Make This Your Financial Habits!

1. Automate payments

Rather than expending energy chasing your bills and figuring out how you are going to save a few extra dollars each month, let automation help you out. Your paycheck should be directly deposited to your account to avoid wasteful bank trips or the urge to cash your check and walk out with a big wad of spendable greenbacks. For savings, set up an automatic recurring direct stock purchase plan where funds are automatically deducted from your checking account each month. If you prefer savings accounts to stocks, have a portion of your paycheck directly deposited into a high-yield savings account each payroll period; most employers will let you split your paycheck among different accounts of your choosing.

2.Know your banking center locations

Rather than just hitting up any old ATM when you need cash, adopt healthy financial habits by making one or two scheduled stops a week at a conveniently located bank branch. If you stick to your plan, you should be able to avoid those rogue cash withdrawals you might experience at the bar on a Saturday night. This will help you stick to a budget and if you go to your bank, you will save on those costly ATM fees.

3.Carry one credit card

With the swarm of credit card solicitations you have, it is no wonder you likely have and use more than one credit card. Besides, they are all useful in some form or another as each gives you reward points from Starbucks to Dillard’s, as long as you use their credit card. Cutting up all but one card to carry with you reduces the temptation of overspending and is a healthy financial habit. Furthermore, in the event you are trying to get your finances together, it is far easier to manage one account rather than several, and you can commit more of your cash to paying off one balance rather than spreading it around. Find one credit card that has practical rewards, such as gas rebates, cash back or travel points (rather than free coffee). When you get your credit card statement, immediately pay off the balance in full, but schedule an automatic payment a couple of days before the due date to maximize cash flow and maybe even earn some interest while the payment is waiting to hit your account.

4.Reconcile your accounts

A lot of people do not reconcile their checking and credit card accounts. Reconciling makes for a healthy financial habit, and by doing so, you will be forced to watch your finances more closely. Often, getting your act together financially simply means paying attention to it; reconciling your account is a rudimentary exercise that makes you look at what you spend to make sure it matches up. Additionally, reconciling can help you identify bank fees and other charges you are not expecting that seem to contribute to your dwindling account balance. Even if you do not find any gaping holes in your spending patterns, the commitment of simply reconciling your accounts each month when the statements come in will put things in perspective.

5.Visit your bank

With online banking available, it is no wonder you never visit your bank branch. Once a month, rather than hitting the ATM, go to the teller to make a withdrawal. This will benefit you because getting some face time in at the branch will ensure that the staff and branch managers will start to recognize you. Nothing is guaranteed, but when you visit the branch and speak with a teller, you may be introduced to a better checking account option with lower or no fees or a savings account that pays a higher interest rate. Furthermore, with a personal relationship established, you are likelier to have success in disputing bank charges and getting preferential treatment, such as no-fee money orders.

6.Watch your credit report

The credit score used to be an invisible number that you couldn’t look at. Things have changed thanks to online services offered by companies like Equifax. These services charge a fee, but you can view your credit report and credit score. In some cases, you can access that information for free when you sign up for a credit-monitoring service and some credit cards. It is nearly impossible to have a perfect credit score, but understanding your score is instrumental in understanding why you did not qualify for the lowest interest rate or why you were declined for financing a new car. Seeing your credit score and recognizing how making payments on time can impact your score aids in putting your financial situation in perspective

7. Use software

The above tasks can be simplified and yield better results when you use a wide variety of software to help you budget, track expenses, reconcile, and plan. Readily available software programs, like Quicken, provide a complete financial management and tracking tool. Most banks and credit cards also let you download transactions to eliminate tedious data-entry and math mistakes. Web-based programs, like Mint.com, do the above as well as introduce you to better deals on savings accounts and credit cards, and tell you exactly how much more you will make or save by taking a new route.

investing and time

Now that you have known about the relationship between investment and savings, let us look at the timeline necessary to make this work:

1. Pay off high-interest debt

The longer you carry debt, the more money you’ll end up paying. Therefore, the first step in a successful financial timeline is paying off the money you owe. But not all debt is created equal, so it pays to pick and choose. The first thing that has to go is high-interest credit card debt. If you’ve been carrying a balance for a while, you could be paying 20% or more. Since you’ll probably never find an investment that provides you with more than that amount in interest, there’s no sense saving money until you’ve completely paid off this debt.

2. Pay off additional debts

Additional debts that should be paid off, but on a different timeline, include student loans and mortgages on first homes. Typically, these loans have a thing in common. The interest, especially on student loans, tends to be lower than on credit cards. That means you have a choice to make. If you’re able to safely make more interest on a given investment than the amount of interest you’re being charged for your student loan, it could be wise to invest rather than pay off the debt. This way, the interest you generate will pay off the interest on the loan and eat away at the principal. And once you’ve paid off the entire loan, you’ll still have the principal from the investment to work with.

3. Set up savings

There’s no hard-and-fast rule for how much you should save. try to put aside 10% of your income. If you’re already saving 10%, try to squeeze a few more dollars in. But remember: The number isn’t as important as the circumstances. If you’re a single guy without a lot of responsibilities, you’ll probably want to save enough for three months of unemployment in case the worst should happen. On the other hand, if you’re a family man, you’ll need to put away a larger chunk because children and a spouse could mean many more unforeseen expenses.

