Retirement saving: Size isn’t the only consideration

I recently read one of those articles debating whether a million dollars was enough to retire on these days. Mostly, the focus of the article was on the fact that a million dollars aren’t as significant as it used to be due to the impact of inflation. That’s a good point, but it also got me thinking that the size of your nest egg is just one side of the retirement equation.

First, to quickly illustrate the inflation issue, consumer prices have roughly doubled over the past 26 years. That means that a million dollars are worth about what $500,000 was in 1988. To think of this on a forward-looking basis, suppose that inflation continues at a similar rate, which has been pretty moderate compared to longer-term history. If you are around 40 years old today and think you could live on a million in today’s dollars, then you had better count on saving two million because that will have the equivalent purchasing power by the time you reach retirement.

The deceptive thing about the size of a retirement nest egg is that the numbers always sound more lavish than they actually are. Between the erosive effects of inflation and the number of years over which savings have to last, it takes a bigger nest egg than most people intuitively expect to fund a comfortable retirement. But again, as challenging as that is, the size of the nest egg is only one side of the equation.

The other side is the question of how much that nest egg will have to buy, and there are several variables that go into this side of the retirement equation:

1. Your mortgage. Your home may be your biggest single asset, but it may be offset by liability in the form of a mortgage. While some people steadily pay down that liability so it will be gone by the time they retire, others continually renew the liability by borrowing against home equity. This makes a big difference in how big a nest egg you will need. If your mortgage is paid off, you will have much lower monthly costs and an asset you can sell at some point. If you still owe on your mortgage, it will probably continue to be your largest monthly expense.
2. Other debt It’s important to think of your nest egg on a net basis, where its value is offset by whatever you owe. So, if you have accumulated a significant amount of debt, your nest egg may be smaller than it appears. If it’s credit card debt, that’s even worse than offsetting because you are probably paying more in credit-card interest than you are earning on your retirement savings.
3. Where you live. The cost of living varies widely from one part of the country to another, so if you plan to live somewhere expensive, think of this as a form of “instant inflation” that will immediately reduce the purchasing power of your nest egg.
4. Lifestyle. What kind of retirement do you envision? Is it a quiet one of reading good books and working in the garden? In that case, a million dollars could still go a long way. On the other hand, if you plan to travel extensively and live it up, you could burn through that million long before you die. Retirement planning should include some rudimentary budgeting based on the lifestyle you plan to lead so you know how far your money has to stretch.
5. Social Security projections. Unless you are one of the ever-shrinking numbers of employees who still have a defined benefit pension, Social Security may be the only regular income stream you have in retirement. The size of that income stream goes a long way to determining how quickly you will spend down your nest egg. You can get a projection of what your benefits will be from the Social Security Administration, based on how long you worked and how much you earned. Getting these projections for yourself and your spouse will help you know how much of your remaining budget your nest egg will have to cover.
6. Work prospects. More and more people are augmenting their nest eggs by continuing to work in retirement, but whether or not this is a viable option depends on your health and the marketability of your job skills.

The point is, there is no universal answer to a question like “is a million dollars enough to retire on?” A million dollars may be plenty for some people, and not close to enough for others. It’s not all a question of how rich you want to be, but also of how well you’ve contained the liabilities that are going to offset that million dollars. So, if you want to make sure your retirement savings are sufficient, don’t just go by general benchmarks. You need to do some detailed planning to determine how big a nest egg will meet your specific needs.

Source: Retirement saving: Size isn’t the only consideration

6 Credit Card Mistakes Students Make

Top Credit Card Mistakes

College students live in a sometimes-confusing world between childhood and adulthood. On one hand, young adults attending college away from home often live in supervised dormitories as they begin to take on some of the responsibilities of adulthood. On the other hand, those 18-year-olds (and older) are granted nearly all of the same rights and responsibilities of adults.

So when it comes to credit card usage,  students often make mistakes that more experienced cardholders are more likely to avoid (or at least to know better than to make). Here are six of the worst mistakes that students make when they start using credit cards.

