Quick and Practical Ways to Improve your Finances – Automatic Saving, Education, Refinancing to Tax Planning

“Saving more” is the top goal on people’s resolution list this year, according to a recent survey commissioned by Putnam Investments, which found that respondents put thriftiness ahead of those two perennials “losing weight” and “exercising more.” But while dieting and exercise require discipline, effort and sweat, savings can easily be put on autopilot with a little bit of planning and preparation. If the money isn’t in your paycheck or your checking account, chances are you won’t miss it.

How to Save More:

1. Set up an automatic deduction from either your paycheck or checking account to a high yield savings account. Two high yielding and FDIC accounts I would recommend based on usage and rates are HSBC (see review) and Ally Bank (see review).

2.The maximum 401k and IRA contribution limit in 2010 is $16,500 (pre-tax), but more than 50% of Americans do not contribute to a retirement account. Given the huge tax advantages of this account, and potential employer matching (i.e. free money), it is a sin not to invest in your 401K if you can afford to. If you are contributing to your 401K, then try and get to the maximum limit. The earlier you start, the better thanks to the power of compounding. Also, starting an IRA is very cheap thanks to low cost offerings from online brokers like E-trade and Zecco.

Get educated

The most valuable and permanent asset is education and when it comes to personal finances, financial literacy equals financial freedom. By understanding how banks, lenders and investment firms make money off of us we can turn the tables and find ways to minimize the money we pay them (and even make some back!).

How to Improve Your Financial Education: Read all the great personal finance blogs out there (but always do your own research before buying or signing up for anything, and that includes what you read here!). I also suggest you subscribe to some of the top personal finance publications like the Wall Street Journal and Money Magazine. A couple of popular personal finance and investing books worth adding to your reading list are The Total Money Makeover (from personal finance guru Dave Ramsey) and the classic The Intelligent Investor by Benjamin Graham

Tame the monthly phone and cable bills

A new year is a great time to review your biggest monthly expenses to see if you can find some meaningful savings. Can you cut the cellphone bill? Combine cable, phone and Internet services in a lower monthly rate? Perhaps consider a VOIP phone service to leverage the Internet and lower your telephony bills. You can also look at your cable bill and cut back on channels you don’t use. With the number of shows available online at network sites and places like hulu.com, you can easily save hundred’s of dollars a year. Finally, with rising home energy costs look to invest in a cheap energy saving meter that can tell you how much energy your appliances are using, that in turn will help you to figure out where you could cut back and save money.

Refinance

If you’ve got a home loan then this is probably a great time to refinance. With interest rates on 30 year fixed-rate mortgage loans falling below 5%, the lowest level since the 1950s, many borrowers can save a considerable amount over the life of their home loan by refinancing. With a number of online portals to compare interest rates for mortgages, you can quickly get an idea of what kind of rate you can get based on your FICO credit score. You can then call or visit your local banks to see if they can match these rates. For those with good credit scores and with enough equity in their homes, refinancing to a sub 5% rate now is a no-brainer.

Get Tax Smart

Probably the most important, but under planned, financial action for most people is related to taxes. Whether it is your pay check withholiding or taking advantage of the $3,000 a year capital loss provision, you must plan year round for taxes. You can deduct most charitable donations and if you are working from home or starting a small business you can deduct a number of these costs as well. So take the time to research your possible tax savings (IRS.gov or the various tax related posts on this site are good places to start), and
plan to get a bigger refund every year. Also with all the stimulus funded tax credits and deductions, like the green energy home repair/upgrade credit still on offer, you can actually make money from the government and increase your tax refund at the same time.

It’s worth taking some time each year to muse about your spending and financial priorities. The choices are free, and the payoff is well worth it.

Related:

~ 6 Investing Lessons to Live By
~ 5 Blue-Chip Stocks Warren Buffet Would Buy – GE, MSFT, GS, CAT and Disney
~ 5 Personal Finance Tips For Smart Retirement Planning
~ How to buy shares – Two simple steps
~ Why Even High-Income Earners Are Not That Far From The Edge of Poverty
~ Seven Sure Fire Ways For Students to Rack Up Debt and Ruin Their Financial Future (How to Avoid This Outcome)