There is that phrase “What you don’t know can’t hurt you”. Unfortunately, especially when it comes to money, it is completely wrong, as the current economic crisis shows us all too clearly. Not knowing about money can be one of the most painful and expensive mistakes you can ever make, and knowing about it can totally change the course of your life.
What we want to achieve in this article is nothing grand. No big concepts or sweeping statements. Just a few simple, practical things everyone can do implement right away that can save anywhere from a few, to a few hundred, dollars a month.
The first thing anyone who wants to get a handle on their finances should do is get and complete a chart of expenses (email me if you would like one). What this does is break down in extreme detail how and where your money is going, as well as how much is coming in etc. It can be a tedious process, but it is a crucial part of really understanding you financial situation.
Something fascinating happens when you start looking at people’s finances: all these things that they didn’t know they were spending money on suddenly surface. And this is where not knowing where your money is going gets scary – it is amazing how much is disappearing through financial leaks people don’t even know are there.
Where do you bank? If you are with Wells Fargo or B of A, how much are you paying for your account? We had one student who was spending $30 per month in “Bank Charges” that they knew nothing about… but had never known existed. Explore what options exist for free checking, free savings etc: then shift away from who-ever you are with that is over charging you for this stuff. Washington Mutual (even despite its recent troubles) certainly offers some of the best deals we have seen.
What credit card do you use? Another student had a “great deal” with American Express. They were getting all kinds of special stuff… and were paying around $350 per year for it. Once they looked into what they actually needed, it turned out that there was a free option that would have given them everything. So they had been paying that extra money every year for nothing.
Do you carry credit card “insurance”? We have all been guilty of this one. You know, the tele-marketer who signs us up for a free 30 day trial of some service, offering a free credit report or something similar. All we have to do is call and cancel if we don’t want to continue… and it seems such an easy thing to do at the time… and yet somehow we never do! Then three years later we find out we have been spending $40 per month for something we never used or cared about… you get the picture.
All these expenses we have all been guilty of at one time or another (or maybe even right now!), and the point is that, with just a little bit of effort, everyone could easily find an extra $25 – $100 just by really knowing where our money is going.
So do that at least. Get the chart of expenses, start working through it, find and plug those money leaks, take a cheap course, but do something now. Putting off is just going to make it more expensive.