1. Carrying a Balance 

If parents could get their college-age children to follow just one piece of financial advice, it should be to pay their credit card statement balances in full. Students may feel like they can cut their immediate expenses by paying the minimum payment, or perhaps a little more, but interest charges will accumulate very quickly on past and future charges. Unfortunately, many parents will be in a poor position to offer this advice, as about two-thirds of all credit card users carry a balance on at least one of their credit cards each month.

And don’t forget that credit card debt can have a major impact on your credit score too. If you want to see how your debt is affecting your credit scores, you can see two of them for free every month on Credit.com, and get some tips on how to build good credit.

2. Missing Payments (or Making Them Late) 

Between attending classes, studying, and all of their other activities, college students can be pulled in many different directions. Add to that their group living environment, frequent address changes, and an irregular academic calendar, and it is easy to see how students can accidentally fail to make a payment on time.

To avoid costly late fees and penalty interest statements, students can create electronic reminders of their payment due dates and log into their accounts online to view their statements. Fortunately, most card issuers now offer both email and text alerts.

3. Paying Your Tuition With a Credit Card 

It used to be that many colleges accepted tuition payments with a credit card, and savvy parents might earn rewards for paying that way. These days, many schools add a substantial processing charge when tuition and fees are paid with a credit card, typically more than the rewards are worth.

Worse, some students attempt to finance their education by charging their tuition and carrying a balance. This is a very risky strategy, as credit cards have much higher interest rates than most student loans. And unlike student loans, interest on a credit card is not tax-deductible.

4. Co-Signing for a Friend 

Before the Credit CARD Act of 2009, banks could offer credit cards to students who had no income, with the assumption that their parents would pay their bills. Now, applicants under 21 must show their own ability to pay their bills in order to be approved. In response, some students are asking their friends aged 21 and older to co-sign credit card applications.

When someone co-signs or makes a friend an authorized user, that person is putting his or her own credit at stake, as the primary account holder will be responsible for paying the bill. Those who make this mistake put not only their finances and their credit scores at risk, but their friendship as well.

5. Not Calling the Card Issuer

Students and other new credit card users can find these products confusing. When they get hit with fees and penalties after the inevitable mistake, the last thing they want to do is call someone at a big company to talk about it. Unfortunately, that would be a mistake as well. Because the credit card industry competes fiercely to attract and retain customers, card issuers can be very generous and understanding when cardholders need help. Students should be encouraged to call to ask for their interest rate to be lowered, their late fees to be forgiven, or just to learn more about their cards and their options.

6. Shirking Credit Cards Entirely

For as much trouble as students can get into when they misuse credit cards, it is almost as big of a mistake to avoid credit cards altogether. Credit cards are not just secure and convenient methods of payment, they are an invaluable way to build one’s credit score. Having a credit card account in good standing allows cardholders to begin to build a credit history. After graduation, having a strong credit history will help students when they need to rent an apartment, get a car or home loan, and purchase insurance.

Class of 2014: Here Are 4 Tips for Acing Real-World Finances

Finance

Congratulations! You have just become a college graduate. This is exciting -- and maybe scary -- time. You're probably looking to start a career, earn your first significant paycheck, take your serious relationship to the next level, find a new place to live, and accomplish a lot more fun stuff.

But you might also be staring down the barrel of a lot of heavy financial issues: paying down student loan debt, saving up for those big life changes, figuring out how to manage your own finances, and determining how soon you'll need to start thinking about retirement. (Spoiler alert: now.)

Don't worry. I'm going to give you four tips to financial success

that will make it all a lot simpler.

1. These Are Your Financial Priorities

You have a lot going on right now. The best thing to do is to take a deep breath, relax, and plan. Start by determining your financial priorities. Most people will want to focus on the following (in order of importance):

• Building up an emergency savings fund.
• Paying down your highest-interest-rate debt.
• Repaying your student loans.
• Balancing debt repayment with saving for retirement.

Wait, we're already talking about retirement? You bet.

2. Save What You Can for Retirement and Future Needs

If you're earning an income from a full-time job, it's time to start contributing to your retirement accounts and investing some of your savings. It's never too early to start making progress in this area because time is your biggest advantage as an investor.

