Money Management

7 Money Hacks Only 1% of People Know

When you think of what differentiates the rich and the poor, what comes to mind is the size of their houses, the cars they drive, and, of course, how much money they have in the bank.

These are all logical answers. However, what truly separates these groups of people is their knowledge on how to best manage their money, and in this post, I will share with you seven money hacks that only 1% of people know, so you can start to manage your own money more effectively.

Ask the average person, and they will tell you that managing their finances is a chore that they would rather do without, and sadly, some people forgo managing their money altogether. The reality is that most people drudge through managing their finances, from tracking their savings to remembering to pay their electric bill.

Well, you would assume that the rich spend more time managing their money than the average person. The truth is that, in most cases, they spend way less time on these activities, allowing them to focus on activities that will only further increase their wealth.

7 money Hacks that will help put you in the best financial position of your life

Here are seven money hacks that will help organize your finances and put you in the best financial position of your life.

1. Open Up The Right Accounts

Open Up The Right Accounts
Open Up The Right Accounts

The first step in building an automated financial management process is opening up the right accounts. Whereas most people operate with a single checking and savings account, this strategy isn’t ideal if you want to make managing your money as simple as possible.

You see, if you only have one or two accounts open, you’ll have to start moving money around every month and this can be a hassle. Instead, you will want to open up multiple accounts that will each have their own designated purpose.

So what accounts should you open?

Besides these standard checking and savings accounts, you will also want to open up an emergency fund and an investing account so that all your financial categories are covered.

2. Setup Automated Deductions

Set Up Automatic Deductions
Set Up Automatic Deductions

Our next money hack is to setup an automated deductions. In the United States, eighty-two percent of workers are paid via direct deposit, and, if you make up this majority, then you were definitely able to leverage the power of automated deductions.

To be frank, one of the best things I ever did for my finances was set up automated deductions for my pay with my employer. In essence, what these deductions allowed me to do was divide up my paycheck and send portions of it into their respective accounts.

When I initially set up this process, I allocated 10% of my after-tax income to my savings account, 10% to my investment account, and 5% to my emergency fund. As they have earned more money and have fully funded my emergency fund, I have now switched to sending 15% of my income into my investment account.

Once you begin to employ this technique in your own financial management plan, you will realize that over time you will need to allocate your income where your money can be best used. I think this automation technique works for so many people for two main reasons.

  • First, it allows you to pinpoint exactly how much you want to save and invest. As long as you set up the deduction percentage properly, you can rest assured that you’ll be putting the correct amount of money into their respective accounts every single month.
  • Second, using automated deductions removes the need to constantly think about your finances and, in my case, allow me to focus on other important things like improving my skills in order to make more money.
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So, in order to streamline part of your finances, you should definitely be leveraging the power of automated deductions.

3. Automate Bill And Credit Card Payments

Automate Bill And Credit Card Payments
Automate Bill And Credit Card Payments

Number three on our money hacks list is automating bills and credit card payments. Paying bills is a drag, but trying to remember to make timely payments only further adds to the pain.

As such, you should always use the power of automation to ensure your bills get paid in full and on time. There are two ways you can set up automated bill and credit card payments.

  • The first is to have creditors automatically draw out the bill balance every month from either your checking or savings account. Since you probably already have one of these two accounts open, all it will take is a few calls to your service providers, and the withdrawals will start on their own.
  • The second option is to open up a bank account specifically for bills. This approach has both pros and cons.

    The benefit of this approach is that it makes reviewing your bills on a monthly basis easier since the account has been set up strictly.

    However, the con is that you can risk going into overdraft and incurring banking fees because if the creditor goes to pull a payment and you don’t have adequate funds in that account, your bank will cover the withdrawal amount and then charge you a fee for doing so.

This likely won’t happen when routing the deduction from your savings account, since that’s where a large chunk of your free cash will be, but it doesn’t mean that you should forget about using a bill payment account.

To mitigate this risk, when you first open your bill payment account, put in one to two times your normal monthly expense amount inside the account, while ensuring that you also have set up regular payment deductions with your employer to cover the ongoing withdrawals.

4. Leverage expense tracking

Leverage Expense Tracking
Leverage Expense Tracking

I am a big advocate of tracking your expenses manually, as I believe it makes you a more conscious spender. However, I realize this method isn’t for everyone. Luckily, there are numerous apps out there that can keep track of all your expenses and require no effort on your part.

For instance, the app Mint allows you to connect your debit and credit cards so that you can see changes in your spending balances and bank accounts in real time. This means that there is no need to write down those five dollars you spent on coffee or the cost of drinks at the bar that somehow you can’t remember.

