An article by BudgetQueen

It is possible to take 5 minutes out of your day to eventually turn a bad or mediocre financial situation into one that is genius! Maybe you do some of these already, but chances are you do not. Try changing just one or two of these habits a week and see how your financial life can change drastically.

Check your bank balance every day

Just like you check your email every day, check your bank balance. Just be aware of what you are spending. Internet banking is extremely easy to use, and it can take less than one minute to look at your balance. Look especially for “leaks” such as overdrafts, internet banking fees, and any charges to places that you don’t use anymore (like the gym).

Take inventory of your retirement

Take a couple of minutes to determine where you stand with your 401K to see if you are on track. As a guide at 30 you should have saved approximately 50% of your salary. So if you make $50,000, you would want at least $25,000 in a 401K or retirement fund. If you are 40, you would want two times your salary. So if you make $50,000 you would want $100,000 in the bank. At 50 years old you would want five times what you make, or $250,000. Are you on track?

Know what a bigger interest rate means

Is your credit card interest rate so high that you end up paying twice for a dress that you charge? It is important to find out. Interest rates do not just grow by a set amount each month. Interest rates are compounded and will grow faster than you can keep up with.

Look at the difference between a 18% interest rate and a 9% interest rate on the same loan. It doesn’t sound like too much of a difference but it is! If you took out a loan of $1,000 at 9% and just paid the minimum until it is paid off, you would end up paying $373.41 in interest. At 18% paying the minimum, you will have paid $923.12 in interest – which is almost as large as the loan itself.

Vow to add savings

Give yourself a deadline: in six months I will have at least a 2-3 month emergency savings account. Contribute to it every month. It is important to have a safety net.

But remember; don’t just build up your savings without paying off your debt. It is important to have a safety net, but the debt often has a much bigger interest rate than the savings, and that debt can grow like a weed. Set aside only 10% of your net income for savings, and set aside 15% for your debt repayment.

Calculate how much you need to save with savings calculators. Add a money market account to your portfolio. Check for the best money market rate possible.

Think of all of the presents that you buy in one year

Take five minutes to jot down all of the people that you buy presents for a year, and average in a dollar amount for each. Take your mother for instance. If you are like me, you will buy her a Mother’s Day present, a birthday present and a Christmas present. That can get pretty expensive. Now do the same for your spouse, your dad, your kids, your nieces and nephews, etc. Now add it all up. What is your number? $800? $1,500? $2,000?

By doing this, you are starting a budget for the year. You are recognizing how much you will need for the year just on presents alone. I am not talking about skipping out on Little Suzie’s present this year, but if you plan for the presents, you can pay cash instead of putting it on a card.

Know your weaknesses and avoid them

Take just a few minutes to realize what your weaknesses are: but don’t eliminate them. Just vow to cut them. Vacations, clothing, coffee and the salon are some major weaknesses we have. Is there any way that you can cut down on some of those expenses? Just go on one vacation this year. Get coffee only three times a week. Avoid even going to the shopping mall until you can pay for clothes in cash.

These simple suggestions may not seem like much, but they are getting you on a path to cutting costs, saving and eliminating debt. That is the difference between rich and poor. It is the difference between being in control and out of control. Do it every day like brushing your teeth; soon you will be impressed with the results.