The earlier you start, the more your nest egg will eventually be worth -- even if you don't feel like you're saving much. The secret is compound growth -- something so potent that when people claim Einstein called it one of the most powerful forces in the universe, folks believe it. 

Even if it's just $50 or $100 a month right now, contribute what you can to your retirement and major savings accounts that will help you cover future needs and expenses. And then don't touch it.

Make this easier on yourself by taking advantage of "free money" opportunities where you can. Your company benefits package is an excellent place to start.

3. Live Frugally to Aggressively Pay Down Debt

Learn this lesson as soon as possible: Material stuff doesn't make you any more of a person. Possessions are unlikely to make you genuinely happy and fulfilled. So stop wasting your money by trying to accumulate things, things, and even more things.

Instead, make sure your spending is in line with your priorities and your values. You worked hard for your money, so be mindful of what you purchase with it. Embrace living frugally -- which doesn't mean living cheap.
Being frugal means you're more resourceful and less wasteful. It means you're not pressured into buying things you don't need -- or maybe don't even want -- by your peers, family members, or a society that encourages mass consumerism.

Once you've realized you don't have to spend every cent you make on stuff that you don't really value, you should have money to allocate toward your debt. Get aggressive with your loan or credit card balance payments.

The sooner these big debts are gone, the sooner you'll be more financially stable and secure. The longer you hang on to debt, the longer you'll be unable to advance other financial goals, and the more money you'll be paying in interest.

4. Establish a Side Hustle

Feel like there's not enough money to go around each month to cover all your financial goals, expenses, and wants? You do have the power to solve this problem. It's called a side hustle. Any kind of part-time work you can do on the side will accelerate your progress as you repay debt, save for the future, and acquire the money you need to make big things happen in your newly independent, real-world adult life.

Investment Advice for New College Graduates

Photo Credit: jannoon028
Congratulations, you are a newly minted college graduate! Now that college is over and you are being pushed into the real world, it is time to think about your future. In order to do so, you need to think about investing. I know, investing can be confusing and therefore overwhelming at times. There is a lot of information out there and much of it contradicts itself. Below is a guide to helping you manage the investing portion of your life.

Keep Living Like You’re In College

You’ve probably heard this before, but I need to mention it before we get started. I know that the first paycheck you get will feel great. It did to me too. You’ll start thinking about all of the things you can buy with it. I did too. But you are better off living like a college student for as long as you can and saving all of the money you can.

You don’t need a new car. If your car is in good shape, keep driving it. A car is not a status symbol, it is transportation. I drove the car I had in college for about five years after I graduated. All of my friends were making $400 monthly payments on a car. I was saving $400 every month. Fast forward to 15 years after college and many of my friends are struggling with their finances, complaining about not having enough. Me on the other hand, I have enough money saved that if I were to lose my job, I could survive for a few years without worry.

This isn’t to toot my own horn. It’s to show you that the habits you start with after college will continue for your life. If you start spending everything you earn, odds are you always will and won’t get ahead. You will always be struggling with money. You don’t want that and I don’t want that for you either.

Contribute To Your 401(k)

Now that you are living below your means, you will have excess money to save. The first thing you should do is start investing in your 401(k) plan at work. Start with 10% of your salary. If you do this from the beginning, you will learn to live on a smaller paycheck from the start. Trust me, you won’t even miss the money. If you are fortunate enough to be earning a high salary, feel free to invest more than 10%.

From there, make it a point to increase your contribution each year by at least 1%. You won’t notice the lower paycheck and you will be able to take advantage of your money compounding upon itself.

As for investments, we’ll get to that a little further down.

Start an Emergency Fund

Your next step is to create an emergency fund. Your emergency fund should cover your monthly expenses for 8-10 months. Many will tell you to have 3-6 months saved in an emergency fund, but I am a little more conservative and like to have more money saved up in cash.

