Every year, nearly 750,000 Americans go bankrupt. In fact, tens of millions of Americans will go into bankruptcy at some point in their lives. Their debts will overwhelm them and their credit will get nuked.
These are depressingly large numbers. But you can avoid being one of them. People who do these five things are much less likely to ever face bankruptcy.
1. Simplify Your Budget
If you really want to manage your money better, try creating a budget.
Ewww, gross. We know. But it’s important to take a good look at what you’re spending and where you can cut back.
If you’re not sure where to even start, we favor the 50/20/30 budgeting method for its simplicity — and flexibility. Here’s how it works:
- 50% of your income goes toward essentials.
- 20% goes toward financial goals.
- 30% goes toward personal spending.
The key is to accept you can’t create the perfect budget in an hour. You’ll have to experiment to find what works best for you.
2. Get Out of Debt Faster
Getting trapped in a cycle of high-interest debt can be one of the quickest ways to end up filing for bankruptcy. A lot of us are being crushed by credit card interest rates north of 20%.
Your credit card is getting rich by ripping you off with these insane rates, but a company called Fiona could help you pay them off tomorrow.
Here’s how it works: Fiona will match you with a low-interest loan you can use to pay off every credit card balance you have. The benefit? You’re left with just one bill to pay every month, and because the interest rate is so much lower, you can get out of debt so much faster. Plus, no credit card payment this month.
Fiona won’t make you stand in line or call a bank. And if you’re worried you won’t qualify, it’s free to check online. It takes just two minutes, and it could save you thousands of dollars. Totally worth it.
3. Invest 15 Cents In the Stock Market
Yeah, we know what you’re thinking: 15 cents? How’s that going to do me any good?
Well, that leftover change from your morning coffee and evening grocery hauls could turn into more than $1,000.
That’s what happened when Penny Hoarder reader Jeremy Kolodziej opened an investment account with Acorns. The app’s round-up feature bumps each of your purchases up to the nearest dollar and puts the spare change into the stock market, which helped him mindlessly save $1,076 in about 20 months.
“It’s a virtual coin jar,” he says. “You don’t even think about it.” He used the spare change to pay for two vacations.
Plus, Acorns invested the money for him, allowing him to grow his savings — without studying stock prices or managing trades.
The app is $1 a month for balances under $1 million, and you’ll get a $5 bonus when you sign up.
Building some extra cushion through small investments can do wonders for keeping yourself out of financial trouble.
4. Make Sure You’re Not Overpaying
Making sure your spending is in control is an important factor in maintaining your financial footing. Unfortunately, there’s no getting around certain expenses — like car insurance.
But one way you could save money is by shopping around and comparing rates at least once a year. Most of us don’t do that, according to numerous studies, although who wouldn’t want to lower their own rates and pay less?
So, just like you compare the prices of flights, shoes and laptops before purchasing, why not compare car insurance?
The Zebra, an online car insurance search engine that offers “insurance in black and white,” compares your options from 204 providers in less than 60 seconds.
We talked to Artie Januario, who found new insurance through The Zebra and managed to knock off $30 a month — or $360 a year — from his premium.
5. Dodge Bank Fees — and Make Your Money Work for You
There’s no law that requires you to bank the old-fashioned way — at a brick-and-mortar bank with a low interest rate on your savings.
It’s time to move your money into the 21st century. An app called Varo Money combines traditional banking tools with modern technology to help its customers become financially healthy.
Here’s the best part: Pair your checking account with a savings account where you’ll earn 2.12%* APY (Annual Percentage Yield) with the opportunity to earn up to 2.80% APY on up to $50,000 in savings. To qualify for the 2.80% rate, you’ll need to have payroll or government direct deposits of $1,000 or more and authorize at least five purchases with your Varo debit card each month.
That’s 31 times — repeat, 31 times — the average savings account, based on a 0.09% average reported by the FDIC.
Varo goes easy on the fees, too. You won’t pay fees at more than 55,000 ATMs worldwide.
Keep Your Finances in Good Shape
This is all about finding achievable ways to better yourself financially and put more money in your pocket.
Obviously, make sure you’re contributing to a regular old 401(k) or IRA while you’re out there making all these smart, savvy financial moves.
Set goals. Avoid traps. Take the long road, and you’ll win a little peace of mind.
Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder.