On any given day, you’re faced with countless financial decisions. How much should you spend on lunch? Are you paying the best rate for your health insurance? Can you afford a vacation this year? While life would be easier if you were able to coast by, that’s not reality.
The reality is that you can make life a lot easier by paying close attention to your finances. While your bank account is an important component of your overall finances, it’s not your entire financial picture. So review your accounts and consider these nine financial decisions you have the opportunity to act on. When you’re done, you’ll feel more confident about your finances.
1. Say “Yes” to the Extended Auto Warranty
When you buy a car, you gain the freedom of the open road. But, unfortunately, you also expose yourself to the possibility of countless headaches and thousands of dollars in repairs. An extended auto warranty can save your bacon if you buy a used vehicle or your manufacturer’s warranty expires.
Today’s cars are full of sophisticated software that’s only too capable of malfunctioning. However, with an extended auto warranty on your side, you’ll have peace of mind that many future high-dollar expenses are covered.
2. Save for Known Expenses
While you’re covered for major auto expenses thanks to your extended warranty, you still need to save for routine maintenance. First, review your owner’s manual for the preventative maintenance schedule and ask your dealer for general cost information. Then, set aside money each month in anticipation of these expenses, and you’ll never be caught up short.
You can use this same practice for your home, personal care, and pet expenses. By ensuring that these known categories of expenses are covered, you can use discretionary funds when life sends you a surprise — bad or good.
3. Negotiate for the Home Warranty — and Keep It
When you purchase a home, you often have the opportunity to negotiate a home warranty into your purchase. If the seller doesn’t offer it, be sure to ask.
Home warranties can help cover the primary mechanical components of your home, like your HVAC and appliances. These items are not typically covered by your homeowners’ insurance and cost thousands or more to fix or replace. Most policies are good for one year and can be renewed at an affordable rate.
4. Stay on Top of Your Credit Score
Your credit score plays a major role in your financial standing and may be a deal-breaker for life’s financial opportunities. Know your score, what parts of your financial history go into it, and how you can improve it.
By law, you’re allowed one free credit report per year from each of the three major credit reporting bureaus. If your score is on the low side, develop a plan to improve it. Start with the factors that are damaging your score the most, such as late payments or a high credit utilization ratio. Take steps to address them (e.g., set up auto-pay, pay down a balance), and you should see improvements in a few months.
5. Take Advantage of Life Insurance Offered by Your Employer
Open enrollment happens just once a year. So while it may be tempting to sign up for just the basic benefits, don’t skip the life insurance coverage.
Often, your employer offers you the best rates for critical coverage like life insurance and disability. Typically, you can get thousands of dollars of coverage for just a few dollars per paycheck. So take care of your family and make sure your obligations are covered with this simple decision.
6. Invest for Your Retirement, No Matter Your Income
Whether you want to admit it or not, there will be a time when you are unable to work. So save for your eventual retirement now and take advantage of the power of compound interest. If your employer offers a matching contribution for its 401(k) plan, try to save at least that amount.
Consider your investment options carefully and pay special attention to pre-packaged target-date funds. These funds take the guesswork out of selecting your investments and adjust over time as you get closer to retirement.
7. Have a Debt Payoff Strategy, Then Put It on Autopilot
Debt is a necessary evil, but it’s essential to master. Keep a running tally of your debt obligations and prioritize your payoff strategy based on your goals.
As noted earlier, you can ensure you’re making payments on time by signing up for auto-pay. If you’re ready to pay down the principal balance on one of your debts, use auto-pay for that, too. Automating your debt payoff strategy ensures that you’ll stay on track, no matter how busy life gets.
8. Save For Emergencies, Even When Times Are Good
Emergencies happen when we least expect them — that’s what makes them emergencies. So plan ahead and work toward saving up three months of your basic expenses: housing, utilities, food, and transportation.
Resist the urge to use all of your annual pay increase to cover just the fun things in life. Instead, consider setting up an automatic savings deposit to reroute that money toward your emergency fund. Then, once you’ve saved up three months’ worth of expenses, treat yourself for a job well done.
9. Know Your Worth, and Ask for a Raise
Even if you’re happy with your job, you should always keep tabs on the going rate for the work you do. First, compare your current salary with what’s reported on sites like Glassdoor. Then, track your annual performance review and merit increases just like you would your work deliverables.
Treat your career like its own business enterprise and advocate for your advancement in both title and salary. If you’re underpaid, develop a strategy to discuss it with your supervisor and ask for a fair rate.
Taking the Easy Route to Financial Well-Being
Many financial decisions take time and deliberation. For example, should you rent or buy? Stay at your current job or pursue your entrepreneurial dream? Invest in stocks, bonds, or physical assets like real estate? Choices like these demand extensive research and contemplation.
Fortunately, there are some financial decisions that are so clear-cut they’re practically no-brainers. So go ahead — seize the low-hanging fruit of the financial world. Once you’ve made these nine decisions, you’ll rest easier.
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