I’m a fan of short-term challenges that can be used to jumpstart progress.
I know firsthand that these types of challenges can really help people.
That’s why I created a 30-day money challenge.
This challenge is great for personal finance beginners and anyone interested in taking the plunge!
It will vary from saving money, getting organized, to making the difficult decisions related to your finances.
I’m confident that in 30 days you will have an improved financial outlook.
Let’s get started!
Money Challenge: 30 Days To A Better Financial You
In these next few days, let’s spend time reviewing some areas that may not get much attention in your daily life.
DAY #1 – Review Social Security earnings record.
Find out if the Social Security Administration (SSA) is recording your earnings correctly.
#1 – Set-up an account at the official website ssa.gov.
#2 – Once logged in, find your Social Security Statement to view your earnings record.
#3 – Compare the yearly summary to your tax return filings or W-2’s.
The earnings record from ssa.gov should be consistent with the earnings on your tax filings or W-2’s.
If your earnings record according to ssa.gov is not accurate, you may not receive your full SS benefits.
Set a reminder to check the ssa.gov annually (around mid-year).
DAY #2 – Review and update beneficiaries.
Review all your retirement plans/accounts/trusts to ensure there are designated beneficiaries (if applicable).
Make a mental note to review beneficiaries periodically – especially after significant life changes and divorce.
DAY #3 – Review credit report.
Analyze your credit report and determine if it’s accurate.
Each 12-month period you can retrieve a FREE credit report from each of the 3 reporting agencies.
You can access your credit report via annualcreditreport.com.
What you want to check:
#1 – Errors and incorrect information.
#2 – Open accounts and amounts owed are correct.
#3 – Irregular activity or signs of identity theft.
#4 – Negative marks or notes due to non-payment.
You don’t have to pull all 3 credit reports at one time. You can stagger the retrieval of reports at various times throughout the year.
Once you pull each report, set a reminder to view it again every 12 months from that point on.
Please note: your credit report is not the same as a credit score. Your FICO credit score can be purchased for a small fee from any of the 3 reporting bureaus. There are free alternatives discussed below.
DAY #4 – Review credit score.
Learn what your credit score is and determine if it needs to be improved.
You have a couple of options to retrieve your credit score.
There’s a FICO score you can get at any of the 3 reporting agencies for a small fee.
Another option is using a free service to access your credit score.
What I’ve done in the past is pay for my FICO score and then use a free service in the interim to monitor my credit score.
The FREE well-known services available are Credit Sesame and Credit Karma.
The scores may vary across all the platforms you use.
From my experience, there are small differences – but that’s to be expected.
To learn more about the difference between a FICO score and the score you get from using free services, check out this article – Boost Your Credit Score & Fundamentals.
DAY #5 – Review common money mistakes.
There are money mistakes that you can avoid that will help your finances. Find out what they are today.
In the next couple of days, the goal here is to find tools to monitor and manage your money.
Keep in mind, that you want to choose tools that you will actually use, so feel free to substitute any of these recommendations to your preferences.
DAY #6 – Monitor financial accounts.
Find an option to view all accounts conveniently.
You may be familiar with financial aggregators, like Personal Capital or Mint.
Both these free services make it very easy to link your accounts and view them all in one place.
This is an A+ way to check your online accounts often!
Try to make a habit of checking on a weekly or bi-monthly basis.
DAY #7 – Manage money.
The method in how you manage your money is very important.
It’s more intensive than “monitoring” your money.
For today’s challenge, the focus is on budgeting and tracking your money.
There are many budgeting options including zero-based, 50-30-20, and cash-only. You can also create your own.
First, you want to choose a budgeting method that works for you.
Do you want to put a name to all your dollars? Try zero-based budgeting.
More about set it and forget it? Try 50-30-20 budgeting. This is where you use 50% for essentials and needs, 30% for extras and wants, 20% for saving and investing.
Don’t like budgeting? If you’re responsible with your spending, chances are having a budget is too restrictive for you.
