Adjust your priorities, you come first
Many fall into the trap of looking at income less expenses, then adjusting what will be put into savings.  By re-framing this to Income – Savings = Expenses, you are able to ‘pay yourself first’.  Over time, this framework will put you in a much better position for the surprises life can throw your way.

Be stingy about fees
Review any account that charges you a fee and make sure the fee is reasonable given your use of the product.  Research free alternatives or make changes to avoid fees all together.  While many understand the concept of compound interest over time, have you ever considered the effect of compound fees over time?  Diminishing or eliminating fees could add up, especially if you are able to defer those funds to savings and earn a rate of return.

Carried Credit Card Balances are Expensive, Prioritize getting them Paid Off
If you are carrying credit card balances, work to pay those balances off.  Low interest rewards cards are getting scarce and minimum APRs have increased steadily in recent years thanks to Federal Reserve interest rate hikes. The average credit card interest rate is now hovering around 17.67%[1].  This means if you are carrying $10,000 in credit card debt, over the course of a year you will pay $1,767 in interest.  Every dollar of carried credit card balance you pay off can be viewed as a 17% risk free return.  If you are serious about paying your carried balances off, research balance transfer offers.  For persons with good credit, these offers are still plentiful.  You may be able to secure a promotional offer of 0% APR for 12 to 15 months, allowing you to eliminate your debt and keep more of your money.

Are you using all your subscriptions?
Review your subscription services.  Ensure you are using each service and it’s worth it.  Subscription services are easy to collect and while individually they may not seem like a lot, they can become costly when added together over the course of a year.  It’s a good practice to periodically ensure that you are using the service enough to justify its cost.  Instead of looking at the monthly rate, calculate the annual cost and make your judgement based on that figure.  If you’re having a hard time deciding what to keep and what to cancel, consider what you would do if you or your spouse were to get laid off.  This should help you pinpoint what is really important.  If you decide to cancel subscriptions, consider using the amount you save to pay down debt or build cash savings automatically each month.

Research Savings Account Rates for your Cash
If you’ve accumulated cash in a Savings account, review the rate of interest you are being paid.  Many of us are guilty of spending more time researching small purchases than we do the rate of interest paid on cash balances.  According to the FDIC, the national average interest rate on savings accounts is 0.1%[2].  Annual money market security yields as high as 2% can be found, which provide the added benefit of liquidity.  While 2% may not seem like a lot, it can add up over time.

Example of Annual Interest Paid on a $15,000 Deposit

$15,000 x 2% = $300

$15,000 x 0.1% = $15

[1] https://www.creditcards.com/credit-card-news/rate-report.php

[2] https://www.fdic.gov/regulations/resources/rates/

 

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