Do you own a dog that can’t do any tricks? Chances are it is because when you were a kid, you also had a dog that couldn’t do tricks. Teaching dogs how to do tricks is usually passed on from generation to generation. How we handle money is also passed on from generation to generation.
Just like an untrained dog, having money around the house that does not know any tricks can be a bad thing. No need to worry — the same tricks you teach your dog can also be used with your money. Here are seven useful money tricks.
Some people think that any extra money should be invested so it will earn more interest. This may be true for retirement savings, but not for your emergency fund. Every household should have a goal of having three to six months of expenses set aside in a savings account for the unexpected, such as job loss or medical surprises. This money has to be readily accessible because you never know when an emergency will happen. You need to let it sit in a simple savings account or money market account and not in a less liquid asset such as real estate or collectibles.
Using a credit card can be like letting a dog loose without a leash. Some people will go where they shouldn’t and bring home things they may later regret. You can command your impulse purchases to heelif you use a set monthly cash budget for spending categories such as food, entertainment, and clothing. Telling a dog to heelcan keep it out of trouble. Using a cash envelope in the store can do the same thing for your money.
If you have been working at a business and contributing to a 401(k) retirement plan and then leave the company, there are three things you can do with the money. One, you can leave it where it is and let your old employer’s plan continue to manage it. Two, you can withdraw the money and pay taxes and penalties. Three, you can roll overthe money to an IRA that is not tied to your old employer’s business. A roll overis the most popular choice because it keeps you in greater control without giving up the tax benefits. It would be wise to check with a professional to make sure you make the best choice for you.
In many countries there is no set price for a product or service — the buyer and seller come to a mutual agreed upon price. In countries like the United States, sellers often set prices to maximize their profits. You are missing out on keeping more of your own money if you don’t take an attitude to beg for a better price when you have a chance. This won’t work on every type of purchase, but many sellers want your business and you may be surprised how many will drop the price a little if it means keeping you as their customer.
When it comes to handling money the KISS advice (Keep It Simple Sister) is good advice to follow. Don’t try any tricks with your money that you don’t understand. Many people fall for get-rich-quick schemes, fraudsters and high-risk investments because the details are more complicated than they understand. Too good a deal is almost always too good a deal and you could end up kissing your money goodbye.
Apart from your emergency fund, which you have taught to sit, you need to teach the money you save for retirement to fetch a return. Compound interest takes time and you don’t get any if you keep your retirement savings in a safe under the floor. That’s not how successful investors like Warren Buffett and Peter Lynch did it.
The majority of adults in the United States do not have a will, leaving the courts to decide what happens to their money when they pass away. Unless your asset situation is complicated, a will for the adults in the household should cost no more than a few hundred dollars and maybe even much less. A will gives you a chance to tell your money how to play dead, so you don’t leave your family stuck with a mess.
Does your money know all seven of these tricks? If not, pick one trick at a time and train your money to do this trick. Once your money has learned all of these tricks, you can rest and wag your tailfor a job well done, and don’t forget to train your kids to train their money. One day, when your children grow up, they will also use these same money tricks.
For tips on what to do when you’re not making ends meet, click here.