Plus, if you buy municipal bonds in your home state, interest may be tax exempt not only on the federal level, but on your state’s income tax too. Talk about a double whammy!2. Pay ’em down. Pay down the highest interest rate expense you have first, which is most likely your credit card.
These high rates will get you in the long term; get them under control before moving on to lesser expenditures.
Don’t be scared to call your credit card provider and see what changes to your interest have been made in the new year.
Companies want to keep their best customers and many are cutting down interest costs for a portion of the year. If you’re not happy with your card don’t be scared to shop around for one that works best for you.
3. Set up an emergency fund. Experts used to recommend 3-6 months worth of bills and expenses, but post-Recession 6-9 months is better if you can swing it. It’s a great way to pad yourself for the unexpected — job loss, salary cut, moving expenses — and you’ll be glad to have it when you need it.
4. Further your career. Use the extra dough to get ahead at work. Subscribe to a trade magazine and study up for fresh ideas and approaches to share with your team, or your boss. Enroll in a class online or at a local university to improve your skills or learn a new one.
5. Save on a schedule. Invest the same amount in a mutual fund every month. That ensures you’ll buy more shares when they’re cheap and fewer when they’re expensive. We like T. Rowe Price’s Automatic Asset Builder program, which lets you contribute as little as $50 a month to nearly any of its funds — and sneak under the usual $2,500 minimum initial investment.
6. Watch your fund expenses. Look for mutual funds that have expenses below 1.33 per cent for stock funds and 0.89 per cent for bond funds; study after study shows that keeping investment costs low is the best way to increase your odds of earning a high return. The cheapest of the cheap are index funds from Vanguard or Fidelity.