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Security and non-connected spending are the only two caveats when it comes to relying on automated tracking software. Like all forms of technology, finance apps are susceptible to hacking and information theft, and while apps like Mint have a great track record of keeping your information safe, you need to be aware that there is still some risk that your personal information could be stolen.

The second caveat to this money management technique is remembering to track your non-connected purchases. For instance, the app will track all debit and credit charges in real time, but when you pay with cash, this tool starts to lack effectiveness. Well, you should be charging everything to your credit cards to receive either points or cash back.

There are times when paying with cash is the only option available, and it’s important to keep tabs on where this money goes.

5. Monitor Your Credit

Monitor Your Credit
Monitor Your Credit

Next money hack is to monitor your credit. Money coming in and going out is obviously an important aspect of your finances to have under control but another critical aspect is your credit.

When most people think of credit, they think of applying for a mortgage, and there’s no doubt that credit plays a big part in the home buying process. However, whether you realize it or not, it affects numerous other aspects of your life.

First, as you know, having bad credit can limit your ability to obtain a mortgage, but it can also impact your housing situation in a much broader way.

Most landlords run credit checks on their tenants, and not having good credit may mean getting refused for the property you want to lease. Besides affecting your living situation, it may also impact your ability to join the 21st century and have a phone.

When you sign a phone contract, the contract relies upon your monthly payments to cover the cost of the phone, and if you have a poor history of repayment, then you may find yourself without a phone.

What most people don’t know is that having bad credit can also hurt your ability to make money? It is becoming more and more common for employers to run credit checks on their prospective employees, and you wouldn’t want to lose that on your dream job, just because you neglected your credit.

Moreover, when you have a good credit, you can usually get the best interest rates on the loans and credit which many people then draw from and put into the stock market.

However, if you can only get loans with inflated interest rates, then again, you will have to give up another way to increase your income. So how do you avoid these credit pitfalls and monitor your credit more diligently?

Well, services, like Credit Karma, allow you to not only track your credit, but they also give you suggestions on how to improve it and, in some cases, go to work for you to challenge the negative marks in your credit history. Plus a lot of credit services have apps that can be very useful for a few reasons.

First, having a credit score app will allow you to check your credit health, which is an obvious benefit, but it will also keep the thought of financial credit in the forefront of your mind, which is an added bonus.

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So, in times where you may be tempted to rack up a little charge on your credit card, and increase your credit utilization ratio, which negatively impacts your credit score, you will instead think twice and maintain your pristine credit record. So it’ll help you avoid those terrible situations I just explained.

6. Eliminate Automated Spending

Eliminate Automated Spending
Eliminate Automated Spending

I know we are trying to make our finances simpler by automating what we can, but one of the exceptions to this process relates to automated spending. Credit cards and housing bills aside, credit cards have made it too easy to sign up for monthly services, and many of these services deserve to be scrutinized monthly.

For instance, if you have an automated payment setup for your gym membership and can’t even remember the last time you lifted a weight, then it’s worth assessing this expense value on a monthly basis. I too have fallen victim to the automated payment trap.

For the last year, I’ve been paying for a Netflix subscription that I probably used a handful of times. Needless to say, I wasn’t getting my money’s worth and that hundred dollars would have been better spent on a nice night out or remaining in my bank account.

Therefore, for all automated spending outside bill and credit card, related expenses, put their payments on manual mode and review them monthly to ensure you only spend the money you need.

7. outsource tax Services

outsource tax Services
outsource tax Services

Besides the word budget, the next worst financial term that makes just about everyone cringe is tax.

The process of paying tax is not only a costly one, but can be an administrative burden If you let it be. Tax software, like Turbo Tax, has become very popular as it allows people to file their own tax returns and save on the cost of a tax accountant.

I may be biased because I am an accountant myself, but I truly believe it’s worth the money to outsource your tax filing responsibilities for two main reasons:

First, hiring a tax specialist can save you hours of trying to figure out what forms to fill out and what documentation you will need to support your claim.

Moreover, trained tax professionals have the experience and knowledge to be able to maximize your return.

Even with my tax knowledge, I had tax specialists find ways to lower my taxable income and maximize my return. And while I was reluctant to pay for tax help initially, I easily recovered the cost with the extra tax savings the individual was able to identify.

Therefore, besides being able to ensure you submit an accurate and complete tax return, outsourcing your filing will save you the hassle of dealing with taxes, and I think that’s something we would all love to avoid.

I hope these 7 money hacks helps you to join the only 1% of people who knew about it.

FAQs

What are money hacks?

Money hacks are techniques that can be used to save money or make more money.

Do money hacks actually work?

Yes, money hacks do work if you choose the right techniques and apply them correctly where needed. Not all money hacks will work for everyone.

Yes, money hacks do work if you choose the right techniques and apply them correctly where needed. Not all money hacks will work for everyone.

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