The Real Simple Guide to Real Life

CREDIT SCORE: A three-digit number that lenders (for example, banks and credit-card issuers) use to determine your creditworthiness. It is a numerical representation of what’s on your credit report and is calculated using information from each of the major credit bureaus. A score of 700 or higher is generally considered good.

DIVIDEND: A portion of earnings that is paid to a stockholder. You can usually choose to receive your dividend payment via direct deposit or have the money reinvested.

EARNINGS: The dollar amount of profit that a company earns. You’ll often hear earnings described as “strong” or “weak,” and they’re usually quoted as dollars (or cents) per share. As in: In the first quarter of 2015, Mega Corporation reported earnings of 78 cents per share.

ELECTRONICALLY TRADED FUND (ETF): An assortment of stocks, bonds, and commodities, this investment is often a low-cost alternative to a mutual fund (see definition below).

GROSS INCOME: Your total income (your earnings and investment income) before subtracting taxes (state, federal, local) and any tax deductions.

INDEX FUND: A specific type of mutual fund or ETF that attempts to replicate the movements (ups and downs) of a specific portion of the stock market, such as the S&P 500, the Dow Jones Industrial Average, or the FTSE 100.

LIABILITY: Any debt that you owe, such as a car loan or credit-card debt. Long-term liabilities are debts that are paid over years or even decades; current liabilities are paid in full within a year.

MUTUAL FUND: This is a type of investment in which a pool of assets (stocks, bonds, cash) are lumped together and managed by investment professionals. Active mutual funds (the most common kind) aim to outperform index funds—in other words, make more money when the stock market is up and minimize losses when the market is meh.

NET WORTH: The amount that all your assets are worth once all your liabilities have been subtracted. Let’s say you own an apartment that’s worth $100,000, a car that’s valued at $7,000, and $2,200 worth of investments. However, you have an $85,000 mortgage and a $5,000 student loan. Your net worth is—bum-da-da-dum!—$19,200.

PROFIT: The amount of money that a business makes after deducting all of its expenses (paying salaries, the cost of office space, employee-sponsored health insurance, staplers, etc.).

REVENUE: The amount of money that a company or the government brings in through its business.

REVOLVING BALANCE: The amount of spending on your credit card that goes unpaid from month to month. The larger your revolving balance is, the more you’ll owe in interest.

STOCKS: A share in the ownership of a business. When it comes to buying stocks, there are two types available for purchase—common, which gives you voting rights even if you own just a single share, and preferred, which usually does not permit you to vote at shareholder meetings but entitles you to a bigger piece of the profits and earnings. Purchasing shares of individual stocks is considered riskier than owning bonds or mutual funds.

TARGET-DATE RETIREMENT FUNDS: A specific type of mutual fund in which a portfolio manager automatically adjusts the funds’ holdings (and thus your risk) based upon how close you are to retirement. If you want to have investments but want them to be as low-maintenance as possible, these are the funds for you.

Determine your top priority: Is it having a smartphone app that allows you to deposit checks instantly? Then narrow your search to national banks with the dough to put behind this type of service. Or are you more interested in doing business with an institution that shares your values or isn’t “too big to fail”? “If you like to support local businesses or consider yourself socially minded, having a checking account at a local bank or a credit union is a great way to put your dollars into your activism,” says Gichon.

Once upon a time, nearly all checking accounts were free. Nowadays, if you’re not careful, the cost of simply having one can reach triple digits annually. But here’s the bottom line: You should never have to pay for a checking account. With most national banks and many local ones, you can avoid this maintenance charge if you meet certain requirements each month, such as direct-depositing a predetermined amount (typically $500 to $1,000 on a monthly basis) from the get-go, maintaining a minimum balance ($1,500 to $2,000), or making a certain number of purchases with your debit card. Don’t assume that the biggest banks offer the best deals. “You can often negotiate to get this fee waived at small credit unions and savings and loans,” says Gichon.

Ideally, pick a financial institution that has ATMs close to both your home and your workplace. Otherwise, every time you use a machine that’s not affiliated with your bank, it will cost you a minimum of a few bucks per withdrawal. But if you rarely use cash, you may not need to choose the bank with an ATM just around the corner.

Regardless of where you do your banking—both checking and savings—make sure that your accounts are backed up by the Federal Deposit Insurance Corporation (FDIC). This means that if your bank goes under (and some did after the economic meltdown in 2008), your money will be returned to you—up to $250,000 total.

“Find something you believe in and invest in it. It’s emotional investing, but you win either way: financially, if the project or cause takes off, or in other ways, by having the satisfaction that you supported something that touched you. It’s much easier these days to find those sources of inspiration. And you only need to contribute a small amount.”

AMANDA DRURY is a news anchor for CNBC.

