Six Steps to Financial Peace of Mind

These are just some things that have worked for us. They may not work for everybody. This is  not to say we do things perfectly, we still sometimes fail when it comes to finances.

Here’s a list of things I recommend doing:

  1. Create an emergency fund. Save up 3 months worth of living expenses. Save it in a high interest bearing account (see below). It’s not easy, but this money should only be used in emergency situations. Not when things go on sale, not when it’s time for vacation – emergency – if you lose your job, if you’re hit with unexpected medical bills, etc. You may not ever use this cash, but you’d be amazed at the peace of mind it brings (and the interest it earns).
  2. Don’t use credit cards. With one exception (see below), credit cards should be off limits. If you have to buy something with a credit card (and stretch payments months into the future) you can’t afford it. Buy everything with cash. If it’s worth buying, it’s worth saving up for.
  3. Get a “Cash Back” credit card and pay off every month. We use Blue from American Express. It gives you cash back on certain purchases. Up to 2% on groceries and gas. We use it for 85% of what we buy, even some bills. Once a year we get a credit to our account for a few hundred bucks. Free money, people!
  4. Get a High-Interest Savings account. Interest rates for savings accounts have come down a bit in the last year or two, but they still blow your bank’s standard savings account out of the water. We use ING Direct. Though competitive, their interest rate is not the highest you’ll find, but their website is great. You can also create separate accounts and label them for specific purchases. (Let me know if you want to create an account with ING. I’ll send you a referral code and we both can earn extra cash.)
  5. Track your spending. This is a no brainer. You can’t control something you don’t track. This should be step one. Even if you don’t yet start budgeting, just by simply tracking every dollar spent will you start to subconsciously start to be a bit more frugal. Same thing goes with calorie intake. Even without dieting, by simply writing down every bit of food you eat, you’ll soon find yourself controlling what you eat. Managing money and watching what you eat are very similar.
  6. Use an online money management tool like Yodlee or Mint. Many sites are popping up that allow you to pull together all of your financial accounts. We use Yodlee MoneyCenter. I log in and see an overall snapshot of our financial situation. One site shows me the balance of the many accounts I own, my upcoming bills, recent transactions, and much more.

Bonus

Budget. We’ve found YNAB (You Need A Budget) quite useful for budgeting and tracking our spending. We’re far from perfect in this area, we’ve started and stopped many times, but we still see this as valuable. It’s a piece of software and a fresh take on budgeting. Check it out.