Jean Chatzky compiles 8 great rules to grow your money. / Simon Battensby/Getty Images
There comes a time in some conversations when your brain — full of new and important information — has had enough. You sigh (or yawn). Your eyes glaze over. Your mind wanders. And you get the look.
I know the look. It tends to happen in conversations about money. It’s one reason many people shy away from talking about money at all, which can be devastating to their financial future.
It doesn’t have to be that way. There are some downright simple financial rules that, when followed consistently, can make your fortunes a lot brighter.
I’ve compiled almost 100 of them in my new book, Money Rules. Here are eight more, including timely tax tips, exclusive for USA WEEKEND:
Bank your windfalls. In the past few years, the average tax refund has been around $3,000. If you plowed that sum every year into an IRA that earned even a conservative return, you’d have a nice six-figure nest egg at retirement. (In fact, 20 years of this habit at a 6% return nets you $122,000; 30 years gives you twice that!)
And tax refunds aren’t the only windfalls that come your way. There are bonuses. Holiday and birthday checks. The money from sending your cast-offs to consignment or selling your old clunker. It all adds up. If you feel the need to splurge, do it — with 10% of your take — then put the rest away.
Note: If you’ve been truly delinquent about filing your taxes, it may pay big-time to do so now. The IRS has $1 billion in refunds waiting for 1 million people who didn’t file in 2008. The deadline: April 17.
Manage what you can. You can’t manage where the stock market is going, or interest rates or tax rates. You can manage how much you save, how much you spend and, to some degree, how much you earn (when was the last time you asked for a raise?). Focus on the manageable.
Credit cards don’t have to equal debt. Some financial experts tell you credit cards are evil. I’m not one of them. For people who charge only what they can afford to pay off each month, and pay the bill in full and on time, credit cards are great. They’re useful tools to build and keep a pristine credit score, avoid checking account fees (by using a card issued by your bank) and earn valuable frequent flyer miles or other rewards along the way. For some people, however, they’re a slippery slope. Research shows we spend more when we use credit than when we use debit, and more when we use debit than when we use cash. That’s because cash feels more real and more important. If you find it tough to keep to your budget when a credit card is your primary means of payment, then steer clear.
Don’t let your money run out before you do. As long as you have a balanced portfolio (your assets are in an appropriate mix of stocks, bonds and cash), the key to not running out of money in retirement is withdrawing no more than 4% of your nest egg a year. That 4% may change with the fortunes of the market, but if you stick to your guns, history says you’ll be fine.
Put your 80-year-old self first. What will you look like then? What will you feel like? Research shows that making the effort to answer those questions may be exactly what it takes to inspire you to save more now so that you won’t run out of money later. The Virtual Human Interactive Lab at Stanford University found that after young people were introduced — then interacted — with avatars who looked like themselves 30 years hence, they said they were willing to save a whopping 30% more. What can you do yourself? Try an aged photo. You can upload and age a photo of yourself free at in20years.com.Then, be sure to capitalize on the impulse to save more by locking into automatic transfers so that you do it not just once, but over and over again.
Buy experiences, not things. Spending on experiences makes people happier than spending on things. Things get broken and go out of style. Experiences get better every time you talk about them.
Tax evasion is illegal. Tax avoidance is smart. Non-itemizers pay too much. Don’t miss out on valuable tax credits and deductions. For instance, if you are a single filer earning up to $27,750 and you contribute $1,000 to a qualified retirement account, take the Savers Credit worth $1,000. Similarly, joint filers earning up to $55,000 who make a $2,000 contribution get a $2,000 credit. That’s free money. Then there’s the American Opportunity Credit, which lets families claim up to $2,500 for the first four years of college for each student. It often goes untaken. The bottom line: It pays to be thorough when filing your taxes. If you think you’ll miss savings, bring in an expert or use a software program that offers expert advice.
Face your finances. I hear from people who shoved bills in a drawer, hid credit scores from a soon-to-be-spouse, ignored destructive spending habits or put off focusing on retirement. They’re almost always sorry. Let the fact that you’re reading this be a wake-up call. Raise the white flag and ask for help from a friend, your spouse or a financial planner. (Find one at fpanet.org, website of the Financial Planning Association, or NAPFA.org, the National Association of Personal Financial Advisers.) It may be painful in the short term, but cleaning up your mess is the only shot you have at a long-term future.