By “pump up,” I mean to do something that improves your financial situation in any way. Reduce expenses, start a rainy day fund, invest for the future, etc.
With that said, let’s take a look at some simple strategies to pump up your finances.
Cut the fat
I’d start by creating a budget. Look at the past three months of income and expenses. Total the expenses, total your income and compare the two. This will give you a clear picture of how much you are spending versus how much you make.
After that, you can go back with a magnifying glass and see exactly where your money is going, and stop spending money where it is necessary, or at least reduce it.
You can also reduce the fees you pay to invest. Mutual funds and ETFs are the most popular vehicles used today, but they come with a cost. It’s listed as an expense ratio. That ratio should be as low as possible. Ideally, it’ll be under .20%.
A quick tip to cut your expenses – get rid of cable/dish. There are too many services available now. You don’t need to spend $100+ on TV anymore.
Increase savings rate
Hopefully, you are saving something. If you are having trouble setting money aside because of limited resources, give this article a read for some help.
You should be saving in at least two places. An emergency fund and a retirement plan.
- Emergency fund – Say you are contributing $20 per month. This is a good place to start, but you’re going to want to save more so you have enough in case your car breaks down or you lose your job. After three months of saving $20/month. Increase that amount by $5. After another three months, at which point you’ll have gotten used to not having that extra $5, increase it again. Rinse and repeat.
- Retirement plan – If you have a retirement plan with your employer and they match, you’ll want to contribute at least enough to get that match. That’s your starting point. Then you’ll follow the same steps as the emergency fund. After a few months, increase the contribution percentage. If you don’t have a plan with your employer, set up an IRA, start contributing what’s comfortable for you, and follow those same steps.
I mentioned you should have AT LEAST these two accounts. Personally, I have several savings accounts. They are set up for different reasons. I have one for holiday spending, one for car repairs, and one for travel expenses. Giving your money a “job” makes it more likely that you’ll use that money for that “job.”
Switch to an online bank
Most online banks have higher interest rates on savings accounts. They also, typically, have lower rates on loans (based on credit score).
If you are saving money for a rainy day and putting it with a brick and mortar bank, you’re most likely earning next to nothing. Better to put that money in an account where you’ll earn a little interest.
Refinance high-interest rate loans
I’m going to dedicate this section to credit cards because that’s what most people think of when they hear high-interest rates.
There are three strategies you can use.
- Balance transfer – Many credit card companies offer a 0% APR on balance transfers for a certain period of time. Some have terms for 21 months. The interest rate will jump after the 21st month, though, so make sure your balance is paid off before then.
- Personal loan – If you have credit card debt and don’t, or can’t, utilize a 0% balance transfer, then a personal loan is your next option. You get a loan for the total amount of outstanding credit card debt. Then the institution will send a payment to each credit card company and pay off your credit card debt. You’ll be left with one payment. Be advised, credit matters here (also for balance transfers) so if the interest rate on the personal loan is higher than the average interest rate of your credit cards, don’t do it.
- The last option is to call the credit card company and ask for a lower rate. More often than not, if it’s available, they’ll give it to you. It won’t lower your payment a whole lot, but it’ll definitely help.
If you want to learn more about credit cards, click here.
Improve your credit
Your credit score makes a difference. It can impact what loans you qualify for, the interest rate, where you live, and where you work.
If you want to start making moves in your financial life, you need to improve your credit.
There are three really simple ways to do this.
- Pay more than the minimum on your outstanding debt and pay on time – on time payments is the #1 factor when calculating your score.
- Call your utility company and see if they report to the credit agency. It’ll count as another credit account (a factor) and it’ll influence your on-time payments.
- Open a secured credit card – You open this type of card with a deposit. The deposit will act as your credit limit. If you deposit $500, you’ll have a credit limit of $500. Make regular, small purchases and pay the entire balance right away. Credit agencies like to so activity and, as I’ve said, on-time payments.
If you want to learn more about improving your credit, click here.
Conclusion
If you want to improve your financial life, it’s actually pretty straight forward. Spend less than you make, save money for the future, pay down debt, and improve your credit. If you do these four things (obviously, easier said than done), goals that once seemed far fetched, can be within reach.
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My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com
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