Chances are, you’ll want a brick-and-mortar bank for your checking so you can easily hit up ATMs. But consider putting your savings into an online bank, such as Ally, American Express Personal Savings, or Capital One 360. (Choose one that can be linked to your checking account and lets you make transfers for free.) Since these banks don’t have the expense of operating physical branches, they can offer you higher interest rates than those with physical locations. Also, since it’s slightly more difficult to get to the money (it can take a couple of days to transfer money from an online bank), you will be less likely to dip into your savings when you want to make a withdrawal from the ATM but don’t have the funds.

FACT: More like two (not counting store cards). Ideally, your main card should be a rewards card that you use to charge everything, racking up points in the process. (Be sure that you pay the bill in full each month to avoid interest charges.)

The second card should be a backup, to be used primarily for emergency expenses. For example, your brakes go out and you must replace them stat. In case you ever need to carry a balance, make sure the card has a low interest rate (look for an APR in the midteens) and a high limit, such as $5,000 or more. Then use this card once a month. One idea: Set up one of your recurring bills, like electric, on auto pay to keep the account active, says Gerri Detweiler, the director of consumer education for the personal finance website Credit.com. Otherwise the issuer may close the account.

If you already have more than two credit cards, don’t fret. Keep the accounts, as long as you’re using them responsibly—meaning, you pay the balance every month and use less than 10 percent of your total available credit. But if you have a hard time keeping track of balances, due dates, and terms and conditions, then you might want to reduce the number you carry to two.

MYTH: Moving a balance from, say, your Mastercard to a new Discover with a lower interest rate saves you money.

FACT: It seems as if 80 percent of your snail mail is made up of credit-card solicitations. And while the cover letters make it sound like balance transfers are awesome for everyone, that’s not quite so.

On the pro side of balance transfers: You will reduce how much you owe each month, save money on finance charges, pay less in interest charges, and overall make your financial life simpler. The cons: Transfer fees could cost you as much as 5 percent of the balance. So moving $5,000 from card A to card B would cost you $250. Plus, the sweet deals, like zero-percent balance transfers for 18 months, are typically reserved for those with a spotless credit history.

Before applying for a new card that you plan to transfer a balance to, find out these important pieces of information from the issuer’s website or a company representative.

• How much you need to pony up each month to pay off the balance before that time ends

FACT: Surprise, surprise: A card can be worth the cost. Before you sign up for one, however, do some math to see if the benefits pay for, or exceed, the yearly charge. Say an airline-sponsored card charges a $100 annual fee but allows cardholders to check one bag for free on every flight. If you take a few round-trip flights a year, you will come out ahead.

FACT: Who says no to a discount—especially when your closet is chock-full of concert T-shirts and you need a work wardrobe à la Olivia Pope? That’s exactly what retailers count on when they offer promotions, discounts, rewards programs, zero-percent financing, and other perks if you open a card account with them. Some store cards can be worth having, but don’t sign up for every one you’re offered—that will put you at risk of racking up debt. “Get them only from the one or two stores that you frequent the most; otherwise you may lose track of when the various bills are due,” says Bill Hardekopf, the chief executive officer of LowCards.com, a credit-card comparison site.

This rule of thumb especially holds true if you’re in the market for something big that requires financing, like a new car. Why? Each application for a new credit card triggers an inquiry on your credit report. Opening several accounts in a short period of time makes you look like a risky borrower and could reduce your credit score by up to 30 points. As a result, you might only qualify for a loan with so-so terms.

If you’re the type who never pays her credit-card bill in full, always say no to store credit cards. They usually charge interest rates that exceed 20 percent, compared with 14 percent and up for regular cards.

FACT: Welll, yeah, it actually could. Your score could plummet more than 100 points—especially if you had a great one (700 or higher). That’s because the higher it is to begin with, the harder the fall. “Someone with a lower score is already seen as a risk, so their messing up is almost expected. As a result, they would potentially lose only 60 to 80 points,” says Liz Weston, the author of Your Credit Score.

If making the payment totally slips your mind until the next month’s statement arrives, there’s not a lot you can do. Except set up automatic bill pay. Which, if you haven’t done it already, you should get on it. Go ahead—we’ll wait.

MYTH: Persuading your issuer to reduce your fees or increase your credit limit is like convincing Justin Bieber to put his shirt back on.

FACT: It’s possible to do. Say you want a lower interest rate. Call customer service, mention that you’ve received a couple of the attractive competing offers, then tell the representative that you would like to remain a loyal customer but that you are weighing your options. Then ask, “What can we do to work this out?” instead of “What can you do for me?” “Using ‘we’ when you’re talking about a solution creates a sense of working together toward a common goal,” says Noah Goldstein, an associate professor of management and organization at the UCLA Anderson School of Management. Keep in mind, however, that if you’ve practiced poor behavior (maxing out your card, habitually skipping payments, or having poor credit), your issuer probably won’t do you any favors.

