Afford Anything - 26 Easy Moves to Improve Your Finances in 2020

Episode Date: January 3, 2020

#234: We review 26 quick, easy actions that improve your financial life, plus 10 new added bonus ideas that came directly from our community. We issue a challenge for you to tackle one action per week for the first 26 weeks (six months) of the year, so you’ll build stronger financial health by summertime. Download the free book that accompanies this episode at http://affordanything.com/2020kickoff and join us in the 2020 One Tweak a Week challenge! Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything, you just can't afford everything. Every decision that you make is a trade-off against something else, and that doesn't just apply to your money. That applies to your time, your focus, your energy, your attention. It applies to anything in your life that's a limited resource that you have to manage. And that opens up two questions. Question number one, what matters most to you? Not what does society say should matter most, but what actually is a priority in your life? And question number two is how do you make daily decisions that reflect that?

Now, answering these two questions is a lifetime practice, and that is what this podcast is here to explore. My name is Paula Pant. I'm the host of the Afford Anything podcast. We are normally a weekly show that airs every Monday morning, but once a month on the first Friday of the month, we air a first Friday bonus episode. So welcome to the January 2020 first Friday bonus episode. Here's what we're doing today. If you've been listening to this podcast for a long time, you know that at the beginning of 2019, we put out a challenge called One Tweak a Week. One Tweak a Week is a series of 26 actionable steps that you could take that would improve your financial health and financial security. It was designed to be small steps, tiny tweaks.

Each one should take less than an hour. Some of them take less than five minutes. and each one makes a small, actionable adjustment to your life. And so if you do one of these per week for the first six months of the year for 26 weeks, then within six months, you'll have made some solid improvements in the way that you manage your finances and your investments in your life. So we put this out at the beginning of 2019. We released a podcast episode about it.

We released a free e-book. And we released a email series such that people would receive a... a free email every Sunday once a week for 26 weeks. And then we developed a community that was all doing it together that would get together on Facebook in our Facebook group and talk about it and share tips and stories and go through this one-week-a-week challenge together. It was so successful last year that we are going to repeat this again this year and we've made some improvements. So here's what we're doing in today's episode. First, I'm going to go through all 26 tweaks and I'm going to do it as a bit of a lightning round.

I won't go into depth on any of these, but I will spend about one minute talking about each tweak. So for the next 26 minutes, I will quickly go over what each of these tweaks are. And if you want a more in-depth explanation of them, episode 169 is where you can find that. You can get that at afford anything.com slash episode 169. So for the next half hour,

I'll quickly go through the tweak spending one minute on each. And then after that, I'm going to share a long list of new tweaks, ideas and suggestions that were generated by people in our community. So if you've already heard episode 169 and you want to skip ahead to hear the new tweaks, that's going to start somewhere around approximately the 35 minute mark-ish of today's episode. Let's say it'll begin somewhere between the 35 to 40-minute mark. So we'll share at that point new tweaks that you can also put into practice, and we'll share feedback that came from the community as they leave comments, some through email, some through voicemail about what impact those tweaks made on their life.

Now, if you want to take the one tweak a week challenge this year, here's what you do. Go to afford anything.com slash 2020 kickoff. That's afford anything.com slash 2020 kickoff. And download our free ebook, one week a week. then I recommend setting aside one hour per week. Ideally, I would recommend choosing the day and time in advance, such as 7 p.m. every Sunday night and set a recurring reminder in your calendar that that's the time each week that you go through this one week a week exercise in order to kickstart your new year. By the way, one last comment before we begin.

I know some of you are listening to this episode on the day that this episode is released and some of you might wait for a couple of couple of weeks and then binge on a series of episodes, no matter when you're listening to this, feel free to start at any time. This is an ongoing evergreen thing. Now, I'd recommend that you download the ebook and get started right away because there will be a group of people in our community who are all going through it at the same time, and that way you'll be in sync with that group. Whenever you download that ebook, you'll, from that point forward, you'll start getting one tweak every Sunday. So your personal week one depends on when you begin. But if you start now, you'll be in sync with a lot of the people who are in our community. You'll be able to chat with them

about it. So head on over to afford anything.com slash 2020 kickoff, download the ebook, join the community, and shape up the first six months of your new year. All right, with that said, let's go through the 26 tweaks, starting with number one. Increase your savings rate by 1%. Whatever amount you're saving right now, boost it by 1%. that's $10 per every $1,000 that you bring home. So if you have a take-home income of $5,000 a month, set up an automation that increases your savings rate by $50. Now, when I say save, I'm referring to anything that improves your net worth.

So that could be making an extra payment towards a debt, like putting an extra $50 towards a credit card or a mortgage. It could be making an additional investment into a retirement account, or it could be literal savings in a savings account. anything that improves your net worth qualifies as savings under this definition. Now, you can use an app like Acorns or Capital in order to make this contribution.

You can set up an automatic withdrawal through them or you can set up the automation through your bank or through your retirement account. The important thing is to automate it so that it happens in the background and you just do it once and never have to think about it again. So that's tweak number one. Tweek number two.

Track your net worth and your spending. There are several tools on the background. line that will allow you to track your net worth for free, such as personal capital and mint. Set up an account with one of these so that you can track your net worth. You can see how your investments are doing. You can see the progress of how quickly or slowly your net worth is growing or declining. And you'll have a central dashboard that shows you that snapshot of your financial health. You can also use these tools to track your spending. And looking at both of these together will give you a good sense of how you are managing your money and

the direction that you're moving in. So that is tweak number two. Tweek number three, check your credit report. And in fact, I'm going to modify this one a little bit. Freeze your credit. So here's the deal. There are three major credit reporting bureaus, Experian, Equifax, and TransUnion. Each bureau allows you to check your credit report for free once a year. Now remember, your credit report is different from your credit score. There are many tools, including some credit cards, that will tell you your credit score, which is a three-digit number. But your credit report, which is a detailed report of all of your accounts, that's something that you want to look at annually.

And since you can do this for free once a year from each bureau, the ideal way to space this out is to create a calendar reminder to check your report at one bureau every four months. So one in January, one in May, one in September. So in week three, you'll be checking your report from one of these bureaus and then setting a calendar reminder later in the year for the other two. Now, as extra credit for this one, you can also freeze your report. It used to be the case that you would have to pay to freeze and unfreeze your report, about $10 to $15 per freeze and unfreeze. But recently, the rules changed such that you can freeze and unfreeze for free. Now, in the second half of today's episode,

I'm going to share my own story about this because during an interview on this podcast, I learned about this, the new freezing and unfreezing for free during our interview with Jill Schlesinger, which was on episode 182. Because of that interview, I froze my credit. And just recently, about two weeks ago, that saved my butt. So in the second half of today's episode, I will share that story. But right now, since we're in the 26-week lightning round, that's all I'm going to say. So week number three is check your credit report and freeze your credit. Week four.

Have a throwaway day. What you want to do is train yourself to dislike clutter, and you're going to do this by getting rid of a bunch of your junk. So spend one hour purging your closets, basement, garage, attic. If there are things that are gathering dust, get rid of them. Take a picture if you have some sort of sentimental attachment to it, but get rid of it and separate it into two piles. Donate and sell. We're going to talk more about what to do with the cell pile in the following tweak. But the reason that we're doing this in week number four is that this trains your mind to view these items as clutter and junk.

And so once you start getting into the habit of discarding items, you may find that you're less likely to want to buy more stuff because you start looking at purchases as, is this just another knick-knack that I'm going to have to throw away later. So week number four is spend one hour decluttering. Tweek number five, sell one item. Pick one item that you decided to discard last week and sell it on Craigslist, eBay, or Facebook Marketplace, or some similar website like that. Now, your time is valuable, so ideally pick the one item that you'll get the highest amount of money for, 30, 40, 50, 60 bucks.

And the purpose of this tweak is twofold. Partially, it is that extra pocket cash, but again, partially it's to train your mind to not want to acquire more stuff in the future because that stuff eventually just becomes burdensome. It becomes clutter that you then have to get rid of or go through the hassle of selling. And so that is tweak number five. Tweek six is to write your why in fewer than 100 words. Write down why you're motivated to improve your financial life. What is the bigger purpose behind this?

Do you want the freedom to quit your job and travel the world? Do you want a stronger safety net for yourself and your family in case there's a medical emergency or a job layoff? Like, what is the point of this? Why are you investing? Why are you saving? Write that down in 100 words or less and put this reminder somewhere that you can see it. Make it the wallpaper on your phone. So that is tweak number six.

Now tweak number seven, save one additional percent. So at this point, it's been seven weeks, nearly two months, since you boosted your savings rate by 1%. Remember, that was week one. So now, seven weeks later, it's time to boost your savings rate by 1% more. So you're going to increase your automatic contributions into a savings account, into a retirement account, into some type of a debt payoff. You're going to increase this by one additional percent of your income. Now, because we're stepping up your savings rate gradually, just one extra percent every two months. It's designed so that you don't feel the pinch.

It's just $10 per every thousand that you make. No big deal. You won't feel it, but if you continue increasing your savings rate by 1% every two months, then by the end of the year, you're saving an extra 6%. So that is tweak number seven. Tweek number eight, research your salary. Go to a website like glassdoor.com, salary.com, or the Bureau of Labor Statistics, and find the average compensation of people who are in your industry or who have your role.

This information is going to come in handy when it's time to negotiate with your boss for a raise. And remember, if you work for a small company, if your company doesn't have that wiggle room to give you a raise, you might be able to increase your compensation in other non-monetary ways. So if your company doesn't have the budget to boost your paycheck, maybe they can give you extra vacation days. Or maybe they can let you work remotely one day a week. In any event, having that knowledge, that information about your salary will be extremely useful when it's time to negotiate. And so that is tweak number eight.

Tweek number nine, create a catchphrase. Develop a catchphrase that you will repeat to yourself whenever you're about to spend money. For example, that catchphrase might be, would I rather spend X or would I rather put this money towards and then insert goal here, right? So, for example, when I was saving up money to travel, whenever I was on the verge of making a purchase, I would say, hey, you know what, would I rather buy this thing or would I rather have an extra $20 that I could put towards my travel fund? And that was sort of a catchphrase or a question that I repeated to myself every time I was about to make a purchase. So think about a goal that you have and then turn that into a catchphrase or a question that you constantly ask yourself. Hey, would I rather buy these Apple AirPods or would I rather have an extra $150 to put towards my trip to Thailand?

And so that is tweak number nine. Tweek number 10. Adjust your thermostat. Now, this is an extremely specific tweak. I know the last few ones we've had have been a little bit more conceptual, like have a catchphrase or write down your why or even negotiate your salary. They've been a little bit more thinking ones. So in week 10, we're going straight to a very, very quick action that you can take, which, is adjust your thermostat. Adjust it by one degree or two degrees. So if you normally heat your home

to 68 degrees during the winter, adjust it to 67 degrees. Maintain this one degree change for a month and then adjust your thermostat one more degree. This is something that is good for the environment. It allows you to save money and it's a fairly imperceptible difference. One degree is not enough to make you start wearing jackets around the house because you're so darn cold. But it's something. It's a small tweak that you can do. It takes five minutes. And that is your your small victory for week 10. And week 11, same deal. Fill your tires. So check your tire pressure and inflate your tires to the recommended levels. This, again, is a tweak that is fairly simple to do. It doesn't take very much time about 20 minutes and it improves your gas mileage.

So you do it once and you get the benefit of that improved gas mileage for weeks or months to come. So that is week 11. Week 12. Hold online items in your cart for one week. In week 12, you're going to be delaying any online purchases that you're making by a week. You'll still make online purchases. You know, if you're a member of Amazon Prime and you use that to buy normal household items, you can keep doing that. I'm not saying change your habits and go get in your car and drive to.

a bunch of different stores. I get the convenience of buying things online. I buy almost everything online myself. But this week, and this week only, get into the habit of putting things in your cart and then instead of checking out right away, keep it in your cart for a week. And at the end of the week, if you still want it, then you can order it. So by giving yourself that delay, you might reduce the number of unwanted purchases or impulse purchases that you make. So that's week 12. Week 13, switch your mortgage to biweekly payments. So if you are currently making monthly mortgage payments, switch to biweekly mortgage payments. And the reason for this is because if you make monthly payments, then you'll make 12 payments per year. But if you make half of a monthly payment byweekly,

then you'll make a total of 26 payments per year instead of 24, which means that you'll make an extra half-months payment without even noticing it or without even feeling the pinch. So by paying half of your mortgage biweekly, rather than your full mortgage monthly, you trick yourself into accidentally paying for an extra half of a month each year. Now, this allows you to repay your mortgage faster. It shaves off the total amount of interest that you'll pay over the life of the loan. And it automatically sneaks in a little bit of extra savings that you won't even feel or recognize. So that is week 13.

Week 14. Embrace old school energy efficiency. So in week 14, you're going to be sealing the drafts around your home. Apply weather stripping around drafty doors and windows. Use caulk to seal the air leaks through cracks or gaps that are less than a quarter of an inch. Weather stripping as a general rule is better for home components that move like doors or windows. Cock is better for home components that are stationary, like the outside edge of outlet cover plates. The reason that we're doing this, the reason that week 14 we're focusing on these old school weather stripping,

caulk, things like that, is because this doesn't cost a lot. It doesn't take a lot of time, and it can help you save money and is good for the environment. There are a lot of much more expensive ways to make your home more eco-friendly. You can replace your windows if you live in an old house that has really old windows, or you can add solar to your roof, depending on where you live and whether or not your roof is a good solar candidate. Those types of upgrades are very expensive, and a lot of times people overlook the cheap, simple tasks of cock, weather stripping, spray foam insulation. Those kind of improvements cost less than 20 bucks, takes an hour, and has a payback period that's almost immediate. So that's week 14. Week 15.

Choose a good savings account. In week 15, you are boosting your savings rate by an extra 1%. Because remember, the last time that you did this was week 7. So it's been eight weeks since the last time that you did this. So week 15, time to boost your savings rate by an extra 1%. And in week 15, you're also going to make sure that your savings, the savings account that you have, is at an institution that has free checking and savings account. and pretty decent market competitive interest rates.

That way, while your money is sitting in savings or sitting in a checking account, it's still working for you. So that is tweak 15. Tweek number 16. Start thinking about your estate plan. Now, this is one of those tweaks where actually building out in the state plan is going to take a lot more than an hour. This is not just a quick thing that you can do.

But if you haven't even begun thinking about it yet, I want you to at least, at least, at least least spend 20 or 30 minutes today sitting down and thinking about how you want to approach the process of creating an estate plan. Do you want to use a template from the internet using a template from a website like NOLO or some type of fill-in-the-blank legal document? Or do you want to hire an estate planning attorney? How do you want to approach this? Who needs to be involved in the conversation? Do you have a spouse or partner that needs to be involved? Do you have a financial planner or a CPA who you want to talk to about this, start the process of thinking about how you are going to create an estate plan because that's an incredibly important and under-discussed

component of financial planning. So you're not going to get that process completed today or in week 16, but at least get it started. So that is week number 16. Week number 17 is to create a charitable giving plan. And I actually have a story about this that I'm going to in the second half of today's episode after the lightning round as well. In week 17, as you are creating a charitable giving plan, first I want you to decide how much money you want to give. Pick a target goal, whether that's a percentage of your income or a specific dollar amount. How much do you want to give this year? After that, step two is to pick, or at least brainstorm some possible charities or nonprofits that you would like to donate to. And you can research nonprofits on websites like

charity navigator, charity watch, give well, and the BBB Wise Giving Alliance. And step three, create a plan for how you will distribute these funds. So do you want to make monthly contributions? Do you want to create a donor advised fund? Do you want to give to the same charities every year? Or do you want to switch it up year by year? Creating an overall vision and overall plan for how you want to manage your charitable giving, that is week 17. Week 18, take your pets to the vet, and more broadly, take care of preventative measures. Because prevention and routine maintenance for your pets' health, for your own health, routine maintenance for your most expensive belongings, such as your home and your car,

these things are essential for your financial life. And it can sometimes be tempting to want to, quote unquote, save money by ignoring prevention or by ignoring routine maintenance. but that is only more expensive down the line. And so week 18, specifically what I put in this e-book is, hey, take your pets to the vet. But really that is one example of this bigger picture in week 18 of paying attention to preventative care and routine maintenance and performing at least one task that's related to that preventative care and that routine maintenance, whether it's for your pets, for your home, for yourself. your focus on that is your task for week 18. Now, week and tweak number 19 is to pick one metric and track that. So choose one metric. It could be your weekly side hustle income. It could be your monthly debt payoff rate. Start tracking this one number. And the reason that I say choose one metric is because if you track too many metrics,

mentally, you spread yourself a little bit too thin, right? If you pick one single metric that you want to start tracking, you know, decide what metric you want to track, figure out what this number is today, and then set a calendar reminder to check back on this metric on a daily or weekly or monthly basis, then you will have some objective unit of measurement that you are constantly trying to improve. So maybe that metric is your side hustle. Maybe you want to improve the month-over-month growth of your side hustle income. Great.

