Between the so-called money experts, your family members, and your friends, you’ve probably endured your share of outdated financial advice and plain old media hype. One person says penny stocks are H-O-T, while others insist they’re an absolute outrage. Your neighborhood real estate agent says the area is a buyer’s market, while the local news tells the story of a bubble that’s about to burst.
It can be hard to know whose advice to trust. But if you cut through the noise, you’ll find that there are some tried and true methods for managing money that can benefit just about everyone. This timeless advice won’t always be trendy or newsworthy, but it can work wonders for your finances nonetheless.
No-Regrets Financial Moves That Are Always in Style
If you’re tired of trying to sort out the good advice from the bad and don’t know where to start, consider these financial moves that could benefit almost anyone:
Pay off high-interest debt.
Where home loans, most student loans, and even car loans usually come with interest rates you can easily manage, credit cards and personal loans can charge interest rates that are through the roof. Plus, there are no tangible benefits to carrying high-interest credit card debt – no tax benefits or anything of the sort (whereas interest paid on a home mortgage or student loans can be tax deductible).
If you’re carrying high-interest debt of any kind, paying it off is generally a good idea. Anyone in debt can tell you exactly how debt weighs you down, stands in the way of your financial goals, and makes it harder to get ahead.
But, buying back your freedom isn’t that difficult if you make debt repayment a priority. If you’re tired of forking over interest payments every month and opening the mailbox to credit card bills galore, consider remedying this situation once and for all.
Trust us, your “future self” will thank you.
Save for retirement.
The varied ways you can save for retirement and the amount you need to save might leave you overwhelmed, but that doesn’t give you license to opt out. If you want to retire one day – and don’t want to subsist on Social Security payments alone – you’ll need to start saving sooner rather than later.
If your employer offers a 401(k) plan, that’s as good a place as any to start. At the very least, you should contribute as much as your employer will match if they offer such a program. If there was ever such a thing as “free money,” your employer’s 401(k) match is it. When it comes to 401(k) contributions limits, they remained unchanged from 2015 to 2016, meaning employees can still sock away up to $18,000 this year.
Financial advisor Jude Wilson of Wilson Financial Group also suggests taking a closer look at the benefits of using a Roth IRA – a type of IRA that is funded with after-tax dollars now but allows you to withdraw money tax-free in retirement — and can be used in conjunction with almost any other type of retirement account, including your 401(k).
“For most people, making contributions to a Roth IRA just makes a ton of sense,” says Wilson. “It’s the gift that keeps on giving since contributing to a Roth today will help you build tax-free income in retirement.”
For the 2016 tax year, individuals and couples who meet certain income requirements can contribute up to $5,500 to a Roth IRA, while those ages 55 and older can contribute up to $6,500.
Build an emergency fund.
There is almost no reason not to have an emergency fund, but a million and one reasons everyone would benefit from having several months of savings stashed away.
Roofs leak. Cars break down. You might need an emergency root canal or a new stove on short notice, or experience any number of unexpected situations that will demand your hard-earned dollars.
Financial advisor Joe Carbone of Focus Planning Group counsels his clients on the benefits of having at least six months of expenses stashed away in a cash account that is easy to access in an emergency.
“This way, if an unexpected expense comes up, you can you use your own money – not a credit card with potential to pay high interest rates,” says Carbone. Meanwhile, a solid emergency fund can also help out if you’re laid off work or experience a pay cut of any kind. Simply put, an emergency fund is always a good idea.
Buy life insurance.
If anyone depends on you for your income, buying life insurance is a smart financial move. Just imagine your spouse and kids trying to make ends meet without your weekly paycheck, and that should be enough to convince you to buy a cheap term policy at the very least.
If you’re unsure of how much life insurance you need, some experts say you should start with 10 times your annual income in term life insurance. And if you want to get fancy (and more expensive), you can also look into buying a whole life policy – a type of life insurance that will never expire and will provide a death benefit no matter how old you grow.
Financial advisor Benjamin Brandt says he suggests his clients get term life insurance above all else. Why? Because it’s dirt cheap, and you absolutely cannot afford to live without it.
If something were to happen, the death benefit can be used by your loved ones to pay off debt, cover daily living expenses, and fund retirement and college savings accounts, he says. Of course, the best-case scenario is that you’ll never need it — but what if you do?
- Related: Term Life Insurance: The Basics
Shop around for savings on regular bills once per year.
While it’s okay to avoid shopping like the plague if you don’t really need anything, one type of annual shopping spree always makes sense: By shopping around for all of your “big bills” at least once per year, you can typically save a whole lot of money – or at least make sure you’re truly getting the best deal.
“I’ve seen clients save hundreds of dollars a year just from making a phone call to a couple different agents,” says Haynes. Don’t leave money on the table by neglecting to call around for the best rates. In the span of just a few hours, you might be able to save yourself several hundred dollars or more.
Track your spending.
Even if you have plenty of money, it can really pay off to track your spending a few times per year. By breaking out last month’s bank statements and credit card bills, you can gain a holistic view on where your money is actually going.
Even if tracking your spending doesn’t reveal any unsavory trends, it can certainly help you confirm that you’re truly on track. And if you’re using a monthly budget, tracking your spending is the best way to make sure you’re actually sticking to your predefined spending limits in each individual category.
The bottom line: Tracking your spending can only help your finances, because you have absolutely nothing to lose. If you want to know where your money is really going, the best way to find out is to take a look for yourself.
Check your credit report at least once per year.
Your credit score is a crucial component of your overall financial health. With a long credit history and a decent score or better, you can qualify for the best rates when you borrow money to buy a home, finance a car, or start your own business.
The best way to keep your credit in tip-top shape is to monitor it closely. Fortunately, you can get access to a free credit report from all three credit reporting agencies – Experian, Equifax, and TransUnion – once per year by following the prompts at AnnualCreditReport.com.
If you want to keep an eye on your credit all year long, you can also sign up for a free account at Credit Sesame. While you’ll only receive an estimate of your credit score (versus your FICO score), Credit Sesame can notify you of changes to your score or when a new account is opened in your name. A number of credit cards also let cardholders see their FICO credit score for free on their statement each month.
Create a monthly budget for your household.
While some people will benefit from a household budget more than others, taking the time to create one can’t hurt, either. If you’re worried about the logistics or don’t want to download some fancy software, you can forget about all that, too. To create a monthly budget, all you really need is a pen and paper, your last few month’s bank statements, and your monthly bills.
At worst, having a written monthly budget to look at can be a smart way to keep track of your monthly bills. At best, using a budget can help you realize and reach your own financial potential. As with anything else, you may never know how a budget could benefit you until you give it a try. What do you have to lose?
The Bottom Line
While financial advice can run the gamut from strange to downright risky, certain money moves are almost always a good idea. To sort through the good and bad advice to find a strategy that works for you, it’s smart to read as much as you can to educate yourself – and, if your situation is particularly complex, possibly call on a fee-only financial advisor you really trust.
Also remember that some of the best financial advice is the simplest. Most of the time, you don’t have to reinvent the wheel to get ahead; you just have to follow common sense.
What financial advice do you think is applicable to anyone? What would you add to this list?