5 1/2 Tips to Immediately Improve Your Financial Situation

“I feel so much shame right now. I’m so upset with myself.”

I received this text from my wife on Tuesday, April 12. 

I asked her what happened. 

“I thought I had automatic payments set up for one of my credit cards. I must have done it wrong, because the bank closed it for missed payments. I feel like an idiot.”

I assured her that she was not, in fact, an idiot. 

It’s easy to mess up the autopay feature that banks and credit cards offer. They frequently turn these off as a result of updates, changes to terms, or even just after a finite number of payments.

But my mind did, of course, drift to the worst case scenario…

A dystopian Terry Gilliam-esque hellscape where our credit score had plummeted to the point our child was taken from us by CPS, leading to a protracted battle with debt collectors and back alley knife fights with goons dispatched by banking executives, ultimately culminating in a shootout at a courthouse where I’d gone to contest the lien against my property and get my kid back.

…

I didn’t say it was a realistic worst case scenario. 

In reality, I knew everything would be fine. 

But this event was significant for her because she had spent the better part of her 20s climbing out of a mountain of debt with nothing but a low-wage service job.

If you’ve ever had to take out a loan against your car so you could make payments on another loan that was past due, if you’ve ever skipped meals–for years–to save money, if you’ve ever had to pick up as many shifts as you can, working yourself to the point of exhaustion week after week… 

You have an idea of what she did to get her debt under control. 

So she cares a LOT about her credit score, because she earned it, and she was deeply upset that the unpaid $300 balance on a credit card is going to put a 7 year dent in it. 

“It will be fine,” I said.

However…

“It’s Time for Some Financial Housecleaning”

It is, according to the internet, Financial Literacy Month. 

So this week we’re going to take a step away from me trying to guilt-shame you into investing more and instead go over a few tips for getting your financial house in order. 

You are, after all, the Chief Financial Officer of your life. 

So it only makes sense that you make some time, once in a while, to check the pulse on your financial situation and make sure it’s still reasonably healthy (or at least not dying). 

I’m going to make an effort to give you some quick Financial Spring Cleaning tips that I use myself, because I can state for a fact that they work. 

I’m also going to try to mention some slightly unusual things I do that you won’t find in other listicles about this topic. 

Finally, I’m going to try to focus on only stuff you could theoretically start in less than a day. Financial hygiene shouldn’t require any more than an occasional spritz. 

We’ll start at the easy stuff that applies to everyone and then move on to more advanced strategies.

Ok, ready? Let’s get into it.

5 1/2 Quick Financial Spring Cleaning Tips

Tip 1: Gamify Your Financial Goals

I’ve mentioned this before, but finances are abstract and boring. So it’s often hard to have anything but a vague goal in mind. And too often, people have too many financial goals to make any successful headway. 

“Gamification” is a way to get around this. 

Gamification is what it sounds like: Turn some act into a game, with a singular set of rules, a simple path to follow, and built-in rewards along the way.

For example, instead of having the goal to “SAVE MONEY,” whatever that means, my wife and I downloaded our transaction history from our bank and looked at all of our spending for the last 12 months. 

We discovered that we were spending close to $1000 to $2000 per month on meal deliveries through Uber Eats. 

So we set a goal: Don’t order Uber Eats for a month and if we succeed, we’ll buy something we want (a set of Oculus VR Goggles). 

This was a good goal because, if we succeeded, the savings would have more than paid for the reward and then some. 

This goal was also attached to a habit we both wanted to change. (If you haven’t, I highly recommend reading Charles Duhigg’s The Power of Habit, which is all about this.)

We succeeded. Now we’re going to try for two more months. We also set another goal to keep the balance of one of our checking accounts above a certain amount, and if we do we’re going to buy a scklůrrgënsplaät from Ikea. (I think it’s a dresser?)

This is something you can do yourself. Pick a specific, small, attainable goal to accomplish in a finite timeframe. Then think of something you really want. Turn what you want into your reward for achieving that goal. 

Tip 2: Actually Look at What You Spend and How You Spend It

In the previous tip, I mentioned how my wife and I looked at our spending habits. 