It does what it’s meant to do – get you super familiar with your money.
You can be as restrictive or as flexible as you want. Simply adjust your expenses to help you achieve your short-term and long-term money goals.
In the next few days, I’m going to highlight some of the calculations that will be helpful for you to know.
DAY #8 – Calculate net income.
Net income = Income – Expenses
I use the term “net income” because it’s considered one of the most important numbers in a business.
When you hear people talking about the “bottom line”, it’s just another way of saying “net income”.
Companies have to watch their bottom line closely. They’re making the big decisions within their operations to make sure they stay profitable.
Of course, that’s what we all should aspire to do in our own lives – stay profitable!
Let’s break it down and calculate net income on a monthly basis.
Include all income that you can use to pay the bills each month. Unless you’re living off your investments through dividends and capital gains, I would NOT include those balances here.
- Take-home pay (what hits your bank account from 9-5)
- Other monthly income (i.e. side hustle, alimony, etc)
These can vary considerably, but essentially everything you pay OUT each month.
- Subscriptions (i.e. phone, Netflix, gym, etc)
- Debt payments
- Pet insurance
Now, it’s time to tally it up – take your income minus your expenses and you have your net income for the month.
Is it higher or lower than what you anticipated?
To calculate net income for the year, remember to factor in extra paychecks for 3 payday months and any other income you receive.
Also, for expenses, include one-off items (i.e. everything you pay on a quarterly, bi-annual, or annual basis).
If you’re using the offered Budget & Tracking Spreadsheet, simply follow along with the prompts and enter income and expenses by line item. You can also enter your one-off expenses.
Please note: For Day #10, you will need to know your estimated yearly expenses, so feel free to calculate it now.
DAY #9 – Calculate net worth.
Net worth = Assets – Liabilities
Net worth takes into account your assets and liabilities.
It’s an overall financial snapshot of what you have to your name at that point in time.
Let’s break it down and look at some of the items in each category.
Assets (balances of value that are owned):
- Cash and cash equivalents (i.e. CD’s, savings, checking)
- Investments (i.e. stocks, bonds, pension)
- Mortgage value (i.e. Zillow estimate)
- Other real estate
- Valuable items (i.e. art, jewelry, boat, auto)
Liabilities (balances owed):
- Mortgage loan
- Student loan
- Auto loan
- Credit card debt
- Other loans
Now, it’s time to tally it up – take your assets minus your liabilities and you have your net worth!
Here are a few reasons why it’s important to know your net worth.
→ Celebrate milestones and motivate yourself to stay on track with your goals.
→ Retirement planning.
→ Insurance purposes for determining how much coverage you need.
→ To minimize debt – if you have more liabilities than assets, it’s time to reevaluate.
Please note: I provided the “textbook” way to calculate net worth. Your circumstances may be different and you may choose to include certain line items and not others.
Personally, I have various calculations when it comes to net worth. It all comes down to one central goal – know what you have to work with so you can make changes that will benefit you financially.
DAY #10 – Calculate prelim retirement numbers.
On Day #8, you did the hard part by documenting your expenses. We’re going to use that information for this calculation.
Many times, you may throw money at investment accounts not realizing how much you’re actually going to need to retire someday.
Below, I’ll provide a quick and simple calculation that you can use now and in the future.
It’s a good starting point, but it’s up to you to truly assess your retirement needs.
To calculate your nest egg requirements, a rule of thumb is to multiply your annual expenses by 25.
Let’s say your annual spend is $60k, using the Multiply by 25 rule, you will need $1.5M ($60k x 25).
The “Multiply By 25 rule” is simply a way to estimate the necessary nest egg by taking desired annual income by 25.
This is another way of looking at the 4% rule which is used for considering how much to withdraw during retirement.
These methods assume a real rate of return of at least 4% (considering inflation).
For a more conservative approach use “33” as your factor, instead of “25”.
To take it a step further, use an investment calculator to compare your nest egg number (calculated earlier) to your projected number (calculator output).
