Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it. —someone
30-day challenges
We are pleased to continue our 30-day challenge series. Past challenges can be found here.
This month's 30-day challenge is to Check your percentages! There are two different challenges this month depending on your position in the "How to handle $" list of steps.
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If you're on steps 0 through 3, do the first challenge. That's you if you're:
- Building an emergency fund
- Paying down expensive debt (interest rate over 10%)
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If you're on steps 4 through 6, do the second challenge. That's you if you're:
- Saving for retirement
- Investing for other long-term goals
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If you're not sure which challenge applies best to you (e.g., not saving for retirement yet, but don't have credit card debt), feel free to pick and choose from either challenge.
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Bonus points: do both challenges!
First challenge
Your challenge is to pursue improving your interest rates. You've successfully completed this challenge once you've done 2 or more of the following things:
- If you have debts, compile information on each debt including the type of debt, the amount owed, and the interest rate. Also find out your credit score and review your credit report.
- If you have credit card debt that you are carrying from month-to-month, call up your credit card company and make a request to lower your interest rate.
- If you have enough money in your checking account to cover at least one month of expenses, start building a second tier to your emergency fund by opening a high interest savings account that pays at least 1% interest rate and deposit $50 or more into it.
- If you already have a savings account, research your options and consider moving your savings account to a bank paying a higher rate. (The wiki has some common recommendations.)
Second challenge
Your challenge is to audit your investment expenses and emergency fund. You've successfully completed this challenge once you've done 3 or more of the following things:
- Request a fee schedule/statement from your financial advisor (if you have one).
- Request a fee schedule/statement from the administrator of your 401(k) or other employer-sponsored retirement plan (or find out your fees by logging into your plan account).
- Look through recent statements to see if there are any charges you don't recognize.
- Calculate your blended expense ratio.
- Evaluate your emergency fund and adjust it accordingly if your expenses and/or risk tolerance have changed. If you raised it, make a plan to meet your new e-fund goal sometime in the future.
The idea here is that you might uncover some expenses you didn't know you were paying, which in turn might give you a reason to make a change for the better. The impact of costs on investments can be depressing. If you find a clean slate, sleep well knowing that your money is working for you first and your investment company second. Another way to sleep well is to ensure you have enough set aside for emergencies. You may have set up your emergency fund goal and met it a number of years ago and perhaps times have changed for you. It's a great time to ensure you have an appropriate amount set aside for your expenses and risk tolerance.
More information on investment expenses:
- General advice on investing be found in our Investing wiki page.
- Specific advice for employer-sponsored plans is in our 401(k) fund selection guide.
Challenge success criteria
You've successfully completed this challenge once you've done 2 or more of the items from either the first or second challenge. You may substitute an item from the extra credit if you run out of items that apply to your financial situation.
Extra credit
- Watch these videos: Start with a Sound Financial Lifestyle and The Bogleheads Investment Philosophy.
- Get a headstart on gathering your required tax documents for this year.
Submitted February 01, 2019 at 08:09AM by AutoModerator http://bit.ly/2S1krAp
