By David Pitt
Is there a shadow cast over your financial life? Maybe that’s because you’re stuck in a seemingly endless cycle of paying too much in taxes, fees, and penalties.
Many of us are like Bill Murray’s weatherman in the movie Groundhog Day, when it comes to managing our own money. We’re searching for a way to break through repeating the same financial mistakes and reckless habits.
The good news is that greater self-awareness can help. Just as it enabled Murray’s arrogant forecaster to escape reliving the same day in Punxsutawney, Pa.
A useful first step is to track your spending.
“It’s an onerous, obnoxious task,” said Wayne Copelin, a financial planner at Copelin Financial Advisors in Sugar Land, Texas, “but it’s real hard to identify bad habits unless you know what your habits are.”
Write down your spending for three months and keep receipts, even for the smallest of items. This will help you better understand what’s draining your wallet. And you’ll be able to spot potential problems, like unnecessarily exposing yourself to ID theft.
If you’re ready to liberate yourself, consider these commonly repeated financial mistakes, and some ways to kick the habit:
•Paying ATM fees — Tracking your spending will help with this. Too often people pay an ATM fee out of convenience but don’t keep tabs on how often they’re throwing away a few dollars.
Plus, ATM fees rise every year. Across the country they hit an average of $2.33 per transaction last year, according to Bankrate.com.
If you regularly find you’re not near an ATM operated by your bank, consider taking out enough cash for a week. You can leave some at home so you’re not tempted to spend. This may also help you stick to a budget.
Also take advantage of getting cash back from your debit card when you’re making a regular purchase like groceries. This removes the need for an ATM, but be sure to keep track of these withdrawals.
•Carrying a credit card balance — A balance of a few thousand dollars may not cause undue anxiety, yet tack on an average interest rate of 14 percent or more and you’re talking about a burden that will last for years.
Use the calculator at Bankrate.com to estimate how long it will take to pay off a balance making only minimum payments, tinyurl.com/rbj9fz. The answer may snap you out of complacency. You can also enter different payments to create a plan to pay off your debt faster.
The economy is improving so you may be receiving more credit card offers. If you’re paying a significantly higher interest rate than what’s being offered, consider a balance transfer. But scrutinize when the introductory rate will lapse, and factor in the balance transfer fee. This calculator at CreditCards.com can help you determine your potential savings, tinyurl.com/4f8f38j.
•Shopping online with a debit card — It’s important to choose your plastic wisely when shopping online. It’s smarter to use a credit card because it will offer additional consumer safeguards, such as return protections.
If you use a debit card, a thief can potentially start withdrawing money from your account right away. And this may only lead to escalating problems. For instance the zapped balance might not cover scheduled payments, and result in overdraft fees. So if you have the money in your account, make an online purchase with a credit card and immediately pay off the balance to avoid interest charges.
This potential hazard underscores the need for a separate emergency fund. If you are the victim of fraud it may take some time for the bank to sort out what happened. Maintaining a separate account will ensure access to funds to get by.
No matter how you use your debit card, it’s important to check account balances frequently to spot any irregularities as soon as possible.
•Failing to be tax savvy — Cutting your tax bill requires year-round attention. For instance, a threshold question is whether to itemize your deductions and that requires some recordkeeping.
For 2010, taxpayers can itemize or choose the standard deduction allowed by the Internal Revenue Service, which is $5,700 for single filers or $11,400 for married couples filing jointly. If you’ve kept good records you may be able to save a sizeable sum by itemizing significant expenses for medical care, mortgage interest and taxes, or charitable contributions.
Also if you’re an e-filing holdout, realize that software can help you save money. Tax preparation programs ask questions to obtain data that should help you maximize your savings. For example, if you made an energy-saving home improvement last year, tax software can help you determine if you qualify for a tax credit.
•Not getting ready for winter — Don’t wait for a barrage of snow to reveal the draftiness of your home. Instead conduct an energy audit to determine if additional insulation, new doors and windows can save you money. It may be too late for this winter, but insulation also keeps cool air in during the summer, so think ahead.
Also, don’t forget about the damage winter weather might cause to your home or car. Winter storms are the third-largest cause of property damage, totaling about $1 billion annually, according to the Insurance Information Institute.
Take preventative measures: Car batteries can take a beating, and be sure your tires have enough tread to grip snow and your brakes aren’t worn. Make sure your auto and homeowners insurance policy are sufficient. More information on cold weather considerations for homeowners and auto policies can be found at www.iii.org. — AP