I use the app Mint to track all my finances and accounts. But I wanted to see things in finer detail, so I actually downloaded spreadsheets of my transactions from my bank. 

You’ll likely discover that many things in your life that bring you joy, like a subscription to Netflix, are not a huge money suck and it might not make sense to get rid of them. 

But other stuff? Without thinking about it, some of your expenses can really add up. 

For us, it was Uber Eats. 

For you, it might be something else. 

But just as a doctor can’t treat a patient without a good diagnosis, you can’t start to improve your financial situation unless you have a good sense of what’s going wrong. 

Tip 3: Shut Down What You Don’t Use

As you undertake Tip 2, you might also discover that you have services, subscriptions, credit cards, and bank accounts that you don’t use. 

Having a credit card she didn’t use or really pay attention to is one of the things that got my wife in the trouble I described at the beginning. 

So this month, I’ve closed three bank accounts I’m not really using, all of which were accruing fees. 

We paid off all my wife’s credit card debt and shut down the ones we weren’t using. 

I’ve also been going through and canceling or pausing subscriptions we weren’t using anymore. 

You probably have something like this slowly chipping away at your finances, too. 

But even if it’s something as small as $10 per month, that’s money that you can transfer to a savings or brokerage account instead. 

And as we know, those small payments to the future version of you can really add up.

Now, let’s get into some more complicated tips you’re not going to see somewhere else…

Tip 4: Use Leverage to Save Money

Yes, I am actually recommending that you take on “debt” to get out of debt. 

But hear me out, because this is a simple way to save absolutely astounding amounts of money. 

Say you have a credit card with a $20,000 balance on it and a 20% APR. 

That means, if you’re paying about $600 per month toward that credit card, it’s going to take you four years and you’re going to end up paying about $9,200 in interest on top of your balance. 

(I used this calculator to get these figures.)

Let’s say you have a 401(k). Or you have a home with some equity. Or you have some other asset. 

You can get a low-interest loan against this asset, which you can use to immediately pay off your high-interest debt. 

For example, if you can borrow $20,000 against your 401(k), you can pay off your credit card instantly, saving the $9,200 down the line. Now you’re paying a small amount of interest…

But instead of paying money to a credit card, you’re instead paying it back to yourself. 

I’m serious. Take a look at what Fidelity says about these kinds of loans:

“Loans and withdrawals from workplace savings plans (such as 401(k)s or 403(b)s) are different ways to take money out of your plan. A loan lets you borrow money from your retirement savings and pay it back to yourself over time, with interest—the loan payments and interest go back into your account.”

I’ve used 401(k) loans twice before. Once to help me make a down payment on a house, and again to buy a stake in a private business. 

Mortgage rates, too, look like they’re going to be trending up for a while. So if you have a high interest rate on your home, right now looks like a good time to refinance your home. 

Tip 4.5: Take Advantage of 0% APR Promotions

If you don’t have an asset you can borrow against to pay off your high interest debt, I suggest signing up for a new credit card that offers a 0% interest promotion. 

Many credit cards, to attract your business, will offer you 0% interest on any credit balance you transfer over to them. And this promotional interest rate can last from several months to several years.

Doing this allows you to chip away at your credit card debt without also losing a ton of money to interest payments.

Tip 5: Pay for your Monthly Bills With a Credit Card that Earns Miles or Rewards

This is another credit card hack that has paid me some serious dividends over the years. 

Rather than paying your bills and utilities out of your debit card or checking account, pay for them with a credit card that accumulates miles or some other kind of cash-back rewards. 

Use this credit card for NOTHING else. 

Then, at the end of every month, you just pay off your credit card bill before it accumulates interest. 

You get all the good (the rewards) and none of the bad (interest charges). 

This way, you’re turning what would otherwise be an expense–your bills–into something that’s actually helping you accumulate wealth. 

Long story short, debt isn’t bad so long as you know how to leverage it, control it, and use it to your advantage. 

And if you follow the above 5 ½ tips? You should be able to knock it all out in about a day, and by the end you’ll be in a much tidier financial situation.