Create a Taxable Account (or Roth IRA if eligible)

Once you are saving for retirement through your employer’s 401(k) plan and you have an emergency fund, you can start investing in a taxable account. Don’t get too scared about the terminology. A taxable account is simply a non-retirement account. I suggest you start one because, with a 401(k) and a Traditional IRA, you can’t access that money until you are 59 ½ years old or pay a penalty. With a taxable account, you can access that money any time, without penalty.

One caveat to this is a Roth IRA. You can invest in a Roth IRA and withdraw any of your contributions at any time, without penalty. If you withdraw any earnings on your money before you are 59 ½, you will have to pay a penalty. And yes, you can have a 401k and an IRA at the same time.

Regardless if you are investing this money in a Roth IRA or a taxable account, you will want to start saving money here too.

Where to Invest

The key to being a successful investor is:

• Have a Plan
• Stick to the Plan
• Find Low-Cost Investments

Have A Plan

To start, you need to have a plan. This doesn’t have to be super detailed, you just have to know what you want your money for. The more details you can provide the better. For example, maybe you want $1,000,000 by age 65 so you can retire to Florida. That is a perfect start to your plan and provides some detail.

Next, you have to figure out how you are going to get there. You need to know how comfortable you are with investing in the market and determine your asset allocation. One rule of thumb is to take 120 minus your age. This is the percent you should have in bonds. So, if you are 25, you should have most of your money in stocks.

But, you might not be comfortable with this amount of risk. If you want less risk, then you need to increase the number of bonds you own. Understand that you will need to own stock if you ever plan to retire. Unfortunately, you won’t be able to earn a high enough return from just bonds alone to meet your retirement goals.

Stick to the Plan

Let’s say you are going with 90% of your money in stocks and 10% in bonds. The key now is to stick to this allocation, regardless of what the market is doing. You are investing for the long-term. What happens next Tuesday is irrelevant to your situation since you are going to be invested for another 40 years.

Understand that the stock market has cycles. It will go up and it will go down. That is the way it works. You are going to hear a lot of “noise” from the news and magazines. Remember that the goal is to get you emotionally involved. Once you act emotionally, you are bound to lose money in the stock market.

Wall Street earns money when you trade. The more you trade, the more the machine makes. But ignoring the noise allows you to keep emotions in check and this will allow you to be a better investor. The sooner you understand this, the better off you will be.

Find Low-Cost Investments

While you won’t see a bill come in the mail for fees that you pay into the mutual funds you own, you do pay fees. They are just hidden in the return of the fund. You want to invest in funds that have the lowest expense ratio possible. You should never be paying more than 1% in expenses.

A 1% expense ratio is equivalent to a $10 fee for every $1,000 you have invested. This may not sound like much now, but when you have hundreds of thousands of dollars invested in the stock market, the fee quickly adds up. It’s your money, don’t give it up so easily.

Final Thoughts

As I mentioned earlier, the concept of investing sounds intimidating with so much information out there. But it really isn’t that complicated at all. You just have to be smart about a few things. If you can make it a point to keep your expenses low so that you have more money to invest, you are going to be in good financial shape. When you begin to invest, pick low-cost investments, and stay invested. Remember that the market will drop and will be volatile over the short-term, but the long-term trend is up. If you can ignore this noise, you will be a successful investor.

Source: Investment Advice for New College Graduates

5 Money Lessons I Learned From Watching Wheel of Fortune

"Wheel of Fortune" is one of America's longest-running game shows, giving away more than $200 million in cash and prizes since its premiere in 1975. But behind all that wheel spinning, hand-wringing, and gown-gazing, the show has something more to offer astute viewers. If the game is financial security and the wheel is just a series of chances to make or lose money, then watching Wheel of Fortune can teach us a few fundamental financial lessons.

1. Pay Attention

In every game, there seems to be at least one "Wheel of Fortune" player who isn't quite paying attention. I can't blame them. Under those lights, in front of that crowd, and in that hothouse of pressure, I'd be lucky just to stay vertical. Players repeat letters that have already been called, solve puzzles partially, and give other players an advantage, or mispronounce words so badly that their answer can't be accepted. These are cringe-worthy moments that make me wonder about the level of self-flagellation that happens once the cameras are off.