That's your metric. Maybe you want to reduce the amount of money that you spend at restaurants. So we're not talking about your overall budget. We're specifically talking about your restaurant spending. And maybe you want to see a monthly reduction in that. Like every month you want it to be a little bit less than the previous month, right? That's your metric. Start tracking that.

So pick one metric and track it. That's week number 19. Week 20. Make a list of annual expenses. There are a lot of expenses that most of us face every year, such as holiday travel, holiday gifts, birthdays, traveling for family reunions, summer camps, classes, seasonal expenses, like getting snow chains for your tires. Oftentimes, when we plan our monthly budget, we forget about these one-time annual costs. A lot of people when they're budgeting are great at thinking about recurring monthly costs like groceries, utilities, their rent or mortgage, and they are good at setting aside an emergency fund for those rare occurrences that you can't reasonably predict. But the thing is, there are also annual expenses that you can reasonably predict. Holidays, vacations, family reunions, those are things that you can predict. So week 20 is to make a list of those annual expenses, add those up, find out how much they cost per year, and then, and divide by 12 and start setting aside that money every month so that you have a bucket for those

annual costs. So that's week 20. Week number 21. Be honest about the difference between can't versus choose. Oftentimes I hear people say, I can't afford it or I can't do it. In this week, I want you to be conscious about every time you hear yourself say the word can't. If you say, I can't start a side hustle because of XYZ or I can't invest in real estate because of XYZ. Notice yourself saying that and create a list, create, open up a note-taking app on your phone, create a list in Google Docs or an Evernote, in which you write down every time that you notice yourself saying or thinking the words, I can't. And at the end of the week, review that list and ask yourself how you can reframe that.

Is it that you can't or is it that you choose not to or you don't want to or you would prefer not to or you don't know how to? Actively addressing this mental shift between can't versus choose, that is your task for week 21. Now week 22 is to enjoy one free activity. The idea behind this is to stop associating enjoyment with spending. Oftentimes people use those two terms interchangeably. They talk about spending money as though that is enjoying your life. In week 22, we want to break this association. So this week, your task is to participate in one free activity.

So you might take a walk through a really beautiful city park or stroll through a really cute neighborhood where you enjoy looking at the architecture, or walk around taking photos of street art with your phone, or visit an animal shelter, or go to the library. This week, you're going to go out and have fun and do something enjoyable that's totally free so that that way you can train your mind to break that association between spending and enjoyment. Week number 23. Check the expense ratio on your funds. If you hold mutual funds or index funds, check the expense ratio.

And if that expense ratio is higher than 0.5%, rethink whether or not. you want to be in that fund. Week 24, negotiate your interest rates. So this applies to people who are carrying credit card debt. If you have a balance that you carry on your credit card, that you don't pay off and full at the end of the month, if you're carrying credit card debt, call up your credit card company and negotiate your interest rate. Point to your history of being a good customer who's made on-time payments and ask them if they would be willing to lower the interest rate that you are paying on your balance. If they say yes, that's fantastic.

And if they say no, then it might be time to make a balance transfer to a different card. So negotiating your interest rate on revolving debt is your task for week 24. Now, week 25 is to strengthen your passwords. Create strong passwords for your financial accounts.

And the reason that I include this here is because preventing identity theft is, again, an important and very overlooked aspect of maintaining good financial health. And again, I'm going to tell a little story about this in the second half of the show. So week 25 is to strengthen your passwords. Week 26, cut the cord. If you have a cable package, cut it immediately. Downgrade to an internet-only, no-cable package, and then fill that void with a subscription to

something like Netflix or HBO Now or Hulu. My recommendation is not to subscribe to all of these, but rather pick one, subscribe to just that one thing, subscribe to just Netflix, use that as your source of entertainment. And if there's a show that you really want to watch that's on HBO Now, then when you're ready to watch that, you cancel your Netflix subscription, you start the HBO Now subscription. That way you're only paying for one edit.

a time rather than paying for multiples simultaneously. I actually just did this. I was paying like $15 a month for HBO now. And at the end of December, I ended that subscription. And then when it ended, I then initiated a Netflix subscription. That way, I'm only paying for one at a time. And so that is week 26. And so that's our lightning round of the 26 tweaks. Now, you can get a reminder of one tweak per week and take part in this challenge by downloading the free ebook at afford anything.com slash 2020 kickoff. That's afford anything.com slash 2020 kickoff. You'll get a free ebook outlining all of these. You'll get a weekly email with a reminder for each tweak. And you can join our online community where you can talk to other people about their

experience with the tweaks. So what we're going to do next is we're going to take a quick break for a word from our sponsors. And then I'm going to come back and outline a whole bunch of of additional tweaks, actions that you can take, quick, easy actions to improve your financial life. And this second list that we're going to hear next was generated by our community. That list of quick, easy actions that you can take to improve your financial life is coming up right after this. Fifth Third Bank's commercial payments are fast and efficient, but they're not just fast and efficient. They're also powered by the latest in payments technology, built to evolve with your business. Fifth Third Bank has the big bank muscle to handle payments for businesses of any size.