Input the information necessary. Play with it and make adjustments to see how it changes your projections.
There are a lot of variations that can occur so it’s always good to be flexible when it comes to calculating your retirement numbers.
In the next few days, the focus is on savings. The goal is to find ways to save more money and set up accounts to add to savings.
DAY #11 – Use a savings plan to save more money.
When you have all your expenses laid out, either by using my budgeting tool or your own, you’ll be able to pinpoint your current spending and make changes.
Most of us want to save more money. The execution is key. There are various savings plans and challenges you can use.
If you want a quick way, comb through your expenses and reduce it by 10-15%.
Money-Saving Ideas: 14 Practical Tips To Save Money
DAY #12 – Find a no-spend activity to do today.
There are ways to curb your spending and also be productive.
Choose ONE activity from the list that is linked below and complete it today!
No-spend ideas: Save Money: 30+ Ideas To Trade Spending For Productivity
DAY #13 – Open a high-interest bearing online savings account.
Savings housed here can include your emergency fund, 1-2 years savings for future purchases, and gift savings.
When you have a separate savings account that’s not easily accessible, there’s a good chance you will leave it alone.
DAY #14 – Contribute to an emergency fund.
Emergency fund money is what will tide you over should a life event occur or if you need money for something important.
Choose to either fully fund an emergency fund OR start contributing by transferring $25-$50 to a savings account today!
A rule of thumb is to save 3-6x monthly expenses.
Keep in mind emergency costs related to housing, cars, family members including pets, deductibles, health, and the list goes on.
Decide on a level of emergency savings that helps you sleep well at night.
Investing is largely important for the long-run. The focus is to review contributions and check for fund expense fees.
DAY #15 – Increase workplace retirement contributions by 1-2%.
First off, if you’re not already contributing the full amount to get the employer match – this is the time do it!
This is a good time to look into increasing your contribution percentage 1-2% or even more.
Review and make upward adjustments each year. Also, if you receive bonuses, consider contributing a portion.
All these changes can be made at your plan administrator’s website.
If you don’t have investments through your employer, this is a chance for you to evaluate any personal investments and consider your contributions for the year.
DAY #16 – Check expense fees for investment funds.
Pay close attention to the “expense ratio”. It can be found in the prospectus of the particular fund.
Try to keep this ratio as low as possible to minimize fees over the long-run.
Be cognizant of fees when choosing your funds as it can eat away at your returns.
Generally, actively managed funds will have higher expense ratios, whereas passive funds will have lower expense ratios.
It’s best to evaluate the types of stocks that are within each fund. This way you can compare similar funds to their respective expense ratios. For instance, you may have a High Growth Fund that has a 1% expense ratio. A similar fund may be .49%
If you’re looking for an alternative way to evaluate your fees, try FeeX.com.
The goal for the next few days is to add ways to maximize the value and minimize the costs when shopping.
DAY #17 – Download cash back and promo code apps to get the most out of your money.
If you plan on shopping, why not get cash back for your efforts?
Here are a few ideas:
Retail-Me-Not – coupon codes
Circle (formerly Cartwheel) – Target shopping
DAY #18 – Make a grocery shopping list for the next week.
Having a shopping list helps you think more strategically about your purchases. Sure, you can still get your snacks – just add them to the list AND EDIT! 😉
It’s time to evaluate what you’re saving for in the short-and-long term. Use your money goals to drive your financial progress.
DAY #19 – Write out short-term money goals and derive an action plan.
Today, the focus is on short-term (1 year or less) goals.
What money goals do you want to achieve in the near future?
Take the time to write them down and use an action plan to help you get there.
Ideas for short-term goals: max out IRA at $5,500, save $2,000 in the next 12-months
DAY #20 – Write out long-term money goals and derive an action plan.
I’ve always said this. If you don’t realize your long-term money goals now, how do you know what is off limits in the interim?
For instance, if you want financial freedom on a modest income, throwing money at a McMansion mortgage doesn’t move you in the right direction.