FACT: Debit cards have their benefits: Unless you overdraw, you can’t spend more than the amount that’s in your bank account, and you don’t have to worry about late fees or interest rates.

Credit cards, however, are generally more consumer-friendly. According to federal law, a credit-card user will pay, at most, $50 if fraud occurs on a card. (Even better, many issuers offer zero liability, meaning you won’t pay a penny.) In sharp contrast, a debit-card user can be on the hook for $500 if she doesn’t report the unauthorized transactions within two business days of learning about them, according to the Federal Trade Commission. And if more than 60 days go by before the bank is informed of the fraud? Say auf Wiedersehen to all that money.

Use plastic for all online purchases and for all big-ticket items (sofas, coffeemakers, trips to Bermuda), since your credit-card company will refund your money if the item you purchased was misrepresented. This won’t happen with a debit card. Additionally, when you use a debit card for certain types of purchases—those in which the final purchase price is unknown at the exact time of the swipe, like filling your tank with gas or making hotel reservations—the merchant can place a hold on your account and reserve more money for itself than you actually spend, says Linda Sherry, a spokesperson for the San Francisco–based watchdog group Consumer Action. Example: A gas station might freeze $100 (even though you bought only $20 worth of gas) for several days. If you need that money, you’ll be out of luck until it removes the hold.

FACT: Alas, there’s no (totally) free lunch—or Kate Spade trench. Yes, rewards-card issuers promise to give you back a percentage of your credit-card purchases every month—sometimes after you earn a preset minimum, ranging from $20 to $100. You receive the cash back in the form of a check, a credit toward your balance, or a gift card.

However, there are a few catches: You’ll need a gold-plated credit score (720 or higher) to qualify for the cards with the best rewards, like those that offer 1 to 1.5 percent cash back on all purchases or up to 6 percent back in bonus categories, like dining or at designated retailers. Cards with the most lucrative rewards levy an annual fee of $50 to $100; their interest rates are higher on average than those for standard cards; and some issuers cap how much cash back you can accrue in a year. These cards can pay off if you are spendy in categories that offer cash back, like gas and clothing, says Beverly Harzog, a credit-card expert. But if you usually carry a balance, she says, “opt for a low-interest card or you’ll spend more on interest than you’ll ever get in cash back.”

I was terrified of spending a dime. Then I figured out a new way to tally my own personal balance sheet. By Cristina Henríquez

I CAN’T REMEMBER exactly how it started. $1.09 for a bar of soap. $7.99 for disposable razors. $22 for a wool winter coat from the thrift store. All of it felt like too much. I remember so vividly standing in the aisle of Walgreens, picking up a bottle of shampoo and putting it back again, having a conversation in my head that went something like this.

It was never really about the money, of course. I had just graduated from college and had walked at last into the wide-open world, which felt enormous and overwhelming. I had a job as an administrative assistant where I earned not very much, but enough to get by. Enough, certainly, to purchase shampoo. But I was scared of so much back then. Sirens blared near my apartment on the South Side of Chicago; cats clawed at each other in the alleyway as I tried to sleep; the radiators hissed and knocked. I was terrified that my boss would discover I had no idea what I was doing and expose me for the imposter I was. I was terrified that anyone would discover me at all, actually, not only at work but in life, and terrified, too, that they wouldn’t. The bounds of the world felt so impossibly beyond me—and they were. I couldn’t control almost anything—but I could control my money.

I sewed skirts with their uneven pleats and serpentine zippers. I gave myself haircuts, hoping no one would notice the blunt ends. I packed my lunches, said no to going out with friends, hoarded prepaid phone cards to keep from paying for long distance.

When my money anxiety got so bad that I had a panic attack, I sought out a therapist. Strangely, I remember almost nothing about the sessions—I went to only a few—but whatever happened must have helped.

Slowly, I found my bearings. The world was still huge, but within it I found a space that felt manageable and safe. Gradually, my fears diminished. The sirens, I told myself, meant someone was getting help; the radiators provided comfort through the long winters; I got better at my job. I learned to focus not only on the money I was spending but also on what I was getting for it in return. It was a lesson about the world: What you give, you get back.

From that point on, I went to Walgreens as often as I needed. I walked through the aisles and bought the razors, the soap, and, yes, the shampoo.

CRISTINA HENRÍQUEZ IS THE AUTHOR OF THE NOVELS THE BOOK OF UNKNOWN AMERICANS AND THE WORLD IN HALF.

Stuff happens. And by stuff, we mean the flu, a sprained ankle, an errant bike messenger who zooms into your crosswalk at the exact moment you step off the curb. If you don’t have insurance, even a small medical mishap can become a financial catastrophe. You are probably covered in one of three ways: through your parents’ insurance; through your employer; or independently. Whichever situation applies to you, here’s what you need to know.