But they also have the fintech hustle that got them named one of America's most innovative companies by Fortune magazine. That's what being a fifth third better is all about. It's about not being just one thing, but many things for our customers. Big bank muscle, fintech hustle. That's your commercial payments of fifth third better. The holidays are right around the corner and if you're hosting, you're going to need to get prepared Maybe you need bedding, sheets, linens. Maybe you need serveware and cookware.

And of course, holiday decor, all the stuff to make your home a great place to host during the holidays. You can get up to 70% off during Wayfair's Black Friday sale. Wayfair has can't miss Black Friday deals all month long. I use Wayfair to get lots of storage type of items for my home. So I got tons of shelving that's in the entryway, in the bathroom, very space saving. I have a daybed from them that's mull. multi-purpose. You can use it as a couch, but you can sleep on it as a bed. It's got shelving. It's got drawers underneath for storage. But you can get whatever it is you want, no matter your

style, no matter your budget. Wayfair has something for everyone. Plus they have a loyalty program, 5% back on every item across Wayfair's family of brands. Free shipping, members-only sales, and more. Terms apply. Don't miss out on early Black Friday deals. Head to Wayfair.com now to shop Wayfair's Black Friday deals for up to 70% off. That's W-A-Y-F-A-I-R dot com. Sale ends December 7th. We are back. Now, here are some additional tweaks that you can take. I want to give a shout out to Sandy. Sandy is part of our Facebook community. If you would like to join that, you can do so by heading to afford anything.com slash Facebook. That will get you to our Facebook group. Sandy left a fantastic message in which she said that she met with her investing group and they came up with many more tweaks and so here are some of those tweaks. Number one.

Open an account on ssa.gov and look at your social security estimate. SSA.gov is the website for the Social Security Administration. And when you create an account there, which you can do for free, you can see how much money you are. estimated to receive from Social Security based on your current snapshot, based on the amount of money that you've contributed into the system up to this point in your life. Setting up an account on SSA.gov and checking out that estimated Social Security payout is a good way of getting that knowledge, getting a handle on how much money in terms of your retirement planning, your long-term retirement planning, how much money you think you might get from Social

Security as things currently stand. And number two, speaking of retirement, run a retirement estimator such as Fidelity's to see if you are on track. Now Fidelity has a great tool. It's called the Fidelity Retirement Score. And we'll link to this in the show notes. So the show notes are going to be available at afford anything.com slash episode 234. And all of the links that we're mentioning here, including ssa.gov, the Fidelity Retirement Score. And of course, the ebook at afford anything.com slash 2020 kickoff. All of those will be included in this. show notes. You can access the show notes at Afford Anything.com slash episode 2,3,4. Back to the Fidelity Retirement Tool, they have this great tool in which you answer six very simple questions about yourself. How old are you? How much money do you already have saved for retirement? How much money are you currently contributing per month for retirement? What's your investing style in terms of conservative, moderate, aggressive? And based on all of

that information, they will show you a score that shows the likelihood that you will have the money that you need for retirement. Now, one drawback with their tool is that they estimate your spending based on your income. That's a bit of a pet peeve of mine. A lot of retirement planning tools do that. They automatically assume that your spending is a certain percentage of your income. And of course, If you are in the financial independence community, you understand that that does not have to be the case. You do not have to spend a given percentage of your income. And particularly as your income rises and as you have more and more discretionary income, oftentimes it's the case that the percentage of your income that you spend declines,

sometimes quite significantly, because when you're a high income earner, it's much easier to live on a small percentage of your income. So that is one drawback with the tool, but that being said, tools like that, like Fidelity's retirement score, CNN has a calculator on how long it will take you to become a millionaire. Tools like that are, they're just, they're fun to play with. They're fun to type in your information and see how on track you are. And then revisit them from time to time. And take it with a grain of salt, but it's a fun way to keep your head in the game and run

your numbers and get some type of feedback on your current financial snapshot. So again, we'll link to those in the show notes to a few of those tools. That's at afford anything.com slash episode 234. So that's number two. Number three, consolidate your retirement accounts. If you have old 401K accounts or other retirement accounts that are being held with former employers, roll those over so that you have all of your retirement assets under one provider.

It simplifies your life. Now, the time that you might not do that is if you have a current employer that does not have a very good selection of investments in the 401k or other retirement plan that they offer. If that's the case and you have a different retirement account that holds better investment choices, you know, in which you can access better funds, that might be a reason to have multiple accounts. but assuming there isn't any good reason to keep multiple retirement accounts open, roll over old accounts so that everything is under one roof. Number four, check the beneficiaries that are listed on your retirement accounts, your bank accounts, your savings accounts, and update those as needed. Spend one hour methodically logging into every single one of your accounts

and checking and updating that beneficiary information. Number five, shop your cell phone plan. you still in the best plan or could you switch to something less expensive? Number six, shop your home and auto insurance. And also, while you're doing it, review the level of coverage that you have. Is the deductible an appropriate amount or can you increase the deductible in order to get a lower premium? Number seven, get umbrella insurance if your net worth is a million dollars or more. umbrella insurance provides extra liability insurance beyond what's provided by your home insurance or auto insurance, and so it provides that extra layer of security. If you own a rental property or if you have a high net worth, umbrella insurance is highly recommended.

