THE BROKEN WALLET

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Money management isn’t taught in most schools, so many people leave school knowing very little about finances. They might know the basics such as paying bills on time and creating a budget. But when it comes to bigger things like getting a loan and exploring savings options, they draw a blank.

However, the more we know about managing money, the easier it is to make good decisions. 

So whether you’re getting financing, saving your money, or preparing for the unexpected, here’s a look at five smart money management tips.

1. Check your credit at least once a year

It’s estimated that “about half of consumers have not checked their credit report or score in the past year, and 18% have never checked their credit.”

Credit is something that some people don’t think about until they’re ready to get a loan or other financing. But the time to think about credit isn’t when you’re filling out applications. 

If you plan to buy a house or car in the next 6 to 12 months, now’s the time to familiarize yourself with your credit history.

Sadly, you might believe that your credit score is better than it actually is. And if you have a low score, this can prevent getting financing, or you could end up with a high interest rate. 

This money management tip also keeps an eye on your credit, catching inaccuracies and fraudulent activity sooner rather than later. So get into a habit of checking your report at least once of year. 

Every consumer is entitled to one free credit report from each of the bureaus every 12 months. You can contact the bureaus directly, or go through Annualcreditreport.com.

*One misconception is that checking your own credit lowers your score. THIS ISN’T TRUE.

2. Negotiate your credit card rates

Credit card interest rates can be high, sometimes as high as 17% or 18%. So if you carry a balance from month-to-month, you might pay hundreds more in interest.

If you’re paying off your credit cards, paying more than the minimum is one of the fastest ways to make headway. But that’s not the only thing you can do. 

You can also call your credit card companies and ask for a better interest rate. A lot of people don’t think to do this, but rates are negotiable.

I did this several years ago when paying off credit card debt, and every single company—with the exception of one—lowered my rate on the spot. 

I didn’t have to beg or plead, and I was surprised by the simplicity of the process.

For this to work, though, you typically need a good payment history, meaning you pay your bills on time every month, either on or before your due date. 

Rate reductions work because paying less interest means that more of your monthly payment goes toward reducing your principal balance.

3. Get pre-approved for a loan before buying a car

A common mistake some car buyers make is thinking about financing last. 

I think most people are accustomed to getting pre-approved for a mortgage loan before shopping for a home. But when it comes to a car, many people will test drive a car, fall in love with a car, decide to buy it, and then think about financing.

But although that’s how many of us approach the car buying experience, it actually serves to your advantage to get financing first, and then shop for a car. So as you’re improving your money management skills, make it a practice to always get pre-approved for loans.

This makes sense for two reasons. One, you know what you can afford before starting your search. And two, you avoid falling in love with a car that you can’t finance.

Getting financing and rate shopping is a fairly simple process. You can work with a local bank or credit union, or use online services like CarGurus to get a personalized rate.

Many people use CarGurus to find a deal on a car, but they also have their Finance in Advance program. Here, car shoppers can get financing offers and see their real monthly payment before contacting the dealer.

And the best part, there’s no impact to your credit score, and it only takes minutes.

4. Move your savings to a high-yield savings account

We know the importance of a savings account. These are great for home repairs, car repairs, plus you can prepare for other big goals. 

But while a lot of people keep their savings account in a local bank close to home, there are benefits to keeping your money less accessible.

High-yield savings accounts are typically with online banks, so there’s no brick and mortar location. You’ll link your online savings to an offline bank account, and then transfer funds in between these accounts. 

I love online banks because they make saving money easier. It can take two days to complete transfers, and many online savings accounts don’t include debit cards, which can reduce impulse withdrawals.

Not to say you shouldn’t have a savings account with a local bank. Keeping a small amount in a bank close to home makes sense for those “immediate emergencies.” As far as the majority of your savings, keep it in a high-yield account. 

These accounts can earn 10X more compared to a regular savings account, thus growing your money faster.

5. Revisit your life insurance policy

Another money management tip is to get enough life insurance for yourself or family.

Life insurance is something that a lot of people don’t like to think about—but they need to. A policy can provide your family with financial support after you die, as well as cover your final expenses. But even if you know the importance of a policy—and you have one—you might make the mistake of never revisiting your policy to ensure adequate coverage.

Insurance needs can change with age. So a policy purchased as a young adult isn’t always sufficient once you’re married with kids. You might need to increase the death benefit to thoroughly protect your family.

There are no hard or fast rules regarding how much coverage to have. One recommendation is a policy that’s 8 to 10 times your salary, if others rely on your income. So if you make $50,000 a year, you need a policy between $400,000 and $500,000. 

Related: Wyshbox (get a quote for personalized term life insurance)

Did you find this information helpful, or got a question about other smart money moves? Let us know ↓↓