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3 simple things you can do today to improve your finances


Welcome to the Smarter Living newsletter! Every Monday, S.L. editor Tim Herrera Send emails to readers with tips and suggestions to live a better and more satisfying life. sign up here to have it in your inbox.

No, I am not going to tell you to skip coffee with milk in the morning (or any tiny semi-regular purchase you make). Of course, you can skip it, and if lattes are a really important part of your budget, then reducing it would probably help. But for most of us, it's simply useless advice.

So what does it matter when it comes to personal finance? Well, rather than skipping an occasional coffee with milk, controlling your finances is about knowing where you want to go on the big picture and knowing what steps will take you there.

Let me return to a personal example to show what I mean. My goal for this year is to save 60 percent of my income. It is certainly a difficult goal: last year I saved around 35 percent, but it is probably realizable. (And even if I fail, I will probably end up saving more than last year, which is a victory).

But why is this my goal? And how will I really get there?

Those are the two questions to ask when thinking about your money. In general, I am saving for the down payment of a house, this is my why. But the most important thing is my how: For me, that how it's a combination of increasing my mindless savings (more on that below); decreasing my pointless spending (also more on that below); and eat less, because that is by far the most important part of my budget that I can control directly.

your why Y how It will, of course, be different from mine, but knowing what they are is the only way to order your financial home. Having goals is great, but it's better to really know why those are your goals and how You will get there.

welcome to Personal Finance Week In a smarter life. Every day we will publish a new story about money that will help you in your financial life. Whether you are struggling with credit card debt, have no idea how to invest, never learned to balance spending methods or need to have that dreaded conversation "My parents are retiring and I don't know what to do", we have I have you covered. Check nytimes.com/smarterliving every day this week to keep up.

To start, here are three things you can do today, right after reading this, that can help you achieve your goals.

OK, to be a little clearer: stop actively saving your money Automate it so you don't have to think about it. This is what I mean by meaningless savings.

Your paycheck must be making pit stops before it reaches your account, getting a little smaller with each stop. The priority of these stops and the amounts saved will vary according to your current financial life, but the general idea is the same: automate your savings so you never have to. think About saving something. Remove yourself completely from the equation: you cannot miss (or spend) what was never there. Self-control is a myth anyway, so don't bother.

There are many ways to do this, all of which you can do right after reading this: increase your 401 (k) contributions by one percentage point today; have your workplace divide your paycheck between separate savings accounts; have your investment accounts make automatic withdrawals the day your paycheck arrives in your account; increase your automatic contribution to your health savings account; or set up or increase recurring transfers from your checking account to your savings account.

Whatever your savings needs, the point is to make them automatic. Again, you cannot miss (or spend) what was never there. Stop budgeting to save X amount each month and simply eliminate that amount from the equation.

If you are just starting, balance the payment of high interest debt (usually anything with an interest rate greater than 5 or 6 percent) with savings for your emergency fund (if you have not already established it, try to increase your savings for $ 1,000 or the equivalent of one month's expenses, whichever is more). Paying high interest debts offers a greater return on your money than almost anything else you can do, and having a savings cushion is crucial for all the events you cannot predict.

(Do you like what you are reading? sign up here so that the Smarter Living newsletter receives stories like this (and much more!) directly in your inbox every Monday morning.

If you are a little later, you have many options. As an example, here are the five stops that my money automatically makes: 401 (k); then H.S.A .; then emergency / medium term savings; then my investment account; and, finally, short-term savings / expenses (think about monthly expenses). What is left is what I can spend. I reached 100 percent of my savings goals and I don't have to think once.

Like reducing coffee with milk, this is a common tip that we listen to all the time, but this one is a bit more based on reality.

As more of the services we use regularly become subscription based, especially given the Flooding of TV broadcast services: it is worth wasting time on your subscriptions. An analysis by the Mint online budget tool found that in 2019, each of us spent $ 640 on digital subscriptions.

That's a lot of money!

Probably not going to cut them all, but it is very likely that there are some subscriptions that you completely forgot (I did it last month and I discovered that I had two subscriptions that I didn't know I had).

Instructions for finding and cutting your subscriptions on many devices and services can be found here, but also check your bank account and look for recurring expenses. You may find something you didn't even know to look for.

This is very simple and will take 15 minutes.

First, open a savings account at a bank that offers an annual percentage return of at least 1.6 percent or more; This is the amount of interest that the bank will pay you just to keep your money with them. I would recommend online banks Ally or Marcus, which I use.

Then, transfer your current savings account. This is your new savings account.

That's! You're done!

We did this because regular savings accounts offer a small fraction of A.P.Y. You get a high performance account. For example: a Chase savings account offers today 0.01 percentwhile a Marcus account offers 1.7 percent. At those rates, if he had $ 500 in savings in each account and did not contribute more, at the end of five years he would have $ 500.25 in his Chase account and $ 544.36 in his Marcus account. It's not a fortune, but it's worth 15 minutes of your time today. (That's the magic of compound interest.)

What are your financial goals for 2020? Tell me on Twitter @timherrera.

Thank you, have a great week!

– Tim

This week I have invited Kristin Wong, author of the personal finance book "Get money"And friend of S.L., to give us some advice on how to be better with money.

Give some money to the meaning

Personal finance has more to do with behavior than with mathematics, and it is much easier to stick to a habit of money when that habit is associated with a broader and more meaningful goal. If you have not already done so, clarify the real purpose of your money resolution. Ask yourself why, exactly, you want to save more than your salary or reduce restaurants.

Break it down

Let's say you want to stop spending money on restaurants, clothes, gadgets and books this year. That is simply too many things to resist!

It is much easier to concentrate on one area at a time. For example, this month focus on reducing the cost of your restaurant. Once under control, spend the next month focused on reducing devices, then clothing, etc. One thing at a time; one month at a time

Don't hit yourself

I don't know about you, but when I destroy my budget or I don't reach a savings goal, this is what usually happens:

1. I get mad at myself for not being smarter with money

2. Shrug and buy everything in my Amazon cart

Living in your mistakes makes you more likely to repeat them. So, the smartest movement is to forgive yourself, recalibrate your budget and your goal, and move on.

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