Number eight, check your tax withholdings and adjust if necessary. If you are overpaying, you can adjust your withholding and then send that extra money directly into savings or into debt payoff. Number nine, learn how to borrow Kindle books and audiobooks from your local library. Many people are not aware that their libraries will lend out e-books and audiobooks. If you haven't set that up yet, it's a great way to read or listen to books for free. And number 10 from this list that our great community member Sandy provided is rebalance your accounts. Set a calendar reminder once a year to check your asset allocation in your investment accounts and rebalance as needed so that your asset allocation stays on track as to where you want it to be. This is something that it's easy to forget to do.

So just set an annual calendar reminder, a recurring calendar reminder, so that there's a particular date each year when you do this. Sandy actually shared several more tips as well. Those are 10 of them. You can find the rest in our Facebook group, which you can access at afford anything.com slash Facebook. We also have a tribe in our community that is going through one week a week together, So you can join that tribe at afford anything.com slash community.

I'd like to share this voicemail from a member of our community named Erica, who took part in the One Tweak a Week a Week challenge last year, and here is what she has to say. Hi, Paula. My name is Erica, and my favorite tweak was the 1% increase in savings that we did periodically throughout the challenge. A tweak of my own that I adopted to try to save money included a challenge for no eating out, So I started by not eating out for a period of one week or a period of two weeks. And then I grew this up to a period of three weeks throughout the year of 2019. And to recap and kind of summarize the most impactful takeaways from participating in this challenge was that I increased my savings rate by about 10% for the entire year.

And I also altered my stock portfolio to decrease my expense ratios, which was one of your earlier tweaks. I've also gotten my will and estate planning in order, which has been a tremendous help and kind of lessen that potential mental worry. So thanks again and looking forward to more tweaks in the new year. Erica, congratulations, a 10% savings increase. That's incredible. So huge congratulations to you. I am super excited for you to go through this again this year and see what else comes out of it, what new comes out of it, what more. further improvements you'll make because you've already done such a great job. So huge congratulations

to you and thank you so much for sharing your story. I love your no restaurant challenge, by the way, and I love the way that you planned it, the way that at first it was just one week and then you increased it to two weeks and then further. So it made it manageable. You took baby steps and you saved so much money by not going to restaurants. So love what you've done. Thank you, Erica. We also received an email from a woman named Amanda, who had this to say. She said that her favorite tweak was listing one item for sale. And her comment was, quote, I've been able to further declutter my home as well as get money for items that are in great condition that I no longer need. I've always been a minimalist.

Now I'm a minimalist with deeper pockets. In terms of we asked if there are any tweaks of her own that she introduced into the challenge. And she said, being clear about my financial goals with friends. friends and family, as well as putting a time limit on my thrifty ways, has improved my relationships. They've worked with me to find cheaper or free activities. That's great. So it sounds like, Amanda, it sounds like this one week-a-week challenge has also helped you improve your relationship with friends and family because now you're clear with them about what your values are, you're working together, you're creating boundaries around the time that you're

spending on it. It sounds like a very healthy approach. That's excellent. And then Amanda also said in her email about a recap of her experience, she says, quote, I've been more mindful of saving for retirement and I've gotten in the habit of checking my credit score and being honest with myself about my financial position. That's awesome. Thank you, Amanda, for sharing that. So we're going to take one last break for a word from our sponsors. And when we come back, I'm going to share my own story about two things that I did this year that made a huge difference. One was freezing my credit. And as I mentioned earlier, it saved my butt because I had a very scary situation that happened very recently.

So I'll tell you all about that right after this break. And the other thing that I did that was big involves a donor advised fund. So I'll tell you all about that, including tips for anyone who wants to start their own donor advised fund. How do you do it? What are the tax advantages? Should you even do it? What are the pros and cons? We're going to talk about all of that next.

And we're back. I want to share a story of two things that I do. that made a huge difference in this last year, one of them was freezing my credit report and the other was setting up a donor advised fund. So I'm going to talk about both of those right now, starting with freezing my credit. Now, this is something that I had avoided because in years past, freezing your credit and then lifting that freeze on your credit whenever you wanted to apply for a loan, cost money. It cost about $10 to $15 per freeze and lift. And so as a result, fewer people did it. I didn't do it. And as a result, those of us, myself included, who didn't freeze our credit,

we were more vulnerable to identity theft. The reason for that is that identity thieves often use the information that's on your credit report in order to steal your identity. So if you freeze access to your reports, fewer people can see your reports, which means identity thieves might not be able to access it, they might not be able to see it, they might not be able to get the information that they need. In addition to that, if your credit is frozen, then it is much more difficult for an identity thief to open a credit account in your name without your consent. By default, everybody's credit by default is not frozen, which means that if a person had enough information about you, if they had your name, address, date of birth, social security number, they could

open up a credit card in your name or take out some sort of a loan in your name fraudulently without your knowledge or consent and that could lead to a whole heap of trouble freezing your credit makes it much much harder for anyone to do that i won't say impossible but next to impossible it makes it extremely difficult for anybody to be able to open up alone in your name because you have to be the person who actively lifts that freeze. So despite the added security around identity theft that's offered by a credit freeze, very few people did it because of the fact that it costs money. But then what happened was in 2017, the Credit Reporting Bureau, Equifax, had a major data breach. This breach in data exposed to the personal information of 147 million people.

