Put down the lottery tickets! You don’t have to pray to the God of Powerball or wish on a shooting star to improve your financial life. You have the power to turn your finances around and sail into retirement on a metaphoric yacht of financial stability. Change your habits and change your financial life with these seven simple secrets:
1. Save Every Month
Sounds simple enough, but so many people don’t put money away each month. Start by saving for a rainy day fund that covers 3 – 6 months of expenses, and then start researching mutual funds so you can earn interest and that sweet financial manna know as compound interest.
2. Put as Much Into Your 401k or IRA as Possible
If you work for an employer that provides any percent match for your 401k contributions, that’s FREE MONEY! Go after that! Even if you don’t get a match from work, try to max out your 401k ($17,500 in 2014) or IRA ($5,500) or put as much away as you can. This money goes into your 401k or IRA tax-free, which means all that extra tax-free money can grow and earn interest over the decades.
3. Buy Good Health Insurance
The Affordable Care Act has made health insurance mandatory, but that doesn’t mean everyone will comply. If you don’t receive health insurance from your employer or are self-employed, buy health insurance even if you are healthy. If you get a cancer diagnosis or are in a bad car accident, your medical bills could easily wipe out your life savings.
4. Ask for a Raise
Ladies, when is the last time you’ve asked for a raise? No, we don’t mean the 3% raise you get at your annual evaluation. A quick online search can show you what others are making in your field. Are you on par? If not, then arm yourself with this data and a list of all the reasons why you are an awesome and critical employee and ask for a raise. If you get a no, it might be a sign to start looking for greener pastures.
5. Pay Your Mortgage Bi-Weekly Instead of Monthly
If you were to take out a 30-year, $400,000 mortgage loan today at a 5% interest rate and make all your payments on time, you would end up shelling out $361,891 in interest over the life of the loan. Simply by paying this same mortgage bi-monthly (an option that most lenders allow), you would pay off your home four years sooner and save $68,713 in interest in the process. Think about what all of that money could do if it were in a mutual fund instead? You could save even more on interest if you paid just $100 extra on each bi-monthly payment.
6. Cut Up Your Credit Cards
It’s so easy to swipe your credit card at the register and take home your purchases when the minimum monthly payments seem small and reasonable. However, when you use credit cards, it’s easy to lose sight of how much money you truly have. All that extra debt you carry around will incur interest, and that interest will incur interest. If you have high-interest cards like department store credit cards, you could quickly slide into a huge debt hole without even realizing it. If you ever hit your credit limit, Game Over.
7. Learn a New Skill
If you are not making enough money at work or dream of one day owning your own business (a risk that could pay off handsomely), learning a new skill can increase your value to your employer or give you something you can build your business around. Engineers are a dime a dozen, but what about an engineer who can also write clear and compelling marketing copy? That’s a girl who could probably ask for a raise and get it!