The new year comes with resolutions, albeit often short-lived, to be better in some way. Before the boost for success weans, you should take some time to conduct an audit of your financial products that may help you reach your money goals for the year.
How to Start a Financial Audit
Start by writing a list detailing all your financial products, including savings accounts, checking accounts, credit cards, investments, student loans, home insurance, mortgage, auto insurance, health insurance, disability insurance and life insurance. The most diligent auditors can even include costs such as cellphone plans and cable and Internet providers.
Be sure to block off several hours to do a deep dive into the current cost of each product as well as research cheaper alternatives. Then take these steps.
1. Look at fees and interest rates with a critical eye.
Banks and credit card companies aren’t nonprofits — they’re looking to milk as much money out of customers as possible, especially long-term customers. The honeymoon period with a bank or credit card can be glorious and come filled with bonus offers, 0 percent APR offers and no fees. But after a year or so — it’s back to the nickel-and-dime life.
There is enough disruption in the banking world at the moment that customers don’t need to be subjected to $12 overdraft fees, 0.01 percent APY on savings accounts and $3 ATM fees levied by banks and ATMs.
The same can be said for student loan payments. Federal loans can have more affordable payments thanks to income-driven repayment plans, and some can eventually be discharged with forgiveness programs. Those with stable incomes and financial flexibility should consider reducing the amount paid by refinancing loans to lower interest rates and making aggressive payments.
2. Double-check all automated payments.
Financial auditors need to scan all their credit card bills and monthly bank statements for automated payments. Ensure that money coming out of a checking account or being charged to a credit card is going toward necessary payments and isn’t the result of mindlessly signing up for a service in order to get a free trial and then forgetting to unsubscribe.
3. Set up automated payments.
Once all automated payments have been deemed worthy, it’s time to set some up. Automating payments and savings is the simplest way to reduce stress in your financial life and avoid missing an important bill. You should also set up payments to yourself.
It’s simple to automate savings to both retirement accounts and personal savings funds. Set up an automatic contribution to an employer-matched 401(k) to at least get 100 percent of the match. Then, route a percentage of each paycheck to go into a personal savings fund. This means the money will never be seen in a checking account and, therefore, is less likely to be poached for monthly spending.
By setting up contributions to both retirement and savings, you can remove the temptation and weak justifications for spending money instead of saving.
One tactic to ensure these automated contributions stay untouched: Keep them out of sight. If you have a penchant for moving little bits out of saving into checking, you should set up a savings account at a different bank, especially one with a decent interest rate. As a result, when logging in to see how much is in checking, your eyes won’t automatically go to your savings account, and you can avoid the temptation to move a little bit between accounts.
4. Determine if all your bases are covered.
Once you evaluate your financial products, it’s time to see if any products need to be added.
Take some time to evaluate if anything changed in the last year, perhaps the birth of a first child, adopting a pet, switching jobs or becoming a full-time freelancer. These life events may require new protections such as life insurance, disability insurance or renters or homeowners insurance.
Recommended Financial Products
Your audit is complete, but now it’s time to figure out how to switch from mediocre financial products to better ones. A few personal finance sites Bankrate, NerdWallet and MagnifyMoney can help you sort through financial products with customizable tools.
Paying down debt?
Recommended balance transfer credit card offers include: Chase Slate, Citi Diamond Preferred and Citi Simplicity.
Recommended personal loans include: SoFi and Earnest, which do soft pulls of credit reports and don’t charge an origination fee or prepayment penalty. LightStream also provides loans without origination fees or prepayment penalties, but does a hard pull to determine rates.
Looking for a better bank?
Sign up for a checking account with no ATM fees or partial ATM reimbursements as well as no monthly fees and overdraft protection without a fee. Options include: Charles Schwab, Bank of Internet USA and Ally.
Savings accounts should also be earning at least 1 percent APY, which is possible with GE Capital Bank, Synchrony Bank, Ally, Radius Bank and Barclays.
It’s Worth the Switch
It may take a little bit of time, but for the average consumer, switching financial products quickly pays off. A 2015 Pew Charitable Trusts survey found the average overdraft fee costs $35. Not to mention, if you’re banking at the Big Four — Bank of America, Citibank, Chase or Wells Fargo — you’re paying $10 or more for overdraft protection. Those with as little as $1,000 in savings would only earn 10 cents at many of the big banks, but could be earning $10 from banks like Ally or GE Capital with a 1 percent APY.
That’s easy money for taking a few minutes to switch banks. Consumers shouldn’t be paying such high fees for banking services, especially when alternatives exist. You and your money deserve better.
More from U.S. News
50 Ways to Improve Your Finances in 2016
10 Foolproof Ways to Reach Your Money Goals
10 Money Leaks to Shut Down Now
How to Audit Your Financial Products originally appeared on usnews.com
