Credit: Shutterstock photoWe all lose money unnecessarily. Do you know when and how? Here are hints and pointers to avoid wasting cash.
Company benefits. Open enrollment looms and you must know how to maximize your company benefits.
Does your employer offer a 401(k) match? If they do, take advantage: They give you money. This added perk comes along with your salary and helps put some extra dollars toward your retirement.
This requires you to contribute a certain amount of your base pay up to a pre-set limit and the company matches your contribution with funds of their own. For example, your employer can match half of your personal contribution up to 6% of your salary.
What about a flexible spending account (FSA)? For 2013, you can contribute, pre-tax, $2,550 to an FSA to pay for qualified medical expenses during that year. This shelters some income from taxes and sets aside cash for co-pays, prescriptions and other medical expenses later.
Pay off high-interest debts first. You can pay down debt many ways and in some cases the emotional satisfaction of getting certain balances off your plate feels much better than pocketing extra money.
First, pay down debt that costs you the most, typically the balances carrying the highest interest rates. Many people throw extra funds toward every liability each month to feel like they chip away at the balances faster. Great strategy, but an even better one allocates all your extra funds toward the highest-rate balance to minimize the interest you pay.
Once you pay off that balance, move the extra funds to the balance with the next-highest rate, and so on. You save money in the long run and get out of debt sooner.
Bundleinsurance coverage. You potentially waste money if you maintain homeowner's coverage through one provider and car insurance through another. Bundling your insurance coverage under one provider likely qualifies you for a multi-policy discount, saving on premiums.
Building an emergency fund to cover deductibles for insurance policies lessens the sticker shock of your out-of-pocket expenses, and saves additional money on your policy each year because the higher the deductible, the lower your premiums. Review your coverage annually and shop around to ensure you receive the most competitive rates.
Plan for purchases. Unplanned impulse purchases cost the most, often winding up on credit cards or paid for out of a savings account once earmarked for a different financial goal. Ultimately, interest eats more of your cash or a financial goal goes completely to the back burner to make room for interest payments.
Set a goal for a big purchase, trip or other large expense and then build a framework to work toward it during each pay period - all the while staying in line with your budget and other priorities.
You stand to enjoy more satisfaction out of the purchase, save the money on interest payments and keep on track with your overall financial plan.
A personal spending budget, by the way, offers spending guidelines (as opposed to rules) and takes time, commitment and a conscious effort. Set weekly or monthly check-ins for yourself to review your progress.
Adhering to your budget and financial plan also ensures you always pick up all you can from the table.
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Mary Beth Storjohann, CFP( R ), is the founder of Workable Wealth, an RIA in San Diego. She is a writer, speaker and financial coach who is passionate about working with individuals and couples in their 20s and 30s to help them organize and gain confidence in their financial lives. She has been quoted or featured in various industry publications on the local and national level. You can find her on Twitter at@marybstorj.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
