We often think that getting our finances in order takes some sort of grand plan. In truth, you can actually go through a series of five-minute actions that will improve your financial life. The secret is to apply a few minutes to each aspect of your financial situation on a consistent basis, which will help develop discipline and keep things from getting out of control.
Here are some examples of using five-minute actions you can take today to regain control of the various areas of your financial life.
Check Your Bills Before Paying Them
Many of us are in a hurry, and will do just about anything to save a few minutes. That includes paying bills without checking the details to make sure they’re actually correct. We assume that computers never make mistakes, and just pay all of our bills without much concern for what the amount is.
But you can easily pay too much, just for want of spending five minutes reviewing the bill. We are often told to do that when it comes to medical bills, but this should also apply to utility bills, and especially credit card bills. Both have the potential to hit you with unauthorized charges or even recurring charges.
Cell phone and cable TV bills are especially prone to recurring charges. But if you spend a few minutes inspecting the bill or use a bill-paying app that will catch these figures, you can put an end to it right away.
Balance Your Checkbook Regularly
Despite the fact that online checking is available, people still bounce checks. The main reason is failure to balance their checkbook on a regular basis. Online banking does not eliminate the need to balance your checkbook regularly. In fact, online banking is probably the reason a lot of people become very lazy about reconciling.
Even with online banking, it’s still possible to forget that you issued a check or used your debit card (not all merchants submit charges immediately). This can lead to bounced check fees, but can also cause a lot of cost and embarrassment when the people and institutions that you send checks to have them returned for insufficient funds.
It’s ironic too that online banking actually makes it easier to balance your account than ever — and yes, you can do it in under five minutes. Where you used to be limited to reconciling your account just once a month — when the bank statement came in — you can now do it virtually any time you like. Online banking means there’s no excuse to overdraw your checking account again. Are you taking advantage of this benefit?
Check Investment Fees on Your Mutual Funds
Many investors choose a mutual fund either because of its recent track record, a recommendation from a friend, or simply because the fund is popular.
But mutual funds can carry a host of fees that will cut into your future investment gains — and even make it difficult to liquidate your position should you decide you need to do so. Spending five minutes reading the fund’s prospectus will alert to what fees are involved with that fund.
Some of the fees that can be charged on a mutual fund include:
- Front-end load – This is a charge expressed as a percentage of the fund balance you pay upon purchasing shares in the fund. It’s usually 1 percent to 3 percent, and it’s the one mutual fund fee that most investors are aware of.
- Back-end load – This fee is similar to the surrender charges that are typical with insurance company investments, in that it’s charged when you liquidate your position with the fund. It’s usually 1 percent to 3 percent of the fund’s value upon sale, and typically charged only in the first one to three years that you own the fund. Many investors are not aware of this fee or forget about it after owning the fund for a year or more.
- Management and operating fees – These are fees paid to the fund’s manager, and they can be as high as 2 percent per year. The fees are a reduction in investment return, rather than a line item on a monthly statement, so you won’t know if the fund charges them or how much, unless you take the time to read the prospectus.
- 12b-1 fees – These are fees that the fund pays to the brokers who market the fund. They can be as high as 1 percent of the fund’s value.
As you can see, not only are these fees well hidden, but collectively they can add up to enough money to significantly reduce your investment returns, particularly over the long-run. A few minutes spent reading the prospectus will alert you to these fees and give you the option to go with another fund that either doesn’t charge them or charges lower fees.
Hesitate Before Purchasing and Ask Why
Most people don’t worry about overspending or making purchases they really don’t need until after the fact. But pause for five minutes to ask yourself this series of short questions:
- Do I really need what I’m buying?
- Do I need this much?
- Is there a less expensive alternative?
Doing so could keep you from overspending and living to regret it later.
Commit Your Investment Strategy to Writing
Nearly everyone has some sort of comprehensive investment strategy in their heads somewhere. But since the mind can be a slippery place, that strategy can easily break down, particularly if market conditions change.
Rather than trying to commit your investment strategy to memory, take five minutes and write it down on a piece of paper. If five minutes isn’t enough today, it will at least get you started. You can spend another five minutes tomorrow (then the next day and the next day) until you have a cohesive written strategy for how you will manage investments.
Not only will the written strategy give you a formal picture of how you want your investments to be managed, but it will also give you a roadmap that will help you weather a market downturn. This is important because memory alone is heavily influenced by emotion. A written strategy will act as a compass — a mission statement — that will keep you on track with your investments no matter what happens.
Change Your Life With 5-Minute Actions
These actions are yet another example of the saying, “An ounce of prevention is worth a pound of cure. And since most efforts at prevention take only a few minutes, you owe it to yourself to benefit from that small amount time.
Readers: what simple actions do you do each day to improve your investment and wealth building ideas?