20 moves to simplify your finances

In the September 21, 2009 Woman's Day article "20 moves to simplify your finances," Mary Hunt provides 20 suggestions for financial success:

I know what you’re thinking: simplify and finances in the same sentence? Ha! Like that’s even possible when we have credit cards, bank accounts, bills, bill-paying options, fees, penalties and interest rates to keep track of! How can we possibly make our finances simple? By knowing the right tricks. Choose to become accountable, then use every tactic you can to streamline—and destress— your financial life. If you can pare things down in the following areas, you’re well on your way.

Spending

1. Use cash. When you’re paying for things like groceries, gas, and other routine items, there’s nothing easier. You can’t overdraft it, and you won’t have to worry about fees and interest. Once it’s spent, that’s it. Done.

2. Organize with envelopes. I’ve said it before, but I’ll say it again: This is quite possibly the most effective money management technique. Get a stack of envelopes and label one for each of the ways you’ll be spending your cash (“food,” “gas” and so on). Place the amount you’re going to spend for the week in each envelope and stash them in a safe place. There—you’ve got a spending plan.

3. Use a gift card. Most retailers, even supermarkets and gas stations, offer gift cards these days. Let’s say you intend to spend $400 for groceries this month. Buy a card in that amount from your supermarket and use it as you would a debit or credit card during the month. If you stick with it, you’re guaranteed to stay on budget.

4. Track your charges, too. Whenever you use a credit or debit card, take 30 seconds to record that transaction in the same way you record the checks you write. (That money’s already spent, right?) Enter it in red ink. Later, when your bank statement or Visa bill arrives, you’ll be able to quickly double-check the red entries.

5. Put kids on a budget. For most families, kids plus money equals a big black hole. Bring sanity to the situation by determining a set amount for each child per month and making a cash envelope with that child’s name on it. It’s up to you whether you or the child manages that money. When it’s gone, no more spending until the next fill-up.

6. Get tech-y. The secret to living within your means is to keep track of your spending. At Wesabe.com, Geezeo.com or Mint.com you can get a clear picture of your finances and create a budget. These sites are free, but you do need to enter your personal financial information.

Mvelopes.com, a similar site, offers more privacy and beefed-up features for a monthly fee. Or try software like You Need a Budget or Quicken, which allows you to download your information to your hard drive ($40 to $60).

Banking

7. Use direct deposit. If you haven’t already, arrange with your employer to have your paycheck deposited directly into your bank account. No more lost or misplaced paychecks, and the money reaches your account even if you can’t get to the bank. The real payoff: Many banks and credit unions offer free or lower-cost checking for customers with direct deposit.

8. Get overdraft protection. If you overspend your account, your bank or credit union can choose whether or not they want to pay the amount. If you haven’t arranged for overdraft protection and they decide to cover your mistake (called “courtesy overdraft”), you’ll pay $30 or more for each item they cover plus a daily fee—say, $5 for every day your account is overdrawn. If the bank chooses not to cover the amount, they’ll charge you $30 or more, plus the merchant will most likely charge you an additional $25.

Overdraft protection links the account either to your savings account, a line of credit or a credit card to cover any overcharges you make. You’ll pay a fee of around $5 to transfer money from your savings to cover the problem. If you use an overdraft line of credit you’ll also pay interest, but it will be a lot less than the bank’s courtesy coverage.

If you prefer to put your own overdraft plan into place, keep a secret $100 or more in your account and exclude it from your current balance. If you make a careless error in the future, you’ll be covered.

9. Hover online. You already check your email, Facebook and other sites at least once a day. Why not add your bank account to the routine? Once you register at your bank’s site, you’ll be able to get current account information.

Bill Paying

10. Make a calendar. Add bill due dates to your everyday calendar. That way if a bill doesn’t show up in the mail for some reason, you’ll still know exactly when it needs to be paid.

11. Change your due dates. Take another look at your calendar: Do you want those dates spread out evenly, or would it be better for them to coincide? You decide, then see if your creditors will change them accordingly—most credit card companies are happy to comply. (Be aware that if you carry a balance on your card, pushing the due date back a few days will result in a onetime adjustment to your next bill, because finance charges will continue to accrue.)

12. Sign up for auto–bill pay. Many people already do this with their insurance premiums, utilities, mortgage and even student loans. They sign a document agreeing to have the payment deducted from their checking accounts. This does not preclude the need to manage, check and verify that the amounts deducted are correct, but it is a good way to make sure your bills are paid on time. You’ll also avoid paying postage, and you may get a lower interest rate on your student loan or mortgage (they could knock off .25% if you agree to set up automatic payment).

13. Pay online. This isn’t automatic— here you’re the one making the payment. Instead of using a paper check, go online to your bank account and pay bills electronically. The money will be immediately deducted from your available balance. It’s neat and efficient.

Plastic

14. Slim down your wallet. You know it can be detrimental to your credit score to close credit card accounts, but that doesn’t mean you have to carry all that plastic! Figure out which card you really need to keep with you, then stash the rest in a safe, secure place. Enjoy the simplicity of using just one card.

15. Manage store discount cards. Many retailers have some kind of frequent-buyer club card, which is great…but boy, can they weigh down your wallet or key ring. KeyRingThing.com offers a clever way to consolidate up to six of your loyalty cards into one for free. There’s a quick demo video on the site that explains how this works. You’ll be impressed.

16. Log on daily. As with your bank accounts, you need online access to each of your credit card accounts. Then check them every day. This may take a few minutes, but that’s the level of care you need to stay well below your credit limit and to catch any irregularities—like mystery fees, purchases you didn’t make—before they become a problem later on.

Planning

17. Prep for taxes. If you dread doing taxes, take away your fear with a handy set of file folders or a single accordion file. Hang on to the receipts you collect during the day (jot a note on the ones that might be deductible), then slip them into the appropriate slots. If you make this a habit, all you’ll need is about 15 minutes to pull the information together to file your taxes next year.

18. Make a will. If you haven’t already done this, stop putting it off! At the very least, you need a will and a Health Care Power of Attorney (sometimes referred to as a Health Care Proxy), which authorizes a person you name to make health care decisions for you if it becomes necessary. And if you have minor children, you need to name a guardian. It’s a simple process that will pay back with peace of mind. To learn more, check out LegalZoom.com and Nolo.com, or make an appointment with an attorney who specializes in end-of-life issues.

19. Scan to CD. Could you put your hands on all your important papers? Even if you know where they are, chances are your insurance policies, birth certificates and tax records are scattered about. Make life easier by taking time to scan all of your documents into your computer, then store them on CDs. Keep a copy for yourself and send one to a trusted friend or relative.

A few tech notes first: Be sure to use a desktop, not a laptop— the last thing you want is for your laptop to get lost or stolen with all of your personal info on it! And when it comes time to replace your computer, erase everything first.

20. Eat on the Cheap. This month your assignment is to create at least ten $5 dinners for your family. (We’re talking the entire meal, not just the entrée—for $5 or less for a family of four.) Impossible? Not at all, says Erin Chase, founder of 5dollardinners.com. Once you get started, you’ll be surprised what you can make. Do a quick calculation of how much you normally would have spent for those dinners, deduct $50 ($5 x 10 dinners = $50) and pop the rest into your WDSaves savings account. How simple!