10 tips to avoid money worries

Man of concern

With joblessness still high, prices going up and a constant bombardment of bad news, everyone is worried about one thing:  money.
You don’t need money to be happy, but having money and watching it disappear doesn’t help your mood one bit.

I am a worrier. I have found that there are a few simple things that allow me to sleep a lot easier at night, though.  Most of them are simple, and none of them require a tremendous amount of work – just a change in attitude or habits.

1.  Set up an emergency fund.

Everyone should have an emergency fund.  Even if you don’t think you need one, make sure you have at least a month or two of cash on hand at the bank.  I recommend using HSBC or ING high-yield savings accounts for an emergency fund, because it takes a couple of days to withdraw money from each.  Having money that’s easy to get to – but not TOO easy – will relieve a lot of short term stress.  Don’t have an emergency fund?  Even if you can only add another $10 to your fund, do it.

2.  Consolidate your financial information in one place.

With free services like Mint.com and others all over the internet these days you can easily set up an account that gives you a quick “snapshot” of your financial health without logging in to 15 different sites.  My bank uses Yodlee, which pulls in everything from my home’s value in Zillow to my retirement accounts to my credit cards.  I don’t worry too much about net worth, but it’s still nice to be able to see it when I want to see it.

3.  Pay down your debt.

I’ve seen a lot of complicated ways to go about this, but Robert Kiyosaki (of all people) has the best tip I’ve seen (and yes, it’s better than Dave Ramsey’s).  If you have consumer debt, pick out an amount you can afford each month and apply it to your highest-rate debt (not your largest debt – the one with the highest interest rate) using some sort of autopay if you have it.  Repeat every month until it’s gone, but this way you can forget about it and focus on your career or your business.

4.  Put as many bills on autopay as possible.

Almost every bank has an online presence now.  Mine lets you “pull” your credit card information straight into your bank account, so you can see all the bills lined up in one place.  Paying them can be as easy as setting the autopay up to be a certain amount each month – and then forgetting about it!  If you’re still writing checks and mailing them in, you’re creating a lot of worry that you don’t need!

5.  Consolidate your accounts.

I wrote a guest post about this a long time ago, but it’s still true.  I used to have a dozen credit cards, checking accounts at multiple banks and IRAs and other investment accounts scattered everywhere.  Don’t use an account more than once a month?  Consolidate!  Most banks and brokerages will be happy to help you consolidate your accounts, so pick the ones that offer the most benefits to you and get started consolidating.

6.  Clean up your insurance.

I had rental car insurance built into my auto insurance for a couple of years after I bought a second car.  The chance I would need insurance for a rental was minimal.  Money down the drain!  Review your insurance policies and make sure you aren’t paying for things you don’t need.

7.  Stop checking your retirement plan information.

If you have a reasonable plan set up, and you’re confident about the long-term prospects of your plan then there’s no reason – none at all – to check the value of your retirement plan more than 3-4 times per year.  The money in an IRA or 401(k) is meant to be used when you’ll be in your 60s or later.

8.  Set up targeted accounts.

Even though I advocated consolidating accounts above, having separate-purpose or targeted “sub-accounts” within a single account can be helpful.  Many of the high-yield savings accounts are good for this purpose.  For example, we have a separate “vacation account” that we put a small amount into each month, simply so we can forget about that money.

9.  Overwithhold on taxes.

This strategy’s been debated for years – is it better to give the government a loan or not have the shock of an additional payment at the end of the year?  Good tax planning can probably get you closer to zero, but overwithholding a bit can help you avoid nasty surprises.

