Financial stress doesn't just impact your spending habits; it causes anxiety, tension, and can even break down relationships. That's why having a healthy savings account isn't just practical, it's good for your peace of mind. In the same vein, having some simple, yet smart money-saving tricks up your sleeve is key for keeping financial stress at bay.
"Financial wellness is deeply tied to one's sense of comprehensive wellness and should not be ignored," says Caitlin Crowe, vice president of financial services at a bank and personal health coach. "You have the power to create change."
Yes, when you take control of spending, saving, and paying off debt, you're not only setting yourself up for success, you're empowering yourself, too. "The biggest mistake I see isn't so much a 'mistake' but lack of realizing everyone has a choice in their finances," Crowe points out. "Expenses such as living arrangements, transportation, nutrition, shopping, and vacations are your choice. If you are living beyond your means, it is up to you to take control and make a change."
Ahead, find advice straight from the experts on the smartest ways to save, limit spending, and pay off debt (because the less bills you pay, the more you can stash away). From getting real about your money habits to cutting costs and budgeting, these pro tips will help shift your perspective and stick to your New Year's resolution to become more money-savvy in 2019.
Take An Honest Look At Your Finances
Taking a good, hard look at your finances is like taking medicine: It may be tough to swallow, but it'll help you in the long run. "The first step is often getting your finances organized so you know what action steps you need to take," explains Kimberly Palmer, personal finance expert at NerdWallet. Take a deep-dive into your spending habits, learn whether you're using the best credit card, and figure out if you're optimizing your retirement plan (need help? Check out the NerdWallet app).
"You can increase your savings by taking steps like switching your auto insurance provider or trimming your monthly bills," she says. "Once you have that big picture insight into your finances, you can give yourself tasks to get done each month, such as open up a 401(k) account or increase your current savings rate."
Build Savings By Budgeting With The 50/30/20 Method
If you're frazzled at the thought of figuring out how much of your paycheck should go where, Alexa von Tobel, founder and CEO of LearnVest.com and chief innovation officer at Northwestern Mutual, suggests the 50/30/20 method. She gives the following breakdown:
Essential Costs: 50 Percent
"These are costs like rent, mortgage payments, utilities, car payments, public transportation or groceries — anything that covers your basics. Think of it this way — if you need to pay for it in order to live or work, then it’s an essential. Also included: The minimum payments you need to make on any credit cards or loans."
Financial Goals: 20 Percent
"This is the part of your budget that is really about helping you secure your financial foundation. It includes what you put toward emergency savings, retirement and other future goals, like a home down payment fund. It also includes extra money you put toward debt, like credit card payments that go beyond the minimum or extra student loan payments."
Lifestyle Costs: 30 Percent
"Finally, you would budget no more than 30 percent of your take-home pay toward those costs that are really wants versus needs. That could include eating out, shopping, concert tickets, and other variable costs (like those fabulous new shoes you’ve had your eye on)."
(Want more advice from von Tobel? Pre-order her second book, Financially Forward, which comes out May 14.)
Cut Out The Triggers
Von Tobel likens the impulse to spend with steering clear of junk food in order to stick to a healthy diet. "I recommend that you take things out of your life that have become your triggers," she says. "Take your credit cards out of your wallet so that you can’t easily swipe. Unsubscribe from email blasts sent by companies that you love. Get so tactical that, if there’s a store that you walk or drive past on your way home, and you find yourself shopping more than you should, find a different route to take." She continues, "Out of sight really is out of mind and if you really, truly need something, you’ll seek it out."
With that said, Crowe adds that saving doesn't have to mean the end of fun, or your social life. "It's all about finding balance," she says. "Seek ways to spend time together that are less expensive. You don't always have to meet a friend for a drink or meal. Why not take a walk or hike together?"
Take Control Of Your Credit Cards
It may sound counterintuitive, but Crowe recommends ditching your debit card for a credit card that offers rewards. But first, she says, do your homework. "Take the time to research the various options and pay close attention to whether there is an annual fee, the length of any zero interest period, how the rewards are structured, and security," she says. "As long as you use a credit card responsibly, it can lead to significant rewards on expenses you would have incurred now matter how you paid for them." The trick here, of course, is to pay off each expense immediately, or wipe out the balance at the end of the week or month.
However, von Tobel points out that if you use multiple credit cards, it can put you on a slippery slope. "Often, your debt won’t be on one card; it’ll be across a few," she says. "So you need to look at all the bills to find out which debt is costing you more money [in interest]. While it’s critical that you pay the minimums on all, make the biggest payment on the one that’s costing you the most." Her favorite tip for paying off cards is to make multiple payments a month. "A fun fact: You can make two payments," she continues. "If your paycheck hits your bank account twice a month, you can make a second payment against your credit card debt in the middle of the month, which will allow you to save extra money on interest intra-month. Credit card debt interest compounds daily, not monthly, so an extra payment, intra-month, can seriously save you some extra dollars."
If the compounding interest on your credit cards means your debt is barely budging, another option is to transfer the balance(s). "You might want to consider transferring your outstanding credit card debt to a card with a zero-percent APR introductory offer, which typically lasts for 12 to 18 months," suggests Palmer. "Just be sure to finish paying off the debt within that timeframe." The transfer will probably cost a fee — usually about two to three percent of the balance — but depending on your current card's interest rate (and the time it'll take to pay it off), it could cost you less in the long run.
Don't Compare Or Try To "Keep Up"
If scrolling through your Instagram feed ignites your inner shopoholic, take a breath and step away from the touchscreen. "Social media is permeated with ways to spend money and make you think shiny, new objects are the key to your joy," explains Crowe. "I would encourage people to disconnect to reconnect." She adds that a shift in perspective will help you stick to your long-term goals. "Take a step back and evaluate," she advises. "Are you on a path that brings you joy and good health? Commit to yourself to make 2019 your year of financial empowerment."
On the flip side, keep in mind that savings accounts don't just grow overnight (unless you win the lottery, of course). Even if you're only able to squirrel away $10 a week, you're still making progress. Palmer reminds, "The new year is a great time to find the motivation to make big money moves — just be sure to break your big goals into smaller steps to avoid feeling overwhelmed." Remember: it's all about feeling empowered by getting a handle on your hard-earned money.