As the global and national economies continue to worsen, working adults are turning to several time-tested, reliable financial tactics to preserve capital. Amid an international supply chain crisis, record high inflation, and rampant unemployment, those lucky enough to still have good jobs are employing all the tools in their budgeting and investing arsenals to remain solvent. For investing enthusiasts, DCA (dollar cost averaging) is making a big comeback, primarily because it allows people to invest on a regular basis even when they have less money to devote to the cause. Adults who are still paying on student loans are discovering that the power of refinancing can not only lower their monthly payments but also help them get a firm handle on education debt. Additional hacks include:
- Paying credit cards down to zero balances in order to avoid pouring cash into the interest pit every month.
- Staying away from the new-car showroom and buying previously owned models instead
- Being disciplined about setting aside a fixed percentage of income, preferably at least 5%
- Readjusting portfolios to include precious metals as a way to offset the decaying effects of inflation
- Consistently adding as much as legally allowable to IRAs
Use Dollar Cost Averaging (DCA) Principles
One of the oldest investing techniques, DCA, works best with stocks, precious metals, standard savings accounts, IRAs, and index funds. But the ingenious concept behind the hack can be applied to numerous money-related situations. The name of the tactic is derived from the method of devoting a specific dollar amount to a specific account every month.
For instance, those who can afford to add $250 monthly to an equities portfolio would purchase that dollar amount, and no more, of their favorite shares 12 times per year, regardless of the price of each share. The mathematical simplicity of DCA is one of its main advantages. That’s why people use it for buying precious metals and other investment-grade assets without worrying about volatile price swings.
Refinance Your Student Loans
Working adults interested in various student loan refinance strategies can gain some tangible benefits in short order. That’s because refinancing allows them to reset their education debt by trading one or more old loans for brand-new one. That means lower payments, a single due date, access to better terms, and competitive rates. A student loan refi is truly a win-win situation for those who are still carrying old college loans and want a solid dose of financial relief. Reduced monthly expenses are the icing on the cake for people who refinance.
Stop Paying Credit Card Interest
The single most avoidable expense for most individuals is credit card interest. Make a commitment to stop pouring your hard-earned cash into the bottomless pit of plastic credit cards. That means you’ll need a detailed plan for paying all balances to zero. After that, it’s okay to use cards for convenience or in emergencies, but make an effort to pay them off each month to avoid additional interest charges. If you need a substantial amount of money for a special reason, apply for a personal loan to get more favorable interest rates and terms than those offered by card issuers.
Never Buy a New Car
New cars depreciate rapidly. For that reason and a host of others, it makes good sense to purchase used vehicles that are two or three years old, have low mileage, and are in excellent condition. Consider using certified pre-owned dealerships that have good reputations in the community. Or work with a vehicle broker who can locate the make, model, and year you desire.
Brokers charge about $500 for their services, but they offer buyers the chance to avoid dealer markups and get what they want. Check with online consumer rating guides to help you find reliable used vehicles.
Save at Least 5% Monthly
Even if you can’t afford to set 5% of our income aside right now, set that amount as a goal. Working people who are able to save that much on a regular basis can build a solid financial foundation for long-term stability, no matter what their income level. The other part of developing a savings strategy is to make the process automatic. Set up a direct payroll deposit at work or your favorite bank. Designate a portion, not a fixed dollar amount, to go into a segregated savings account. The double purpose of this approach is to make saving a habit and to slowly build up to the 5% target level.
Contribute the Maximum to IRAs
Married couples must maintain separate IRAs, but each individual can contribute up to $6,500 annually to their accounts or $7,500 per year if they are 50 or older. Unless you earn too much, consider using a Roth IRA for maximum convenience and tax benefits. Roth plans use after-tax contributions, but there are no taxes at all on future withdrawals, regardless of the account holder’s income bracket or tax status.