10.  Consider alternatives, but after considering – forget.

Study alternatives, investigate, consider, but then decide and once you’ve decided, forget about the alternatives you didn’t choose.  Once you’ve chosen one path, sitting around worrying about what might have been is pointless and unproductive.  Don’t fight yesterday’s battles – move forward to the next challenge!

photo credit: Lisa Brewster

6 Replies to “10 tips to avoid money worries”

  1. This is the best collection of common sense about money I’ve seen in a while. Well said, all the way around, Steve!

    On the autopay, it might be added that a person should set up automatic payments so they’re made from the consumer’s end, not from the creditor’s end. For some years before banks their customers provided a electric bill-pay function, utilities and insurance companies offered the option of automatically deducting the amount of a bill from your account. You would give them your account and routing number an they would engross the number from their end.

    While this obviates the need for you to physically pay the bill each month, my credit union’s manager recommends against it, saying it gives too much discretion to the creditor, that getting vendors to return money incorrectly charged has proven very difficult, and that in some cases — particularly involving insurance companies — CU customers have found it impossible to cancel this “service” without closing their accounts and moving money elsewhere. Better to use the proactive “bill-pay” function, in which you set up payments either automatically or manually on your end.

  2. I agree with most of these tips, but I think with auto-pay, you have to be careful. Many times companies can make mistakes, or worse, take money out of your account even after you have canceled the account, etc. I’d rather have the extra step of paying manually online and have the opportunity to check my bills. I don’t want to give anyone the power to take money OUT of my account without me authorizing it first!

  3. To follow up the bill pay think already mentioned, companies can be unethical once you give them your bank info. A good example of this is XM radio. I bought a GM car that came with XM radio. It came with 6 months free, and I activated it after that 6 months with a 1 year purchase of the plan. I told them I wanted to go year to year, and they required me to give them a credit card. I was okay with that as I could cancel at any time and get my money back. 3 months into my contract, they charged my credit card for the 3 year plan. So not only did they charge me for the plan I did not select, they charged me 9 months early. I called, complained, and they refused to pay my money back (and pay the interest rates on the credit card as even though it was disputed, they disputed my dispute and my credit card believed them). Well I sold that car (for other reasons) prior to my first year being up, and tried to cancel my service. First off, they canceled it no problem, but refused to refund the 3 years pre-payment of service. I did not authorize it, and they said it was in some fine print on page 12 of the service contract. It has been over a year, I have a successful small claims court case against them, and am now sicking collection on them as they refuse to pay.

    Just be Leary of autopay.

    The main reason I wanted to respond was overpayment of taxes. While that is all fine and good that you don’t want to pay too much taxes, I would love to have less taken out of my paycheck each month, but the current tax laws do not allow it. I get between a 4 and 8 thousand dollar federal tax refund every year. Why? I don’t know, I fall somewhere on their charts that they take a hell of a lot out, and I cannot get them to take less. I claim 10 dependents (even though it is just me, and 10 is the max), and don’t pay anything extra. They just take out so much an I have a few tax deductions (house, mortgage, kid), and I even have a ton of investments I earn money on yearly which have no taxes taken out, I still get a huge refund every year.

    I have talked to CPAs and tax preparers and they say “yeah – you are since parent, you are screwed.” There is nothing that you can do in my situation for that as the tax law states what must come out of your paycheck, even with those 10 deductions. So even though my tax burdeon is not that much – I know I am getting a refund every year and try to not.

    Oh well.

  4. Concerning the overwithholding….ordinarily I would advise clients (I’m a CPA) not to overwithhold because of the “free loan to the government” aspect, but really, the interest rates are so pitiful these days, you aren’t getting much if you DO keep the money (and chances are you’re going to spend it, not save it, anyway).

    So, when I know someone that has the slightest bit of money problem, I don’t hesitate for a moment to tell them: take out MORE than you will owe, and get a nice surprise at the end of the year.

  5. I think an overall plan of attack is one of the most important things to avoid money worries. You need to put a plan together and be disciplined enough to stick to it.

  6. Autopay is on of the best tools to get rid of debt for sure. The emergency fund is also a good idea but can we really trust fiat money in this environment? I mean with all the “Quantative Easings” I worry about the value of the dollar in the near future.

Comments are closed.