The median American household income is about $60,000. Almost eight in 10 American households are living paycheck to paycheck, struggling to just get by. The majority of American workers believe they will always be in debt. The majority of Americans save less than $100 each month. It’s a bleak picture out there, folks.
The thing is, most households could make just a few tweaks to their lifestyle and simply stick with those tweaks and they’ll put themselves on a completely different trajectory. There are many, many little tweaks out there that people can make to their financial lives that they’ll barely notice, but in the background those tweaks will gradually contribute to a better and better financial situation over time.
Here are eight of them.
Increase your 401(k) contributions at work (or start one).
If your workplace offers a 401(k) or 403(b) or TSP plan or something similar, sign up for it and start contributing a small sliver of your paycheck. (How much? Start with just a couple percent of your check; if your employer offers matching, try to contribute enough to get every dime of that.) Don’t sweat the investment option – if your plan offers a target retirement fund, just choose that one.
If you already have such a plan in operation, just bump up your contributions by 1%. Go from 2% to 3% or from 3% to 4%.
- Read more: A Complete Beginner’s Guide to 401(k) Plans
Cut the cable cord.
“But how will I pay for those additional 401(k) contributions?” One simple way to cover it is to finally cut the cable cord. Look at alternative streaming options for your entertainment needs like Netflix and Sling. We cut cable several months ago and our family legitimately didn’t even notice; we saved about $80 a month due to the move and we replicated virtually every program we watch with a mix of Netflix ($10/month), over the air coverage with a digital antenna (free), Sling ($25/month), and occasional HBO Now binging.
As I was writing this, I asked my family if there were any programs that they actually miss and couldn’t watch right now that they would watch if we still had cable; one child named one program and another child showed them immediately where it could be found, and no one else could come up with anything. Talk about low hanging fruit to save $80 a month.
Start an automatically-funded emergency fund at another bank.
This one’s simple. Just open up an online savings account at another bank (Ally is a good choice and is pretty universally recommended by Money360) and set up an automatic contribution to that account from your main checking account. Have it move over $10 a week – you probably won’t even notice that. At the end of the year, you’ll have $522 (or so) in that account, which is more than enough to handle a real-life emergency like a car breakdown or something of that nature. Put aside $15 a week and you’ll be around $783. Put aside $20 a week and you’ll have $1,044 or so.
Forget about that transfer. Just let the new account keep slowly filling up a drip and a drop at a time from your main checking account. Then, when emergency strikes, you can just sign into your new online savings account and transfer the money back to your checking and suddenly you don’t have to go into credit card debt to deal with the emergency. Rather than having a hefty new balance on your card, the financial emergency is just handled.
Negotiate a better cell phone deal.
“But how will I get the money for that emergency fund?” A simple way to come up with enough money each month to fill up that emergency fund is to shop around for a better cell phone deal. See whether or not other providers in your area are offering a good deal. Check the big ones like Verizon and Sprint, but don’t overlook other smaller providers like Ting and Cricket.
Figure out a plan that gives you what you need, and don’t forget to look at the new customer offerings for your current cell plan. Then start by calling up your current company and say you’re looking at jumping ship to this other offer because you simply can’t afford the current plan and see what you can get. Many cell phone companies will match – or come close to matching – that other offer to retain you as a customer. Boom – instant savings. (Note that this doesn’t work really well if you’re in the middle of a contract.)
A strong suggestion here: Be courteous and calm and pleasant when talking to customer service representatives. They have thankless jobs and often catch verbal abuse from other callers. Try to make their day as pleasant as you can and you might just find that they’re more willing to help you than you might expect. A customer service rep won’t go the extra mile for a raging customer, but they might just do so for a nice, pleasant one.
Start a Roth IRA and automatically fund it.
What do you do if you don’t have a 401(k) plan at work? Or what do you do if you’ve heard your plan at work is pretty bad? The solution is to start your own Roth IRA, which is essentially a “do it yourself” retirement account offered by most investment firms. I have one myself, through Vanguard.
Getting one set up is easy. Just go to your financial institution of choice and sign up for one – it’s much like signing up for a checking account. You’ll have a plethora of investment options available – a good default choice is the “target retirement fund” that best matches your expected year of retirement.
When it comes to funding this account, the money will come straight out of your checking via an automatic transfer, so choose a small amount on a regular basis that you’re sure you can handle.
- Read more: The Best Roth IRAs
Shop around for better car insurance, homeowners insurance, and renters insurance.
“But how will I come up with the cash for that Roth IRA?” One way to get that cash is to shop around for better deals on the insurance policies you carry, from car insurance to home insurance. Companies like Geico and Progressive tend to offer great prices for new customers, particularly if they switch companies, so it’s worth your time to shop around.
Visit a few insurance websites and gather a few quotes for the policies you want and see if any of them are a better deal than what you’re currently paying. If you find a good deal from a reputable insurer, jump ship – or at least call your current insurer and give them a chance to match the rate you found.
Pay off a credit card quickly by setting up an automatic payment plan through your bank’s bill pay.
Many banks offer online banking and bill pay services, which means that you can set up many of your bills to be paid automatically. One great feature of this is that you can set up a recurring extra credit card payment that automatically throws money toward taming your unruly credit card balance each month while you continue to cover the minimum balance.
It’s quite simple. Just set up an automatic monthly payment in your bank’s online bill pay service that pays a certain amount to your credit card each month on a date when you’re sure your checking account will be flush with cash. Over time, those extra payments will slowly eat away at your credit card balance, which means lower balances and lower finance charges and eventually freedom from that debt.
Set your thermostat a few degrees lower (in winter) or higher (in summer) than you’re used to, and wear sweatshirts (in winter) or open the window (in summer).
“But how will I come up with the cash for that regular credit card payment?” One great way to do that is to simply adjust your thermostat a bit more aggressively. During the winter months, slide that thermostat down a few extra degrees and wear socks and a sweatshirt around the house. During the summer, slide it up a few degrees and open the windows on the shady side of the house.
Such a simple change will make a profound difference in your monthly energy bill, as your heating and cooling systems will run far less than before.
There’s a simple principle hidden behind all of these simple steps: You can pay for debt repayments and retirement savings and other such goals by being frugal if earning more money isn’t an option for you.
Earning more money is incredibly powerful, but it’s a long-term approach that often doesn’t pay off much in the short term. Spending less money, especially in ways that don’t affect your quality of life, is an approach that anyone can use without needing to earn more money. It’s always there. There isn’t a “better” option for everyone when comparing the options of earning more or spending less because it depends so much on your situation.