If you’re resolving to accomplish anything this new year, chances are that thing has to do with money–namely, spending less and saving more. It probably also has to do with settling bills for those times you spent money you didn’t have.
A recent study found that the average U.S. household is carrying almost $7,000 in credit card debt (meaning they’ll have to fork over almost $1,000 of interest each year). Kimberly Palmer, a personal finance expert at NerdWallet, helps you get back on track and meet your financial resolutions.
1. Get a Balance Transfer Card
If you’re carrying credit card debt, consider a transfer. “Interest rates are rising right now, so it’s really useful to lock in a balance transfer card for the new year before rates go up more,” says Palmer. These cards allow you to transfer debt from your old credit card – and with a zero percent introductory APR.
That means if you can meet the minimum payment each month during the 12-15-month introductory period, you can pay off your credit card debts without accruing more interest. It may sound too good to be true, but it’s the real deal. Remember, though, stick to a strict budget by using cash or debit cards. You don’t want even more debt piling up.
2. Eliminate Banking Fees
“A lot of people don’t realize that they are paying monthly fees just for their banking,” notes Palmer. These include monthly maintenance fees, overdraft fees, or fees for using out-of-network ATMs. But the real kicker is the minimum balance. Just by failing to maintain a minimum, the average person pays upwards of $12,000 in fees over his lifetime, says Palmer.
Avoid banking fees altogether. Look for a free checking or savings account (but make sure it’s labeled “FDIC insured”), one where you’re earning a high yield (2 percent or higher). So $10,000 in a free savings account at a 2 percent rate, means an extra $200 for you every year. Take advantage of those rising interest rates and earn more on your money in the bank.
The average person pays upwards of $12,000 in banking fees over his lifetime
3. Follow the 50, 30, 20 Rule
For the most part, saving money is all about budgeting. Palmer recommends a basic breakdown: 50 percent for your essential needs (housing, food, etc.), 30 percent for your wants (going to the movies, going out to dinner, etc.) and then 20 percent for future planning (debt payments, savings, etc.).
Try cutting back on those want costs – like taking taxis and eating out. And (we know it’s hard) subscription services–like Netflix or Amazon Prime. Some areas you definitely don’t want to cut back on, though–like your emergency savings (which should be six months’ worth of living expenses) or your retirement contribution.
4. Re-shop Your Auto Insurance
Turns out, that little gecko might actually be right: fifteen minutes might help you save 15 percent. “It’s actually pretty surprising how few people shop around for their auto insurance,” says Palmer “In many cases you’re paying much more than you need to.” How much more? On average, just over $400 a year! It only takes a few minutes to go online, enter your information, and see where you stand on getting a lower rate. So don’t let that excessive bill creep up on you again next year, mate.
5. Put Money Away
Creating long-term saving success means creating saving habits. Try to automatically transfer money into your savings account each month, advises Palmer. Or after each paycheck. You can do this through your bank or through your work’s direct deposit. So if you put in just $40 for every bi-monthly pay cycle, that’s almost $1,000 of savings at the end of the year. Make saving second nature and future New Year’s resolutions will be a cinch.