Not paying attention to our personal finances is just as risky. Being on financial autopilot costs money

. We don't adjust our savings rate as our income increases; we put off revising our withholding tax and continue to think that a big refund check at the end of the year is actually a good thing. Or we don't get around to canceling that unused gym membership and end up tithing $65.00 a month to a very unworthy cause.

When it comes to solving our own financial puzzles, not paying attention is a luxury most of us can't afford.

2. Think Creatively

If there's one skill that serves contestants well on "Wheel of Fortune," it's creative thinking. Solving those puzzles effectively means not letting your mind get too attached to a single potential outcome. For example, the partial clue, "h_ _ _es" could turn out to be horses, houses, or hoaxes. Finding the right solution means cycling through options quickly and creatively and trying to see how different possibilities might fit together.

The same is true of winning the financial game. Successful savers need to constantly source new avenues of income, savings, and investing. Getting locked into one path to the exclusion of all others limits potential and return. (See also: How Cash Flow Allocation Helps You Retire)

3. Seize the Moment

Smart players also seize rare moments, and it's exciting to see solid strategy pay off. For readers unfamiliar with the game, contestants are presented with one Prize Puzzle each show. In addition to the regular cash payout, the winner of the Prize Puzzle gets a deluxe vacation package. I can't tell you how many times I've seen players keep spinning that wheel even when it's obvious they've worked out the correct answer. All too often, these relentless players land on a "bankrupt" wedge and their competition swoops in to collect the trip to Nassau or Hawaii.

In our financial lives, the same thing can happen. We keep spinning that figurative wheel well past our moment to lock in a better mortgage rate, transfer our credit card balances to zero-interest introductory rate, or shake hands and finalize a smokin' bargain on a used car. I'm not advocating thoughtless action, but there are moments when calculated-but-quick action wins the day.

4. Don't Get Greedy

Sure, every game show is a gamble — that's the whole idea. But it's curious to watch players keep spinning the wheel when there are only one or two (quite obvious) letters remaining before the entire answer is spelt out before them. The motivation is obvious: collect more money. The risk is just is clear: get stung by that looming bankrupt wedge. Call me overly cautious, but with a comfortable lead and an answer in my head, that spinning wheel would come to a screeching halt. Vanna might even have time for a quick coffee break.

Same with my financial life, taking an unnecessary risk just to feed the idea of "more" seems counterproductive. I know it sometimes takes big risks to establish a big lead, but the potential pitfalls can be profound.

5. Stay in the Game

Even when it appears to make no financial sense at all, savvy "Wheel" contestants buy vowels. Buying vowels keep them in the game, keeps their mind churning for a solution, and keeps their competitors at bay (at least momentarily).

The financial rule behind this approach is simple: Sometimes you have to spend money to make money. Stretching tight budgets, sacrificing certain wants and needs, and forgoing a few of today's comforts can all help fund investments in our tomorrows — and that's an essential piece of any sound money management plan. Saving and investing keeps us in the game even when it's hard to see the big picture.

Bonus Round

At the risk of stretching this analogy too far, let's wrap things up by talking about the bonus round. On "Wheel of Fortune," the bonus round is the winning player's last chance to walk away with an even bigger payout. The player is given 10 seconds to solve a single puzzle; the minimum cash prize is $30,000, but it can go as high as $1 million for lucky players who've managed to score the requisite million-dollar wedge. (See also: Do You Know Where Your Net Worth Is?)

I call this part of the show the "financial independence" segment, closely mirroring retirement. Players who've managed to make it this far have done several things right and now simply have to up their game slightly to sail through to the end. Of course, a little luck doesn't hurt either. I guess life really does mirror art…or game shows (or both).

Are you a Wheel Watcher? If you could characterize your savings strategy by a game show, what show would it be?

Source:  5 Money Lessons I Learned From Watching Wheel of Fortune

A New College Student’s Guide to Saving Money on Campus

It wasn’t all that long ago that I was enjoying that special summer between high school and college. I had graduated from high school, of course, but I was also the first person in my family to actually attend college. It was exciting and a bit frightening and almost overwhelming.

