Latest posts by R.J. Weiss, CFP® (see all)
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I love the concept of disproportionate rewards–getting the biggest rewards, for the least effort.
You can use an app like iBotta to save money on groceries and in a year’s time save a few hundred dollars. While saving money this way is easy, it’s not like the benefits are going to change your life.
Compare this to finding a low fee-investment provider. A few hours of research and moving your account can knock years off your working life. The rewards for the effort here are disproportionate.
What personal finance actions have disproportionate rewards?
Here are 15 of my favorite.
15 Smart Personal Finance Actions
# 1) Minimizing Your Investment Fees
Say you invested $500 a month into a brokerage account for a total of 30 years. If you were charged a 1% fee a year, your total fees over 30 years would add up to $98,404.65!
If you’re not careful, investment expenses can be one of the biggest expenses in your life! Review each of your investment accounts and the fees you’re paying.
A few tips:
- Investment companies like to hide fees. Use Personal Capital’s Free Fee Analyzer, which logs into your accounts and discovers actual fees.
- Rollover old 401(k)s into an IRA at a low-fee investment provider such as Vanguard or Betterment. A 401(k) typically has a higher fee than individual brokerage accounts.
#2) Calculate your Financial Independence Day
Knowing the date when you can live off your investments is telling of your current financial situation.
A good rule of thumb is you need saved up 25X your annual spending.
Along with uncovering fees, I use Personal Capital to track my own financial independence day.
With Personal Capital you’re getting a dashboard to manage all your account balances. You can then quickly view key numbers such as income, expenses, and net worth. The data is pulled automatically from your financial accounts, so numbers are visible instantly in colorful graphs and pie charts.
Personal Capital then uses this data to calculate your financial independence day. You can take a look at mine below.
It calculates that I have a 51% chance my portfolio will support my goals based on my desired retirement age of 45, current investments, and annual spending.
This is incredibly helpful to know today and even more helpful to track overtime.
#3) Refinancing Debt
As interest rates are starting to rise, locking in a low rate on your student loans or mortgage is becoming more important.
You can potentially save thousands by lowering your interest rate.
Head over to Credible, which lets you search rates for both student and personal loans as you would a flight or hotel.
If you’re looking to refinance your mortgage, try SoFi or contact a local mortgage broker with a good reputation.
#4) Learning About Credit
Understanding how your credit score works can save you tens of thousands over your lifetime.
# 5) Calculate The True Cost of Car Ownership
One eye-opening personal finance action is to calculate the true cost of ownership of your car.
In my experience, most people severely underestimate how much driving is costing them.
When you add in the cost of depreciation, interest, taxes, fees, insurance premiums, fuel costs, maintenance, and repairs–the total can be shocking. It’s important to know this number so you can make better decisions regarding owning a car.
Edmunds has a calculator to help you.
# 6) Open an IRA
If your high interest debt is paid off and you’re maximizing your employer match in your 401K, a great financial move is to open an IRA.
First, learn whether a Roth or Traditional is right for you.
Next, head to a low-fee investment provider such as Vanguard or Betterment and open an account. A good starting point is opening a Target Date Retirement Fund (I personally invest in the VFIFX) or complete Betterment’s risk tolerance quiz.
# 7) Optimize Credit Card Rewards
Once you understand how your credit score works and NEVER carry a balance, you can take advantage of lucrative credit card signup bonuses.
So far this year, I’ve earned a net of over $2,400.
This was achieved with three signup bonuses:
- 100,000 points for Chase Sapphire Reserve (myself)
- 100,000 points for Chase Sapphire Reserve (my wife)
- 80,000 points for Chase Business Ink (my business)
The Reserve card has a $450 annual fee but you get $300 of travel credit reimbursed, for a net fee of $150. The Chase Business Ink has a $95 annual fee.
If you don’t want to play this game, that’s perfectly OK. Still you should look at your current credit card perks to see what you may be missing out on. For example maybe one card offers more cashback on groceries, while another offers more on gas. Take time to understand which card to use.
# 8) Switching To A Low Fee, High Interest Bank
If you’re constantly getting dinged fees, whether ATM, overdraft, or made up which banks tend to do, switch banks. I use and enjoy : It’s a no-fee checking and savings, with some of the highest interest rates you’ll find. My favorite feature is that you’re able to setup multiple savings accounts to save for different goals.
# 9) Make a Strategic Career Move
If you spend 100 hours looking for a job (most people spend much less) and are able to get a $10,000 annual raise, your time was worth $100 an hour. Potentially much more if you account for future raises.
This makes finding a higher paying job a very rewarding activity.
Start strategically thinking about your career. I recommend the book The Start-up of You: Adapt to the Future, Invest in Yourself, and Transform Your Career.
#10) Automate Your Finances
One of the most time saving, both in times of time and money, personal finance actions is to automate your finances. You save hours each month by automating your finances and potentially hundreds each year in late fees.
Setup your credit cards or any bills to autopay. Review your 401(k) contributions (can you add more or should you switch to Roth?). Setup automatic IRA withdrawals.
#11) Reading Your Benefit Packet
If you get your health insurance through an employer, sit down and read through your entire employee benefit packet.
Yes, it will take an hour or so. However, if you’re like most, you’ll find ways to save you’re not taking advantage of. This can come in the form of discounted dental visits, no-cost life or disability insurance, and a FSA to reduce medical expenses.
# 12) Learn to Negotiate
Negotiating is a skill with disproportionate rewards.
Consider the ROI on spending an hour learning the basics of negotiation for a home purchase or negotiating a raise (You can and should spend more time, however, since most people don’t spend any time here, even an hour of prep makes a big difference).
Beyond asking for a raise and in home transactions, negotiation is a valuable career skill. Since few people take the time to understand negotiation, it’s extremely valuable.
Some of my favorite books on the subject are:
- Getting to Yes: Negotiating Agreement Without Giving In – by Roger Fisher
- Never Split the Difference: Negotiating As If Your Life Depended On It – by Chris Voss & Tahl Raz
#13) Shop For Insurance
One of the simplest personal finance actions is to shop your home and auto insurance at least once every three years. Rates can vary from carrier to carrier 50% or more. To save time call a local independent agent who will shop multiple companies for you.
# 14) Pay Off Your Debt With Cash On Hand
If you can pay off high interest debt with cash in your bank account, go for it. Without the interest payment, you can quickly build up an emergency fund to where it is now and save hundreds or even thousands in interest.
# 15) Setting Financial Goals With Your Spouse
Money is the leading cause of stress in marriages. Often it’s because the lack of communication and shared vision.
My best advice for communicating with your spouse when you’re not on the same page is don’t bring up past mistakes. Instead, set a vision of where you want to go in the future based on what’s important to each of you. Then, determine what you both need to change to get there.
I’ve written a financial goal setting workbook, to help guide both individuals and couples for setting a vision. It’s a step-by-step process for gaining clarity in your financial life. Click here for free access.
Bonus Tip: Sign Up For Sites That Offer Bonuses
Many free websites offer signup bonuses for first time user.
Take 30-seconds and sign up for each. You’ll earn $25 and a few points in very little time.
- Swagbucks: This site lets you earn money for things you’re already doing online such as searching the Internet. It offers a $5 signup bonus.
- InboxDollars: Similar to Swagbucks, in that you can earn points for completing everyday tasks. It offers a $5 signup bonus.
- YouGov: A free survey site with a 2,000 point signup bonus.
- MyPoints: Popular survey site that has a $5 signup bonus.
- eBates: Get money back on online purchases. Offers a $10 signup bonus.