Ideas for long-term goals: down payment for new home, financial freedom, once-in-a-lifetime trip
DAY #21 – Automate savings for money goals.
Automate your savings by scheduling recurring money transfers.
Short-term: $5,000 for new-to-you car to be purchased in 1 year. You will need to transfer $417/month for 12 months to make it to your goal.
Long-term: $30,000 down payment over 24 months. You will need to transfer $1,250/month for 24 months to make it to your goal.
At this point, you may find that it’s getting easier to envision how you’re going to progress to a goal. Your goals may need adjustments – make it work for you.
It’s always good to know your options. I’m highlighting a few of the areas that you may need to review or add coverages to depending on your needs. Research and only add services that you understand.
DAY #22 – Review insurance coverage.
Have your coverage needs changed? Do you need more or less coverage? Today, take a moment to review your needs and make adjustments accordingly.
DAY #23 – Research umbrella insurance.
Umbrella insurance helps guard your assets against claims and lawsuits.
The premium varies depending on coverage, but is minimal compared to the benefits.
Check with your current insurance carrier for an affordable option.
DAY #24 – Research identity theft protection services.
There are ways to protect yourself from identity theft that you don’t necessarily have to pay for, such as checking your credit regularly, limiting your exposure, setting up fraud alerts, and practicing good judgment.
Below are some ways to guard against identity theft:
→ Avoid googling customer service phone numbers. There may be a hacker on the other end that is waiting to steal your information.
→ Don’t open suspicious emails.
→ Research anything that seems too good to be true or has suspicious circumstances.
→ Don’t be afraid to ask questions.
→ Avoid phone calls from unknown numbers unless you’re expecting them (on your personal number).
If you’re seeking additional layers of security, purchasing ID fraud insurance for $10-$35 per month is an option.
Below are some of the coverage highlights (*amounts vary depending on the plan):
→ Credit monitoring
→ SSN and identity usage alerts
→ Stolen funds reimbursement*
DAY #25 – Research health savings accounts.
A health savings account is used in conjunction with qualified high-deductible health plans. Evaluate your health needs and go into registration at the end of this year knowing your options.
It’s time to organize! These next few days really work on organizing your financial life.
DAY #26 – Store debit or credit cards away.
Add a post-it note to the cards to remind you of its intended use.
For instance, you may have a card strictly for travel. If so, adding a note to the card and hiding it away will help you get things organized and be ready when you do need it.
Carrying around all your debit/credit cards everyday leads to more of a headache if you potentially lose your wallet. Carry 1-2 cards and store the rest.
DAY #27 – Change passwords.
You may have your passwords organized in your memory.
Consider changing your passwords and adding an additional layer of security to all your accounts.
Organize all the changes by writing it down or using another way of documenting it.
DAY #28 – Keep financial documents organized.
Gather all documents and create one central location. This way you know exactly where to go to find something – or ask your mate to find for you!
For instance, recently I took all my files from a file cabinet, sorted out a good amount to be shredded and put them back in one area. My goal is to get a portable box and file everything in there so I can pick it up and go.
These last few days, let’s tackle debt. If you don’t have any debt and have no upcoming debt plans, you finished early!
DAY #29 – Make a debt payoff plan for non-mortgage debt.
This refers to credit card debt, auto loans, and payday loans – to name a few.
Before accruing debt, make a plan as to how you will pay it off. Keep in mind that all debts can be paid off prior to maturity (given there may be a pre-payment penalty). It’s always in your best “interest” to pay off high-interest debt.
To start, take all debts and list them out one by one. An option is to pay all the smaller balances first. With this method, you can build momentum and confidence working through your debt payoff journey.
The length of time may span a few years so set up a plan that works best for your situation.
DAY #30 – Make debt choices that don’t hinder financial progress.
DEBT. A 4-letter word that can spell trouble. Today, learn more about what to watch out for when making debt decisions.
YOU MADE IT!
If this 30-day money challenge has helped you, please share it!