Little things can mean a lot to your budget

Have you ever saved your change? You know, you get home at the end of the day, empty your pockets and throw whatever coins you find in a jar. Then, after a year or so, you take that change to the bank and what seemed like next to nothing — pennies, nickels, barely any quarters — has somehow miraculously turned into real cash, and almost always more than you were expecting.

That's because little things truly do add up over time. Those pennies and nickels, seemingly worthless, can turn into enough cash to pay for a date night. You don't feel like you're saving, but you are. Believe it or not, you're likely to feel the same way about other small tweaks to your financial habits. That's what this column is about: The little things you can do that make a big difference over time.

• Bump up your retirement contribution.You hear this advice all the time: Save 10 to 15 percent of your salary. That number can seem like an impossible dream, even when you factor in matching dollars from your employer (which, for the record, definitely count). Here's how you get there: Increase your contribution by just 1 percent. On a $40,000 salary, that's only an extra $400 a year, $34 a month. You'll adjust, I promise, and once you do, bump it up another 1 percent. Continue to increase it on a regular basis — and add even more when you get a raise or bonus — and you'll be on track in no time, with little to no pain.

Cash back: On that $40,000 salary, a 1 percent increase will net you an extra $83,786 after 30 years, assuming annual salary increases of 5 percent, no employer contribution and 8 percent returns; 2 percent and you'll net an extra $167,572. The difference between saving, say, 6 percent and the full 15 percent: $749,053.

• Lower your expense ratios.Employer-sponsored retirement plans are notorious for being more expensive, in general. There are ways to cut costs, says Diana Palmer, a certified financial planner in Ohio.


"Sit down and take a look inside your retirement plan. Most plans have electronically traded funds (ETFs) or index options in addition to actively managed funds. Actively managed funds can be two to three times as expensive as index funds," she said.

Passive funds like index or ETFs also generally perform as well as actively managed funds, so you're likely not sacrificing much return.

Cash back: Palmer says that shaving just half a percent off your expenses inside your retirement fund could yield you a balance that is 13 percent larger after 30 years.

• Use employer benefits.You probably signed up for the health insurance plan and the retirement plan, but there may be other perks offered by your company that you're missing out on.

"You need to get into that human resources manual because there are benefits, I guarantee, that you're not taking advantage of you and that you may not even know about. This is particularly important if you're not getting a raise — and many people aren't right now. You need to do everything you can to make your employer work for you," says Stacy Francis, a certified financial planner in New York.

A few common offerings: Flexible spending accounts, tuition reimbursement, discounted disability, life and liability insurance, and TransitChek, which allows you to pay for public transportation with pre-tax dollars.

Cash back: If you pay 25 percent taxes and put $1,000 in a flexible spending account to pay for things like glasses and dependent care, you could save about $250. Just keep in mind a new rule this year: Money in FSAs can't be used for over-the-counter medications unless you have a prescription. TransitChek could save you even more: Here in New York, if you make $40,000 and buy the unlimited ride monthly MetroCard ($104), you could save up to $492 a year by purchasing it with pre-tax dollars.

• Lower your interest rates.Now, says Francis, is the time to do it.


"We're seeing interest rates on credit cards creep up for two reasons: First of all, interest rates are rising. And then there are fewer defaults. Most people are paying on time, which is a great thing, but it means that credit card companies aren't making as much money from interest and late payment penalties," Francis said.

We've talked about this before, but here's a quick refresher: Wait until you get a 0 percent balance transfer offer in the mail, then call up your credit card company. Cite a few reasons why you're a good customer — you always pay on time, you have a long history with the company — and then explain that you have another offer and you're going to take your business elsewhere if they won't lower your interest rate. If the first person you talk to says no, ask for a supervisor.

Cash back: If you have a $3,000 balance on a card with an 18 percent interest rate, making just the minimum payment will cost you $6,351 in interest alone. Bump that rate down just 3 percent, to 15 percent, and you'll save $2,643. Talk them down to 11 percent and you'll save $4,394.

• Pay attention.This is, I think, one of the single best things you can do for your finances, and it's an easy one: Simply track where your money is going. Whether you find that $100 is blown on sandwiches every month or those little last-minute trips to the grocery store are costing you an extra $250, knowing, as they say, is half the battle.

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