Written by Jack Fehr for Next Avenue
New Year’s resolutions: so easy to make, so hard to keep. But what if you could make just one financial resolution that would improve your life in four ways?
Here’s how: Make a habit of reading between the lines of your financial statements from your bank, mutual funds, credit card issuers, insurers and mortgage company. Many of these companies, sadly, shroud their products in confusing terminology that requires a linguistic scholar — or at least a person with some time — to decipher.
Learning how to sort through and interpret the financial and legal goop that confuses and abuses can help you…
Remember when banks used to offer decent-paying savings accounts and offer lures for banking with them? Now that they only pay a smidge over 0 percent for savings accounts, charge for checks, ding you for debit card use and sock you with ATM charges, those days are gone. But you don’t have to take it.
Read between the lines of their rules to find accounts that waive some charges if you use your debit card so many times a month, pay your bills automatically through checking or direct deposit money to the bank. Keep an eye on changes in these and other areas, such as soaring returned-check charges.
According to NerdWallet, in 2015, the average household had $15,355 in credit card debt and paid $6,658 in interest. To get control of your credit in 2016 — a year when rates on credit cards and loans are expected to rise, according to Bankrate.com’s Chief Financial Analyst Greg McBride — take a hard look at your APR, or annual percentage rate.
Even a favorable credit card rate is in the low teens these days and can cost you dearly when you make only minimum payments. A minimum payment of $15 a month for a $600 iPad on an 18 percent credit card can ultimately jack up your cost by more than 50 percent and it’ll take you five years to pay off the product.
For a closer look at your credit card habits, look at your statement’s finance charges each month. By making merely the minimum payments, you could wind up paying as much for these as you do for principal. Instead, knock off your debt one card at a time or in one of these ways.
There’s an added benefit of tackling debt in 2016 if you’ll be looking for work. “Whittling away debt over time can give you more flexibility when attempting a career transition,” says Next Avenue contributor Kerry Hannon, author of Getting the Job You Want After 50 For Dummies and Love Your Job: The New Rules for Career Happiness. “When you pay down your bills, you can afford to accept less from a new job.”
Financial providers love their fees and charge all manners of them — including asset management fees, sales charges, surrender charges and commissions. You need to find them so you can see if you can do better elsewhere.
In your investment account statement, look for transaction fees paid for buying or selling securities and any other fees that may fold into commissions. You may have to dig into your opening account papers for more specifics on these.
If you can’t find them, demand a detailed breakdown from your investment sales rep or financial adviser. Even what seems like a small cost can make a big difference over time. According to the Securities and Exchange Commission, over 20 years, annual fees of 1 percent can reduce an investment portfolio earning 4 percent annually by nearly $30,000 compared to the same portfolio with a 0.25 percent fee.
The lowest health insurance premium doesn’t usually represent the lowest cost insurance, thanks to a bevy of other charges. If you own private insurance, read between the lines by learning the terminology in this Healthcare.gov explainer. If you’re 65 or older and on Medicare, get the ABCs on Parts A, B, C, D and Medigap in this article at Medicare.gov.
These helpful guides explain deductibles, copayments, coinsurance, network services and other key terms. After reading them, you can start comparing total costs accurately. (For an amusing, but educational, look at health insurance lingo, check out Kaiser Family Foundation’s cartoon video here.)
Whatever you do, don’t automatically renew the same health policy without looking — insurers often change their approved providers and services annually.
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