13 Ways to Avoid Unlucky Losses
This Friday the 13th, we want to point out some simple ways to avoid losses and improve your overall financial well-being.
1. Face Your Financial Fears
Fear can cause us to avoid thinking about many financial decisions: goals, debt management, insurance, etc. Finances are overwhelming, especially if you feel helpless, so it's understandable that so many people have anxiety about their financial lives.
Unfortunately, avoiding finances can cost you hundreds or thousands of dollars over time, particularly if you have student loans or other types of debt. So, take the first step towards facing your financial fears!
2. Prioritize Your Needs Over Wants
"Basic needs" typically consist of things like housing, food, and transportation. However, it's important to note that our needs are determined by our values and/or responsibilities. SMMC typically defines a "need" as something that could jeopardize your health, safety, or livelihood if you went without it.
Obviously, it's important to define what you feel are needs and wants so that it is easier to make difficult choices if you get to a point where you need (or want) to cut your costs.
3. Set S.M.A.R.T. Goals
Speaking of goals, setting S.M.A.R.T. goals can help give your dollars direction & purpose. There are many versions of this acronym, so you should use the one that works best for your goal(s):
- S = specific, significant, stretching
- M = measurable, meaningful, motivational
- A = achievable, agreed upon, attainable, acceptable, action-oriented
- R = realistic, relevant, reasonable, rewarding, results-oriented
- T = timely, time-based, time-bound, tangible, trackable
Don't be afraid to update & re-prioritize your goals as your values and/or responsibilities change.
4. Build a Budget (That Works for You)
Whether you call your strategy a budget or a spending plan, it's important to figure out what works best for you. You can start with a simple template, like the ones listed below:
Or, you can learn more ways to build your own with our Spooked by Spending Plans module in the Spend course or the SMMC web page on Budgeting.
5. Track Your Spending
Once you make a plan (or budget), you need to implement and track your progress. The best way to do that is by tracking both your spending and saving behaviors. You may find that you routinely spend more, or less, than you planned in your budget. Your expenses could be:
- Fixed - the same amount each month (or budget period)
- Flexible - amount varies; could be fixed or occassional
- Occassional - timing varies though amount could be fixed or flexible
Tracking your spending can help you look for ways to cut costs or avoid repeat late fees since you can make adjustments based on your spending behaviors and needs.
6. Monitor Your Financial Accounts
Similar to tracking your spending, monitoring financial accounts can help you avoid losing money to things like fees or identity theft.
Fees that may catch you by surprise could include:
- ATM Fee
- Checking Account Fee
- Inactivity Fee
- Minimum Balance Fee
- NSF or Returned Check Fee
- Overdraft Protection Fee
- Statement Fee
Identity theft has many forms, but many people associate unauthorized charges on their financial accounts with identity theft. Credit cards have more legal protections than debit cards or e-checks when it comes to dealing with unauthorized charges, but remember to monitor both. Learn more about ways to watch for identity theft & fraud in our Protect course.
7. Use Insurance to Cover Your Assets
Insurance is one of the best ways to protect yourself against financial losses. There are many types of insurance to choose from. For example:
- Renter's insurance
- Car insurance
- Health insurance
- Disability insurance
- Life insurance
- Dental insurance
- Home owner's insurance
- And many more
You can learn more about how to cover your assets with insurance in our Protect course, or you can register for our upcoming webinar, Health Insurance Dissected, to learn about health insurance specifically on April 7th at 12 PM CST.
8. Look for Cost-Cutting Opportunities
Cutting costs is a great way to limit your losses, both in terms of money and time/opportunity cost. For example,
- Comparison shopping can help you save on things you need (e.g., food, clothes, etc.)
- You can look for free or reduced-price options to fulfill your needs (e.g., carpool, bus)
- Step-down high-cost behaviors over time to reduce spending (e.g., coffee, eating out)
It may take a bit of a mindset shift or a big behavior change to make these cost-cutting options work for you, but that's why framing your choices as a trade-off between immediate wants and long-term goals can be so powerful!
9. Make Sustainable Choices
There are many ways to make sustainable choices that can limit your financial losses:
- Reducing plastic waste can help reduce costs of buying bottled beverages
- Using LED bulbs to reduce energy consumption can save on utilities
- Biking, walking, or riding the bus instead of driving can reduce parking, fuel, and other car-ownership costs in addition to reducing emissions
Each university has resources dedicated to sustainability for you to get even more ideas, especially in preparation for Earth Day & Week celebrations in April!
10. Review Your Credit Reports Annually
Your credit reports contain your credit history, including information about debts, payments (both late and on time), as well as other publicly available information. They do not contain your credit scores, but it is extremely important to review your credit reports every year for accuracy from each of the 3 main credit bureaus: Experian, Equifax, and TransUnion.
Inaccurate information on your credit reports could cost you in many ways, like:
- Higher interest rates on credit-based products (e.g., loans, credit cards, etc.)
- Higher rates for auto, home, or other types of insurance
- Compromised career opportunities (in some states)
- Denial of an apartment lease
- Identity theft
The only place you can get all 3 of your credit reports for free every 12 months is annualcreditreport.com.
11. Maintain an Emergency Fund
A solid foundation for any financial plan is to have an emergency fund. Emergency funds can be used for suprise expenses (e.g., a flat tire) or opportunities (e.g., a spontaneous concert).
Having money set aside for these types of expenses can save you money compared to borrowing with credit.
If you're not sure where to start with establishing an emergency fund, think about the fact that 40% of Americans between 18-65 couldn't cover a $400 surprise expense without borrowing or selling something they own according to the Report on the Economic Well-Being of U.S. Households in 2017.
12. Determine a Debt Management Plan
If you have or need to take out student loans, the earlier you have a debt management plan, the more money you could save. Debt management plans can also be used for:
- Establishing credit history
- Repaying credit card debt
- Managing multiple types of debt
To get started with a student loan debt management plan, you can register for our upcoming webinar on Student Loan Repayment on April 22 at 12 PM CST.
13. Be Flexible
Your life, resources, responsibilities, values, etc. can and will change throughout your life. Being flexible with your financial plan can help you avoid both stress and lost opportunities. Feel free to make changes to your plan.
As more people rely on you, or you rely on others, you'll just want to have open and regular conversations about how financial plans, goals, and needs may change.