Looking back now on my journal entries from that time and recalling the choices I made, I recognize how completely inefficient I was in those first years in school. I made a ton of little financial

mistakes that stretched my already thin finances even thinner – and eventually stretched them to the breaking point.

If I were to sit down with my eighteen-year-old self again and offer some pointers on how to maximize every dime on campus while also having a lot of fun, here’s what I would suggest.

Contact your roommate now
Many of you have probably already done this. If you haven’t, find your roommate on Facebook now. Drop that person a friend request.

What you’ll want to find out from that person is what shareable items to bring. Items like a television, a microwave, and a mini-fridge are items that you can share in a dorm room without any real problems. Plus, doing so will save one (or both) of you some cash if you don’t already have the items. If you do, now’s your chance to return the item.

Start looking into campus organizations, particularly those related to your major and interests
I would strive to make a list of at least five organizations that you might be interested in joining. Most organizations on campus will have meetings or some sort of activity during the first week or so of classes, which will give you an opportunity to find out more about them.

If I were doing this again, I’d make a list of ten of them and try to stick with at least five of them.

Why do this? There are several reasons why campus organizations not only help you to save money but can help you to earn money in the long run.

For starters, it gives you a great chance to meet and hang out with other people who are genuinely into the same things you are. If the topic of the group interests you, then you know that other people in the group are going to be interested, too, making it easy to get to know them.

Second, they’re great resume boosters, particularly if you get involved in leadership in the club. I am firmly convinced that my participation in and leadership in a couple of organizations late in my college career helped me to get my first post-college job.

Third, they’re often huge money savers for poor students, as most clubs have a budget of some kind that’s often used on food. Many organizations have movie nights and other gatherings where the club’s budget pays for a meal.

The more organizations you try out, the more free meals you’ll get, and the more likely you are to find organizations that really click with you.

Watch your university’s calendar for even more entertainment

College

campuses are loaded with free movie nights, public speeches, free concerts, and countless other things going on virtually every day of the academic year. Even if you find 80% of it uninteresting, the other 20% will pack your schedule full of things to do.

Dive into those activities. Revel in them. This is the time in your life to tap into those things. Take full advantage of it.

Don’t sign up for a credit card
There will be lots of people on campus trying to get you to sign up for a credit card. They’ll have all sorts of little enticements – free t-shirts, tickets to some event, and so on. 

Don’t. If you’re going to sign up for a credit card – and it’s probably not a good idea, to begin with – it’s a terrible idea to do so at one of those booths. Instead, research options for student credit cards or cashback rewards cards. And if you do open a credit card, always pay the balance in full each month.

Your student loans are already establishing a credit history for you. Credit cards really provide little benefit for you other than getting you into a debt situation you don’t want to be in on graduation day.

Detach yourself from easy spending
This goes hand-in-hand with “no credit card.”

It’s incredibly important for college students to minimize the routes they have in their life for spending money. For most college students, those routes start with their electronic devices.

If you have a credit card, delete those numbers from your online accounts. Yes, it makes it harder to make a purchase. That’s the point.

Delete bookmarks you might have for online shopping sites. Unsubscribe from any emails that encourage you to buy things so that you’re not seeing them. Don’t sign up for anymore and, if you can’t subscribe, filter those emails straight to spam.

The fewer temptations you have and the harder the route is from the temptation to spend, the better off you’ll be.

Find a job connected to your major and shine with it
If you’re serious about really making your mark on campus, try to find a job connected with the academic department of your major. These jobs typically pay minimum wage or sometimes less (if they’re work-study jobs), but they offer a great chance to interact with professors and other professionals in your department. That’s where the value is.

If you can get such a job, use it as much as you can to help out professors and others in your department. Look for every chance to interact with and serve in a positive way. Some won’t notice, but quite a few wills.

I did this myself and it led to a sequence of jobs that not only put cash in my pocket, they also resulted in a lot of free meals, a free computer, at least two free textbooks, and a very nice resume.

