Personal Finance Advice

You’ve heard it a million times: Put 10% of what you earn into the bank.  People who consistently save 10% of their income and stick it in an interest-bearing savings account usually manage to build up a nice nest egg, even if they aren’t huge earners throughout the years.  You may have heard stories about life-long waiters or seamstresses who retire quite comfortably despite having earned a salary that was considered very low.  How did they manage to get so much money in the bank even though they had low incomes? It’s because they saved money and allowed compound interest to do its magic.

If you don’t actively save your money for a rainy day then it’s likely that there are two reasons for this:

1.  You don’t think you can afford to put 10% of your income into a savings account.  Most people, however, actually can afford to put more than 10% into a savings account without much belt-tightening at all if they actually take a look at how they spend their money.

2.  You don’t think that 10% can amount to much, so why bother? Although it depends largely on when you start putting 10% away - whether it’s in your early twenties or late fifties, for example - a small percentage of your income can make a big impact later down the road.  Put this thought into your mind: It’s far better to save a small percentage than nothing at all.

Even if you can’t save a full 10% of your income right now, start saving something.  Save regularly and make it a habit.  It’s great if you can set up an automatic withdrawal from your paycheck or checking account so that you don’t even have to put much thought into it.  In fact, for many people, it’s better when they don’t even notice the money moving from one place to another.  It just happens automatically and before they know it they have a respectable savings account built up.

Should you put away 10% of your income before or after taxes? If you’re in the financial position to comfortably afford putting 10% of your pre-tax income into savings then by all means do…but if you can only afford a 10% savings after taxes then don’t let that stop you from doing so. 

Just save something.

Quick quiz, no peeking allowed: What is the interest rate on your credit card?

If you are like most people you probably don’t know the answer.  You probably have a vague idea of what it once was, but as interest rates fluctuate you may have lost track of what you’re actually getting charged for interest on your credit cards. 

Plenty of people don’t even peek at their credit card statements.  They just make the payments and don’t really take the time to figure out exactly how much the credit is costing them.  The truth of the matter is this: Unless you have a 0% APR and a guarantee of no fees attached to the account, the credit is costing you something.  The question is, how much is it actually costing you?

Dig out your credit card statement and take a look at your interest rate.  Does it look like a reasonable amount? If you have no idea of how much you should actually be paying in interest, take a look at what the average interest rate charged to people with comparable credit scores is.  If your interest rate is similar, then that’s great.  If it’s much higher, then it’s time to call your credit card company and demand a lower interest rate.

You should keep in mind that if you have consistently made late payments or exceeded your credit limit then calling and asking for a lower interest rate will probably be met with a cordial, “We regret that we can’t lower your interest rate at this time.”  If your payments have always been on time and you can generally be considered a valuable customer then there is a good chance your credit card interest rate will get lowered. 

Sometimes it’s as simple as asking.

If your credit card company is not willing to lower your interest rate, and you know you can qualify for a better interest rate elsewhere, go ahead and get a different card and do a balance transfer.  After all, if your creditor isn’t willing to lower your rate, why should you be loyal to them?

Of all unexpected expenses that people encounter, medical care can be a real issue.  If you have good health insurance coverage you might still wind up paying a hefty deductible when you have to seek medical treatment for an injury or illness, and if you don’t have any medical coverage then a trip to the emergency room can be disastrous to your finances.  How do you handle these unexpected medical bills that have the tendency to pile up really quickly?

1.  Have an emergency fund set up.  Most financial experts suggest that people have emergency funds sufficient to cover three to six months worth of expenses.  Unexpected medical costs certainly fall into the category of “emergency expenses.”

2.  Keep your insurance up to date.  Monthly health insurance premiums aren’t something you should pay late or forget to pay altogether.  You never really know when you might have to head to the doctor, but if you haven’t paid your monthly premiums then you may discover that your insurance card is rejected.

3.  Make it clear to the doctor that you’re paying cash.  If you don’t have health insurance and need to pay for your medical expenses out of pocket, tell the doctor beforehand.  Many doctors actually like cash customers quite a bit because there is no insurance paperwork to file.  Ask for a cash discount.

4.  Ask about assistance programs.  Most hospitals have assistance funds for patients who cannot afford to pay their medical bills.  You can also apply for county or state assistance if you have a low annual income.

5.  Work with the collector.  If you fall behind and wind up getting called by debt collectors regarding a medical bill, remain cordial and try to work out a feasible payment plan with the collector.  Yes, it may seem unfair that you have these unexpected medical bills, but the debt is yours and you’re responsible for paying it.  Most collectors will accept monthly payments that are small as long as the payment is made consistently, or you may be able to settle the entire debt for a smaller amount if you negotiate correctly.

6.  Stay healthy! Have you heard the saying an ounce of prevention is worth a pound of cure? If you can manage to stay as healthy as possible - exercising, not smoking, getting enough rest - then you may be able to avoid certain illnesses altogether.  If you’re trying to keep your medical costs down, staying healthy is a great way to start.

Unexpected medical bills can throw a huge wrench into even the most well-devised budget.  Plenty of people have found their personal finances thrown into a state of chaos because of an emergency trip to the doctor or a surprise diagnosis.  Like any other debt, medical bills shouldn’t be ignored but should instead be paid down as quickly and steadily as possible.