Personal Finance Tasks That Aren’t as Hard as You Think
The thought of making a budget or preparing your own taxes makes you want to collapse on the couch and binge watch your favorite TV show. It’s understandable: Most people don’t consider personal finance to be a fun way to pass an afternoon.
But the truth is, most personal finance tasks aren’t nearly as difficult or time-consuming as you think they are. And if you muster up the courage to finally take them on, you can generate a nice financial boost for yourself.
These personal finance tasks aren’t as tricky as you think. Give them a go. You’ll feel a lot less guilty when you waste three hours streaming old episodes of Battlestar Galactica.
- Writing a household budget
Drafting a budget is the first step toward making good financial choices. The problem? Making a budget sounds dull and difficult.
The good news, though, is that it doesn’t take nearly as much time or effort as many people assume it does. Simply list your monthly expenses that never change — everything from your mortgage or rent payment, to your car payment and insurance costs. Next, list those costs that change each month — such as your utility bill, transportation costs, and grocery spending. Put down an estimate for how much you think you’ll spend on these items every month.
From there, list the expenses that are more discretionary, such as eating out or going to the movies. Create a maximum spend for these items each month.
Finally, list the money that comes into your household from salaries, overtime, bonuses, settlements, investments, and any other source that pays out each month. Compare your expenses to your income. Now you know how much leeway you have in your monthly budget and how much you can devote to savings. Best of all? Doing this doesn’t have to take more than an hour. (See also: Build Your First Budget in 5 Easy Steps)
- Building an emergency fund
Financial experts recommend that you have six months’ to a year’s worth of daily living expenses saved in an emergency fund. That way, if you face an unexpected financial emergency — anything from a $1,000 car repair bill to a job loss — you’ll have money set aside and won’t have to resort to credit cards.
Building such a large emergency fund sounds intimidating. But if you take it in small steps, you’ll find that building this fund isn’t nearly as hard as you think.
Start with whatever you can spare each month. If you can only devote $100 a month to your emergency fund, start with that. After a year, you’ll have $1,200 saved. If you can save $200 a month, you’ll have $2,400 at the end of a year.
The key is to continue depositing whatever you can in your emergency fund. If you do, you’ll be surprised at how quickly it grows. (See also: 5-Minute Finance: Start an Emergency Fund)
- Making a will
Drafting a will not only sounds complicated, it’s also not much fun to think about. No one wants to consider their own death. But if you own property and assets, you absolutely need a will to make sure those assets are passed on to your loved ones according to your wishes after you die.
How to do it? Start by titling a blank document with the words “Last will and testament.” Then, state your name and write that you are of sound mind and legal age (this is usually 18).
Name the executor of your will — the person who will carry out what your will states after you die — and name a legal guardian to take care of your children if you should pass away.
Your will should include the names of any beneficiaries, the people whom you want to inherit your assets. Usually, this will be your children or spouse. But you can also name friends, charities, other relatives, or organizations.
Finally, list your assets and whom they should go to. This can include your home, your savings, your car, or any other possessions.
Sign the will in front of at least two witnesses. Check with your state; in some, your witnesses can’t be beneficiaries. Write down these witnesses’ names and addresses. Make sure they sign your will, too.
- Paying your taxes
It can be tempting to hire an accountant or tax pro to do your taxes for you. The truth, though, is that most of us can do our taxes on our own.
Taxes for most people aren’t overly complicated. Things only get messy if you rely heavily on freelance income, write off part of your home as an office, or have plenty of deductions that you want to claim. Most taxpayers don’t fall into that category. They can file their taxes on their own, especially with the help of easy-to-follow tax preparation software.
So before you spend $600, $700, or more on a professional tax filer, consider doing this on your own. It’ll usually take you less than an afternoon.