When you think about how to save money, spend it wisely, or invest it wisely, those are the big levers to financial success and freedom. However, people often miss some crucial moments to save or make sure they are in good shape, and they are very common moments that I want to mention.
#1 Accounting – Spend
Hire an accountant. Yes, it will cost more than Turbo Tax, but an accountant is someone who can ensure that you aren’t going to get a penalty or audited. If you do, you have someone contracted on your behalf to make sure everything goes smoothly. In addition, you could be wasting money in various ways or not aware of new changes to the tax law that you could benefit from. If you own a small company they can recommend excellent payroll software companies or proper expense reports or general documentation that is helpful or your day to day and makes general account much easier and smoother without needing a full time accountant.
#2 High Points Credit Card
Get one. Go to the Points Guy and research what you need for your lifestyle. No need for travel points if you are a homebody. Then put everything on here. Now listen. If you aren’t good with day-to-day expenses you need to be careful here, but in general if you aren’t using a points card you are giving away money. Then put everything on here. Figure out how to put every little expense here. Especially, recurring home expenses like gas, electric, internet.
#3 Your Mortgage
This is typically a one-time expense or a once every so often expense so make sure you understand every detail, every expense, and compare compare compare mortgage rates. You might look at a $100 fee on a $500,000 loan and think it’s nothing, but if you are mortgaging that amount that $100 could end up being $300 over the life of the loan. Agora can help find the cheapest origination fees. Nerdwallet can find the best rates. I know I know, you are tired from looking at houses and home inspections and negotiating and earnest money and closing costs…but pay attention. The process is set up to be very easy to add more and more dollars to the process, so dig in and fight or put it on the seller.
#4 Pay Your Mortgage Off Early
Look. This doesn’t have to be suffocating. You don’t need to pay it off in half the time. However, if you make just one extra payment per year, you will shorten your loan by 7 years. So if your payment is $2400 just make it $2600 and don’t think about it again. If you have more, pay more. Depending on the loan type and length and the like, you typically will pay about 3x the amount of the loan if you take it to term. So your $500k house will cost you $1.5 million–just in the financing, not the home improvements–over the life of the loan. Certainly, you want to get as much money into the market as you can, but you will have more money to put into it later if you aren’t paying 3x. You don’t need a special loan to do this, just add more principle to the payment each month.
#5 Pay Your Car Off Early
Same as with mortgage. Take the longest payment plan that doesn’t increase your rate, get the smallest payment they require, then pay it off fast. Car rates are typically about 2x what mortgage rates are, so you won’t pay 3x over it’s life, because their lives are shorter, but you want to pay the least interest possible. The reason for the smallest payment, is so that around Christmas or when you want to take a vacation, you can back off for a month without taking a penalty.
#6 Remember You Don’t Have Enough
This philosophy came from my high school buddy’s dad. I’m not sure if he knew what he was talking about or was just being cynical, but he usually had some wise advice, and he said this to us once and it stuck. You don’t have enough. This works at any age. It’s really hard to truly convince yourself that you have enough. Certainly some people actually do, but even they think they don’t. If you are comfortable and feel like you do, you don’t. Or at least convince yourself that you don’t. This will keep you looking at each expense and lifestyle choice through the lens of long term security. It will keep you straight and narrow.