4. Plan for retirement

This is the big one, and most guys don’t do it early enough. The fact is that you’re never too young to start thinking about your retirement. If your employer matches your contribution, put in the maximum and take advantange of the free money. If your employer doesn’t offer this, ask your tax adviser how much you should contribute

5. Build an investment portfolio

This is where you’ll want to put the rest of your money. In all likelihood, it’ll be your biggest sector for growth, because savings and retirement funds alone probably won’t cut it. Think of it this way: Your retirement money should give you enough to survive when you stop working, while your investment money is the extra that will allow you to really enjoy that time. And the bigger the pie, the faster you can stop working and start enjoying life.

To make the most of your portfolio, you’ll need to put money in stocks and bonds. If you’re young and you can afford it, your investment portfolio should be an aggressive mix of risky and safe bets because you can always build back your losses should things go south. If you’re older and you started late, however, concentrate on growth with as little risk as possible;

plan for the future

As you can see, with the exception of paying off your debts, your financial timeline will be an ongoing commitment. The more room you have to operate in your monthly budget -- that is, the more money you can channel into savings and investments -- the more money you’ll have later. If you plan wisely, a bump in the road will be just that -- a bump. But if you fail to put money away, your plans could derail. Remember: The more money you’re able to put away today, the sooner you’ll be able to claim your financial freedom and start enjoying all your hard work.

long term savings you must

Short of investing.... Long term savings is the next big thing if you want to be rich. If you just invest without savings you won't be rich. Here are some tips on saving long term ( that is where the big money in savings are):

House down payment

How much: $20 % of your intended house
When to start: 5 years before

Owning your own home is one of the most important financial decisions you can make for yourself and your family. Real estate can certainly be an investment, but you should not view it as a quick-flip opportunity. Over a course of several decades, real estate prices tend to appreciate, but they are not immune to short-term price fluctuations. Buying a home can be a very emotional decision, but you should not let feelings interfere with the business aspect of your decision. First, estimate what an affordable monthly payment would be based on your income, then find a house within that price range -- not above, no matter how much you adore the house itself. Then, aim to save at least 20% of the purchase price for a down payment. It is a lofty savings goal, but it will help your personal finances enormously as it will help you avoid the PMI, obtain a more favorable interest rate from the bank, and it may even help you negotiate the price of the house. Sellers are more interested to work with prospective buyers who are serious and have the real means to make a purchase -- which means a 20% down payment. Talk with your employer about depositing a portion of your pay check directly to a high-yield savings account ( or ASB) to get your must-have long-term savings in order for a house down payment.

The formula

• Monthly payments (interest, principle, taxes, insurance): 28% of gross income.
• Total house purchase price: 2-2.5 x total gross income.
  

Retirement account

How much: $5,000/yr
When to start: Now


Regardless of your income, this must-have long-term savings goal is not an optional expense, and should come before many things, such as saving for your kid's education. You can make your annual contribution as early as the first of the year and as late as April 15 of the following year. You can take advantage of these factors in one of two ways, the first of which is to fund as early as possible. It may put a short-term damper on your cash flow, but you can have that $5,000 working for you a whole year earlier than if you had waited until the last minute.

Education savings

How much: $200,000
When to start: Now (if you have kids or are expecting)

If you have kids or will have kids one day, you can be certain that paying for college will be a serious issue -- and realistically should not be an option considering that, on average, someone with a college degree makes about $800,000 more during their career than someone without a degree would. If you just had a baby, expect college to cost, at present, $15,000 per year, and up to over $59,000/yr in 17 years. Just like retirement, the sooner you can start this must-have long-term savings account, the better, as you will likely have less time to amass cash for college expenses. A relatively aggressive mix of stocks should be used as historically, stocks have outperformed bonds and savings accounts. Specifically, considering the average 7% per year increase in college costs -- the 3% savings account or the 4% CD is not going to cut it. If it comes down to a choice, you should fund your retirement account before you stash away cash for your kids' college expenses. While it is not ideal to have your loved ones saddled with debt after college life, student loans are always an option -- retirement loans do not exist.

Formula

College costs increase about double the inflation rate, 5%-8% per year

Emergency fund

How much: $500-$1,000
When to start: 0-3 months

We're all smart enough to understand why it's important to have a cushion of cash in the bank. Unfortunately, it's easier said than done, especially when the experts are saying you need to have cash on hand to cover three to six months of living expenses, should the worst happen. That might as well be $1,000,000 in today’s world. Start simple and just commit to always having $500-$1,000 on hand in a savings account linked to your checking account. This will be a savior when it comes to things like bouncing checks or dealing with more common emergencies like speeding tickets or insurance deductibles. Even in the event that the emergency exceeds $500, that must-have long-term savings stash will help you tremendously. Don’t wait on this -- just do it -- and make it your first priority. The feeling of being in control of your finances will do wonders for your financial confidence in the long run.

Formula

• Put $500 aside now and work from there.