Stay in
It’s tempting to want to go out, but every time you set foot in a business establishment, you’re pretty much begging to spend money. You’re far better off hanging out at someone’s dorm room or apartment.

Instead of eating out, make your own simple meals, or make meals together with friends. If you simply must order food, even that’s usually cheaper than going to a restaurant.

If you’re going to drink, it’s far cheaper (and less likely to end disastrously) if you’re drinking in someone’s apartment rather than out and about. You’re in a relatively safer environment and it’s far less expensive.

The things you can do while staying in are far cheaper, too, and they’re still quite fun. Have a movie night. Turn on some music. Play a board game or a video game. If you can’t come up with something to do that’s fun, you’re not trying very hard.

College is perhaps the best time in your life to figure out who you are and what you want to be doing.

 That process doesn’t have to involve spending money – in fact, outside of the tuition and other direct fees, most aspects of college make it as easy as possible to do that self-discovery without spending cash. Take advantage of it

Setting Up a Weekly Money Routine

As I’ve mentioned before, I have a weekly routine where I set aside roughly two hours on the weekend to evaluate my to-do lists, take care of some weekly tasks that I’ve overlooked, and do some thinking about my long-term goals and what I’m doing right now to reach them (or not).

Naturally, personal finance is a significant part of that routine. There are several things that I do each week to make sure that our finances continue to flow smoothly.

Here are the personal finance-related tasks that make up my weekly money routine.

Pay all bills We pay all of our bills on a weekly basis. If a bill has a due date in the coming week, we pay it. We also fully pay off all credit card bills each week.

For the bills that aren’t credit cards, we choose to wait until the due date is closer in order to keep the cash in our account. I usually just schedule them to be paid the day before they’re due using online bill pay.

For the credit card bills, I prefer to always keep the balance as close to zero as possible so that a big balance doesn’t ever build up. Plus, doing this ensures that I always have a very strong debt-to-credit ratio that virtually always remains below 10%, which is where I want it to be for my credit score.

Categorize expenses Over the past few months, I’ve taken to using You Need a Budget to manage our family’s cash flow. I usually record all of our spendings at once at the end of the week, which involves categorizing all of the different expenses.

I simply look at each thing we spent money on this week and assign it to the appropriate matching category. It’s really easy and just takes a few minutes.

Doing this enables me to really look at our expenses and ask hard questions about how we’re spending money. How exactly do I do that?

Review our spending plan After I’ve recorded expenses for the week, I look at our spending plan and see how those expenses match up with what we should be spending. Are our non-essential expenses too high? Are we spending too much on unnecessary things? Are we saving for everything we should be saving for?

This also takes just a few minutes, but if I discover a problem, I spend some time digging into the reason behind that problem, which can end up taking a fair amount of time.

Look for possible deductions and save them Did we spend any money on anything that’s potentially deductible this week? If we did, I record it in a separate spreadsheet and save the receipt in a manila envelope.

At the end of the year, this spreadsheet and manila envelope is a godsend. It makes filing taxes a lot easier, plus it directly saves us money on our income taxes. Taking two minutes once a week to record this stuff can add up to hundreds of dollars in tax bill reductions at the end of the year.

Learn about one new thing For the last several months, I’ve been choosing one topic to learn about or refresh myself on for the coming week. I try to devote five hours throughout the week to learn about this topic.

A significant number of those topics are related to financial issues. One week, I chose to look at Coverdell education accounts (I couldn’t really see why we would use one over a 529, but I was glad to know about them). Another week, I looked at how people do technical analysis of stocks. Another week, I dug into how the Federal Reserve sets interest rates. Another week, I focused on teasing through all of the fine print on a credit card (I expected to find some surprising clauses, but I really didn’t find anything that truly surprised me).

Each week, I learn something new about the world that strengthens my understanding of my own life, whether it’s through a better understanding of a personal finance issue or something else entirely.

A weekly financial routine is a valuable thing to get started in your own life. It doesn’t take too much time, but it’s very useful in terms of keeping your finances in balance over the long haul.

Source: Setting Up a Weekly Money Routine