Building Wealth How hard is your money working for you?
When you sit down and evaluate your finances, keep this one thing in mind...
It's what I think about when I'm researching how to help my readers make and save money, so they can live a richer retirement.
Is your money working as hard as it can for you? And do you have any holes in your financial boat that could easily patch up?
As a Health & Wealth Bulletin reader, you're already ahead of most average folks. But even money-savvy people fall for these small mistakes that could have huge impacts on their wallets.
Today, I'm sharing three common mistakes people make that drain their money needlessly, and how to correct them. The next time you're checking out your spending, look to see if you're making any of these mistakes.
If you avoid them, I can almost guarantee you'll be on track to save yourself thousands of dollars in the next decade...
No. 1: Never Use Cash When You Can Pay With a Rewards Card
Rewards cards are what they sound like... A merchant or card issuer will give you incentives to use its card. Depending on the cards, the rewards can be things like cash back, airline miles, or points to exchange for gift cards. As long as you pay your credit card off every month, you can treat these rewards like free money.
I use several rewards cards... For example, I like to use a card branded by one of my preferred airlines to rack up flier miles. My assistant Laura uses a cash-rewards credit card. This card lets her trade in rewards for gift cards and other items.
I like to keep cash on me for emergency purposes. But otherwise, I almost always use a rewards card.
To find the best credit card for your situation, use the websitewww.nerdwallet.com to help find the card that makes the most financial sense for you and offers the kinds of rewards you're most likely to use.
When you visit the site, it will ask you three questions: "What kind of card are you looking for?" "How do you plan to use your card?" and "What are you most interested in?" (It will offer multiple-choice responses.) Then, the site will offer up a list of cards that may fit your criteria. On the list, you'll see the expected net annual rewards you'd receive, the reward rate, the annual fee, and the current signing promo. You can also read testimonials from people who use each card.
Several years back, I took a two-month road trip around the U.S., but got a card that gave me 3% and several cents a gallon off on my gasoline purchases. That card alone saved me several hundreds of dollars that summer.
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No. 2: Never Pay DRIP Fees
Reinvesting dividends is one of the simplest ways to grow your wealth... That's why I often recommend the stocks of shareholder-friendly companies like McDonald's (MCD) that regularly pay dividends.
Before the advent of online brokerages, the best way to reinvest your dividends was directly through the company, using what's called a Dividend Reinvestment Plan (DRIP). So if you owned MCD shares and wanted your dividend reinvested – instead of receiving a check in the mail – you'd join the McDonald's DRIP. Of course, McDonald's would charge a fee for this, as much as $20. This was a good deal then... but not anymore.
Now, you have a much simpler way to reinvest... use your online broker. Once you own shares of a stock, request your broker to reinvest your dividends. The best part is that most brokers do it for free.
No. 3: Never Ignore New Banking Fees
Make sure claims of "free banking" are really free. Truly low-fee or free banking is getting harder to find. A recent comparison done by Bankrate, the online aggregator of banking industry news and information, shows 38% of banks offer fee-free, non-interest-bearing checking accounts. That's down from close to 75% in 2005.
Some typical fees include monthly service fees for low balance accounts, overdraft fees, ATM fees, and transaction fees. Bank of America even tried to impose a $5 fee to customers for using debit cards. The plan was dropped after huge customer backlash.
Some banks still offer free checking accounts with little to no minimum balance or use requirements, including EverBank, Capital One, and USAA.
Keep in mind, some of these banks mostly operate online. If you're comfortable doing all of your banking online, these banks are a great alternative to traditional brick-and-mortar banks. Online banks have fewer expenses, and many offer better rates than you'll find at a local bank.
Bottom line, use these tips and keep more money for your retirement.
- Did you miss it? Stop overpaying for these three things.
- Something different: What would keep a pro from playing at the Masters?
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
April 4, 2018