Today we are finishing our list of the 30 steps anyone can take to have great finances.
If you are new to this series, please read through the steps we've already covered, starting with 30 Steps to Great Finances: Steps 1 through 3, before reading this post.
If you have been taking action since the beginning of this series, your finances are probably in much better shape now than they were earlier.
The last three steps focus on some final ways to improve your finances. Take these steps, and you will be able to keep all of the good habits you have developed.
Let's get started.
Step 28: Automate Your Finances
You may think to get ahead financially, you must continuously make smart money decisions. Of course making smart money decisions is necessary. But you don't have to make great moves continually; many times you just need to make them once. One way you can take some of the burden off your shoulders is by automating your finances.
So what should you automate? Let's begin with the pay from your job. Contributing to an employer-matched 401k is the first no-brainer for an automatic deduction. Then have money taken from your check for things like flexible spending accounts, health savings accounts, and the like. From there you can send the rest of your check to your bank where it can be dispersed as you like (I have funds that go from my bank to Vanguard each month where they are automatically invested there.)
You can also save yourself a boatload of time (and potentially money -- you will never pay late fees) by automating payments of your monthly bills -- anything that's a recurring cost.
You can also fund any number of accounts automatically. You can build up your emergency fund, save for your next car, or put money away for your kid's college costs.
So try to automate as much of your finances as you can. It will make saving, investing, and managing your money much, much easier. And after a while, you won’t even notice that the money is not in your paycheck and is quietly growing your wealth through no further work on your part. How sweet is that?
Just don’t be lazy. Don't "set it and forget it." You will still need to occasionally check/manage your accounts to make sure there are no unauthorized charges or other errors.
Step 29: Develop Long-Term Goals and Plans
Now that your finances are solid, you can develop long-term goals and plans.
This isn't to say that you didn't have goals back when you started this process because you certainly did. But those were likely more along the lines of "get my finances in order" sort of goals. Now that your finances are in order, you're looking at a whole new world of possibilities.
So what do you want to accomplish? Don’t be afraid to dream big. Do you want to retire at 50? Do you want to buy that "special" car you've wanted since you were 13? Do you want to create your own non-profit to help disadvantaged youth in your area? Do you want to do some special things with your family (like take a cruise)? Do you want to completely fund college for your kids?
Whatever you'd like to do, write down your plans. Trust me, you’re much more likely to accomplish goals when you write them down instead of just thinking about them. Once you have them written down, be sure to review them regularly to make sure you keep a focus on your priorities.
Step 30: Establish Regular Tracking and Review of Both Your Net Worth and Spending
Way back in Step 1 we discussed computing your net worth. Now that your finances have improved, you should calculate your net worth at least every year. (Personally, I compute it monthly, but I'm a bit anal about money management.)
Why?
Because it's a measure of your progress. You can see how healthy your finances are (or aren't) and make adjustments accordingly. Hopefully you can watch your financial situation improve every year -- which will likely motivate you to make them even better.
In addition, review your spending plan once a month. Take the time to reconcile how much you have spent to make sure you are on track and not overspending. Over time you will develop a feel for your spending plan and will know if you are over, and you can review your plan less frequently (I moved from monthly to quarterly to semi-annually to annually to whenever I see something on Quicken that I want to check into.) Whatever time period and method works for you, be sure to keep a handle on how your money is spent. Otherwise you risk letting valuable savings/investments simply slither out of your hands without any notice at all.
There you have it. Thirty steps to improve your finances.
If you haven’t yet started your journey to better finances, what are you waiting for?
Have you had success with following these steps? I would love to hear your feedback!
If you are new to this series, please read through the steps we've already covered, starting with 30 Steps to Great Finances: Steps 1 through 3, before reading this post.
If you have been taking action since the beginning of this series, your finances are probably in much better shape now than they were earlier.
The last three steps focus on some final ways to improve your finances. Take these steps, and you will be able to keep all of the good habits you have developed.
Let's get started.
Step 28: Automate Your Finances
You may think to get ahead financially, you must continuously make smart money decisions. Of course making smart money decisions is necessary. But you don't have to make great moves continually; many times you just need to make them once. One way you can take some of the burden off your shoulders is by automating your finances.
So what should you automate? Let's begin with the pay from your job. Contributing to an employer-matched 401k is the first no-brainer for an automatic deduction. Then have money taken from your check for things like flexible spending accounts, health savings accounts, and the like. From there you can send the rest of your check to your bank where it can be dispersed as you like (I have funds that go from my bank to Vanguard each month where they are automatically invested there.)
You can also save yourself a boatload of time (and potentially money -- you will never pay late fees) by automating payments of your monthly bills -- anything that's a recurring cost.
You can also fund any number of accounts automatically. You can build up your emergency fund, save for your next car, or put money away for your kid's college costs.