Think about that. That is nearly half of the population of the United States. I'm shocked that it wasn't a bigger story than it was. So that massive Equifax data breach, which happened in 2017, put half of the U.S. population at risk. It exposed people's names, birth dates, social security numbers. And one of the fortunate benefits that came out of that is that now you can freeze your credit for free and lift that freeze for free. Now that whole process does not cost anything to you. So I learned about that. I learned the fact that freezing your credit is now free in March of 2019 on this podcast when I interviewed CBS News Analysts, Jill Schlesinger. And after that interview, I went and froze my credit. So the process to do that is a little bit cumbersome because in order to do that, you have to go to the website of each of the three credit reporting bureaus, Equifax, Experian, and TransUnion. So you go to each website separately and you request to freeze your credit.

You have to fill out some forms with your information, your name, your address, your date of birth, your social security number. You have to prove your identity. And then you create an account. You freeze your credit. And they'll give you a pin or a password that you can use whenever you want to come back and temporarily lift that credit freeze in the event that you're applying for a credit card or refinancing your mortgage. So the process for me took about 45 minutes.

I froze my credit. Everything was good. Life went on as usual. And then in December of 2019, so last month, I received a card from the U.S. Postal Service. And this card is a confirmation of change of address. This thing from the Postal Service says, hey, we're confirming that we received your change of address request. For security purposes, we are not showing the new address, but this is a mailing that we're sending to the old address to confirm that change of address. Well,

I never requested that. That was a fraudulent change of address. So somebody fraudulently filled out a U.S. Postal Service form that then diverted mail away from my address and towards some other address. I don't know who and I don't know where, but somebody fraudulently filled out one of these such that my mail would no longer go to me. Now, as I said, I received this in December, and as you recall, if you're a long-time listener, I spent the entire month of November in Ecuador, which means that that whole month of November, mail was piling up. So I actually do not know, I received it in December, but I do not know when they sent it. It's possible, although I can't confirm it either way, it's possible that they sent that as early as sometime in November while I was

out of the country, and I just didn't receive it until I came back. So who knows how long this had been going on? So when I saw it, of course, I immediately got concerned. I called the U.S. Postal Service right away. I reported it as fraudulent, and then they asked me, hey, have you had any fraudulent activity on any of your other accounts? So I check my credit card, and sure enough, there are about $1,200 of fraudulent purchases that have been made using my credit card number. Many of these were items that get shipped, so I'm assuming that what probably happened was that the scammers used my credit card number to place online orders that then got shipped to whatever change of address they filled out. Now, if somebody had this much information about me,

they had my credit card number, they had my address, they had my name, Date of birth is very easy to find. It's all over Facebook. It's all over the internet. It's highly likely that this might be the type of scam or these might be the type of scammers that might steal my identity or try to open up new accounts in my name. There's no way to know that. I can't prove that or disprove that. But if they are going to the trouble of fraudulently filling out a change of address form, it's not a far stretch of the imagination that they might have tried to fraudulently open up new lines of credit in my name, fraudulently take out a credit card in my name. Fortunately, I had frozen my credit, and so that didn't happen. And that was a huge wake-up call slash validation of exactly what Jill Schlesinger and I discussed in episode 182, the importance of freezing your credit.

And it also reconfirms and validates the importance of checking your credit report regularly, once per credit reporting agency every four months, which is included in one week a week. I share that story to illustrate that, you know, we talk about these things in concept. You know, we talk about checking your credit report or freezing your credit in concept. But when the consequences of that actually affect your life, those are the moments where you're like, glad I took action on that. And all of a sudden, that 45 minutes that I spent freezing my credit, which I'd previously thought of as kind of cumbersome, like, oh man, I got to spend 45 minutes doing this, that suddenly felt like nothing, like the least cumbersome task in the world as compared to how much work would have been involved in unscrewing up the situation if I'd actually had my identity stolen.

Again, it's that small investment in prevention that saves you big down the line. So I hope you join one tweak a week. I hope you take part in this challenge for the next six months, the next 26 weeks. And remember, one of our first tweaks that we tackle is creating a system to methodically check your credit report every four months and to freeze your credit. And again, you can download that ebook at afford anything.com slash 2020 kickoff. That's afford anything.com slash 2020 kickoff. All right, final story today before we wrap up, the other major change that I made in my financial life in 2019 is that I set up a donor advised fund. This idea actually came out of a podcast episode that I recorded this year.

In episode 207, which aired in August 2019, Financial Planner Sophia Bera, who was hailed by Investment News as one of the top 40 under 40 financial planners, She joined me on that episode to answer questions that came from you, the community. And one of the questions that she and I both answered is about long-term giving and charitable giving. Within her answer to that question, she mentioned that she had a donor-advised fund, and that one of the benefits of that for her was that it simplified record-keeping. Because when she makes charitable contributions, even if they're small amounts, even if she's donating $50 or $100,

she can make that contribution directly from her donor-advised fund, which means that if she donates to a wide variety of charities, then instead of having this huge shoebox of receipts that she has to organize and put into a Dropbox folder and keep track of and input things on a spreadsheet, instead of that whole bookkeeping and administrative mess, she simplifies things by just making those donations out of a donor-aids. fund so that that way the record keeping is really simple. The records of all of her charitable

activity, both contributions into a fund as well as grants made out of that fund, are consolidated in one place. So I thought about that quite a bit after she said that because I often will make small contributions, a hundred bucks here, 200 bucks there, and it is cumbersome to then create a spreadsheet that says like charitable contributions 2019, and then you have one column that's the amount and another column that's the name of the organization and another column that's the tax ID of the organization. And then that spreadsheet has to go in a drop box folder that also has uploads of receipts or confirmation forms or some sort of documentation. Organizing it that way is a huge pain in the butt. And so when Sophia described the

organizational simplicity of a donor advised fund, that really appealed to me right off the bat. And then I started looking into it further. And one of the other major advantages of having a donor-advised fund is that you get the full tax benefit in the year in which you make the donation, which means that let's say you're not sure what charities you want to give to, but you know that there is a certain pool of money that you want to use for giving. You can donate that money into a fund and get that tax write-off in that current year in which you make that donation. And then that money can grow. It can be invested in a low-fee, broad-marking. market index fund inside of your donor advised fund, and it can grow while you're contemplating

what organization or groups you want to give that money to. So it separates the pledging of the money to charity from the decision about which charity gets it. And so if you remember when we went through one week a week a week, how I talked about creating a plan around charitable giving, and one of those steps, that first step was deciding how much money you want to give, whether it's a percentage of your income or a certain raw dollar amount, right? That's the first step. And then after that, the second step is deciding who gets it? What nonprofits do you want to give it to? So if you've done step one, but you're still, you know, the jury is still out on step two, well, a donor-advised fund is perfect for that situation. Now, the third thing is if you have variable or

volatile income and you have one year in which your income is particularly high, you can batch your charitable giving, you can give a larger percentage of your income or a larger raw dollar amount in a year in which your income and therefore your taxes, your top marginal tax bracket, is high so you can make a big donation in that high income year and essentially donate in advance of the next year or the next two years if you think that your income in one given year is going to be significantly higher than your income in the following years. And certainly if you plan on retiring early, and so you think there's going to be a big drop in your income, then it makes sense to create that donor-advised fund while you're still working, because that's when

you're in a higher tax bracket, batch or front-load the next five years, 10 years, 15 years worth of donations during your working years, and then once you retire and your income significantly drops, you can then decide how to grant or distribute that money. And so what I did this year, and of course, I waited until the very end of December. I opened an account at Schwab Charitable, and I donated $15,000 into that donor-advised fund. And here's what's cool about this. That $15,000 is the current fair market value of assets that I held in a taxable brokerage account. So I have investments in a taxable brokerage account at Schwab. They've appreciated significantly over the span of many years, which means if I were to sell out of those assets, that would trigger

long-term capital gains tax. But instead of doing that, I could instead donate those investments into a donor-advised fund and I get a tax deduction of the full fair market value, the $15,000 that I put into the donor-advised fund rather than the cost basis that I had initially paid. So that's another way of saying that by virtue of donating appreciated assets into that donor-advised fund, I was able to circumvent the long-term capital gains tax that I otherwise would have paid. And that's to the benefit of the charities that will ultimately receive this money, right? Because I don't have to pay long-term capital gains tax on those gains, that means that the charities, the nonprofits that receive this money get the full amount. So to be clear, I am not transferring that tax burden. The nonprofits are not going to have to pay the long-term capital gains tax.

Nobody has to pay it. The nonprofits get the money and the long-term capital gains tax on those assets goes away. So if you are interested in opening one, I've just outlined a lot of the benefits of opening one in terms of the tax advantages, the income strategy. Now, I will say in fairness, the drawback to a donor-advised fund and the biggest criticism that people lob against the funds is that there are a lot of great non-profits that need money now. And so there are critics who will argue like, hey, it's not fair if you put money into a fund. You get the tax benefits of making that donation, but the charity hasn't received it yet and you're delaying that charity getting the money. That's the biggest criticism that from, I've done a lot of reading about this,

and that's the biggest criticism that I've heard. And that is a fair criticism. if you let the money just sit there indefinitely forever and ever and ever. But that said, you could use a donor-advised fund to create a short delay, six months, eight months while you're evaluating different nonprofits, or you could use a donor-advised fund to effectively create an endowment. So if you make a big contribution, let's say you put $100,000 into a donor-advised fund, put that money into broad market index funds, inside of the donor-advised fund, allow it to grow, and then start making grants out of it using the 4%

rule. So if you make a big enough contribution to a donor-advised fund, you could, in effect, create an endowment that creates a long-term, sustainable stream of income that charities can receive. Now, not every fund will allow you to do that. Some funds actually have limits on how long money can stay inside of a fund. So there are some funds that will, mandate that you start making distributions to nonprofits out of your fund after a given period of time. You could also do a modified version of what I just said in which you put money inside of a donor advised fund, invest it, and if you're confident about your ability to manage investments and make a pool of money grow, you invest it until it has grown to a certain amount, at which

point you then grant it to the charity or charities of your choice. So while I do understand the criticism of a lot of nonprofit leaders saying, hey, like, we need this money now, please don't delay it. I get that. And it's also true that a donor advised fund sets up a situation in which those nonprofits, when they do receive money, receive more than they otherwise would. Like I said, the avoidance of capital, long-term capital gains tax is a huge benefit to the nonprofit that receives the money. So if you want to open a fund, you can do so at Vanguard, Schwab or Fidelity. There are are several other institutions as well, but those are the big three discount brokerages. And that is what I would consider to be my major tweaks, my major victories of this past year.

And for me personally, I do intend to give away that money in 2020. So my next step is to figure out what organizations I want to grant it to. And you'll be hearing more about that in the coming weeks and months. Thank you so much for tuning in. My name is Paula Pant. This is the Afford Anything podcast. You can join the One Tweek-A-week Challenge. afford anything.com slash 2020 kickoff. That's afford anything.com slash 2020 kickoff.

Make sure that you are subscribed to this podcast so that you don't miss any of our future episodes. And big thanks to the sponsors of today's episode, FreshFooks, Gusto, Radius Bank, and Blinkist. I hope you're having a fantastic start to your new year, and I will catch you on Monday's episode.