So try to automate as much of your finances as you can. It will make saving, investing, and managing your money much, much easier. And after a while, you won’t even notice that the money is not in your paycheck and is quietly growing your wealth through no further work on your part. How sweet is that?
Just don’t be lazy. Don't "set it and forget it." You will still need to occasionally check/manage your accounts to make sure there are no unauthorized charges or other errors.
Step 29: Develop Long-Term Goals and Plans
Now that your finances are solid, you can develop long-term goals and plans.
This isn't to say that you didn't have goals back when you started this process because you certainly did. But those were likely more along the lines of "get my finances in order" sort of goals. Now that your finances are in order, you're looking at a whole new world of possibilities.
So what do you want to accomplish? Don’t be afraid to dream big. Do you want to retire at 50? Do you want to buy that "special" car you've wanted since you were 13? Do you want to create your own non-profit to help disadvantaged youth in your area? Do you want to do some special things with your family (like take a cruise)? Do you want to completely fund college for your kids?
Whatever you'd like to do, write down your plans. Trust me, you’re much more likely to accomplish goals when you write them down instead of just thinking about them. Once you have them written down, be sure to review them regularly to make sure you keep a focus on your priorities.
Step 30: Establish Regular Tracking and Review of Both Your Net Worth and Spending
Way back in Step 1 we discussed computing your net worth. Now that your finances have improved, you should calculate your net worth at least every year. (Personally, I compute it monthly, but I'm a bit anal about money management.)
Why?
Because it's a measure of your progress. You can see how healthy your finances are (or aren't) and make adjustments accordingly. Hopefully you can watch your financial situation improve every year -- which will likely motivate you to make them even better.
In addition, review your spending plan once a month. Take the time to reconcile how much you have spent to make sure you are on track and not overspending. Over time you will develop a feel for your spending plan and will know if you are over, and you can review your plan less frequently (I moved from monthly to quarterly to semi-annually to annually to whenever I see something on Quicken that I want to check into.) Whatever time period and method works for you, be sure to keep a handle on how your money is spent. Otherwise you risk letting valuable savings/investments simply slither out of your hands without any notice at all.
There you have it. Thirty steps to improve your finances.
If you haven’t yet started your journey to better finances, what are you waiting for?
Have you had success with following these steps? I would love to hear your feedback!
I've just stumbled upon this - I think I have some catching up to do reading 1-27!!
I completely agree on these three points. I only started tracking my spending and net wealth in minute detail in the past few years and I don't think its a coincidence that my net wealth has increased by 50-100% each year compared to much lower figures in years before that.
Posted by: moneystepper | January 15, 2014 at 06:21 AM
The advice about not setting it and forgetting it is very true.
Beginning of last year I had automated everything, including large extra payment on the mortgage and transfers to saving account. Suddenly 2-3 months in the year I realized my checking account is running on fumes. I hadn't accounted for the fact that early in the year my salary is a bit smaller due to social security payments, also I had moved from regular to Roth 401k, etc - and on the expense side my toddler started day care, which or some reason was not in my budget estimates. So a net difference of over $1K a month almost put us in the red until I noticed what is happening.
And on a smaller scale this month I noticed the trash service hadn't made their quarterly charge (all our bills are automated). I called them and it turned out that when I automated 2 years ago I put a limit on the charge which was sufficient at the time but was just exceeded. If I hadn't called to check and correct they would have been after me for late payment.
I find automation extremely helpful, when I am not asleep at the wheel :-)
Posted by: Ivy | January 15, 2014 at 11:11 AM
I find that the Bill Pay system available on my Credit Union account makes it very easy for me to manage my payments. I take care of our credit card and utility bill payments by scheduling them for payment on the day preceding their due date. This way I hardly ever need to mail anything, have never had a late payment, and maximize the balances in our checking and savings accounts. Now that I am 79 I also don't rely on my memory as much as I used to and use a desk calendar to jot down when payments are to be made and also when money needs to be transferred from Savings into Checking.
Another great advantage of my credit union is that they never charge me any fees whatsoever and their interest is higher than I can get at a bank. Another big plus for credit unions is that when I need some cash I don't have to drive to my own credit union to use an ATM since many of them are networked such that you can use whichever credit union happens to be closest to you. You can also use ATMs at 7-11 stores but the login process is not as easy to use.
Posted by: Old Limey | January 15, 2014 at 11:36 AM
All 3 tips are great, but I especially love automating. I recently even started automating my giving. I can give my tithe to my church online and it allows me to set an amount that comes out every month. Even if your church or charity doesn't have an online payment option, you can still set it up with online banking. Automation makes everything easier. I actually just finished writing an article, that I plan to post next week, on having an automatic budget. Thanks for the post!
Posted by: Kalen | January 16, 2014 at 12:54 PM
A very good list that will help anyone who wants to be able to manage and secure their finances. Commitment is the key and the continuous and innovative effort to find ways to make every step work for your unique needs.
Posted by: Mike Goodman | January 18, 2014 at 05:44 AM