You’re good to go until the age of 26, at which point you will need to obtain it through your employer or purchase it yourself.

Go ahead and select a plan offered by your employer. In general, if you are healthy and don’t suffer from any chronic illnesses, you can consider a plan that has a lower monthly premium and a higher deductible. Just remember that if you do get sick or have an accident, you may need to cough up a lot out of pocket. This type of policy often has a health-savings account (HSA) attached to it, which allows you to set aside pretax dollars to be used for medical expenses. If the funds aren’t spent during the calendar year, they roll over to the following year.

However, if you have a chronic illness or want the peace of mind of knowing that you have lower copays and deductibles, opt for a plan that charges more money up front.

Once you make your choice, be aware that you are committed to that plan until your company’s next annual open enrollment period (typically in the fall), unless your job is terminated.

Head to HealthCare.gov, the federal health insurance marketplace, which presents all your insurance options in one place and in easy-to-understand language. (If your state runs its own marketplace, the federal site will redirect you there.) You’ll see all the various plans that are available; the monthly cost, copays, deductibles, and out-of-pocket maximum costs of each plan; prescription-drug restrictions; the provider network; and whether you’re eligible for a subsidy to help reduce your monthly expenses or cost-sharing reductions, which will lower your deductibles, copays, and coinsurance.

If you’re worried that you will sign up for a junky policy, fret not. All individual plans sold through the marketplaces must meet minimum-coverage requirements established by the Affordable Care Act (ACA)—including emergency services, prescription drugs, rehabilitative services, lab work, and pediatric care. The ACA also prohibits insurance companies from denying you coverage because of preexisting conditions, and it kills all lifetime dollar-amount limits on necessary benefits, like hospitalizations. It also allows you to receive a number of preventative-care services—vaccines, blood pressure checks, depression screenings, a yearly physical, and in most cases contraception—for free, even if you haven’t met your insurance deductible. Some also offer dental and vision coverage. All individual plans must include maternity coverage, too. And while that may not matter to you today, in a few years you might think differently.

Finally, when shopping the marketplaces, understand that all policies are categorized into four types—bronze, silver, gold, and platinum. A bronze policy, for example, may have a lower premium but could charge higher cost sharing or a higher deductible, whereas a platinum policy will probably have a higher premium but lower cost-sharing expenses. Regardless, the benefits are the same across all four tiers, protecting you from all sorts of medical-related financial worries.

MONEY-SAVING SECRET

EATING OUT? BE THE ONE WHO ORDERS FIRST

HERE’S WHY: According to research from the University of Illinois at Urbana-Champaign, peer pressure strongly influences your meal choice, even more so than price or calorie count.

“People eating together may not choose the exact same entrée, but they tend to pick dishes that are in a similar category,” says Brenna Ellison, an assistant professor of agricultural economics and the study’s author. So if your GF orders the expensive beef tenderloin, you’re more likely to pick something of similar quality, like rack of lamb, even if that means you won’t be able to pay your Visa bill for the month.

To keep dining-out expenses from eating up your budget, speak up first when the waiter takes your order, says Ellison. If you’re planning to order only an entrée (saving money by skipping an appetizer or dessert), stick to that, even if your friend opts for a feast. Or scout the online menu and make a decision before you ever sit down.

If you drive, this coverage is a must. And it’s illegal to drive without it in nearly every state. Your liability policy will include bodily-injury protection, uninsured- and underinsured-motorist coverage, and property-damage coverage. You should have at least $100,000 worth of coverage per person and $300,000 per accident for each of these types of coverage, says Jeanne Salvatore, a senior vice president of the Insurance Information Institute (III), an industry organization.

If you bought a new car and you financed the purchase, expect your lending institution to require comprehensive and collision coverage as well. If you have owned your vehicle for a while or paid cash for it but can’t afford to replace it or pay for extensive repairs (some idiot runs into you or a tree falls on the windshield), elect to have this protection. Just cut your comprehensive and collision premiums by taking the highest deductible that you can afford. You’ll save about 40 percent on the total cost by upping your out-of-pocket deductible from $250 to $1,000.

More than one in four of today’s 20-year-olds will become disabled at some point during his or her working life, according to the Social Security Administration. And by “disabled,” we’re not talking about broken legs. We’re talking about people sidelined for weeks, months, or years by conditions ranging from depression to cancer. Yet fewer than half of workers in their 20s and 30s have disability insurance.

If you’re lucky, your boss offers long-term disability insurance that pays 60 to 70 percent of your gross income if you’re unable to work because of injury or illness. If your coverage falls short (which it’s very likely to, particularly if you work for a small business), you can buy a supplemental plan on your own or through your employer that will cover up to 70 percent of your earnings. (Sorry, there are no plans that replace 100 percent of your income.)

If you have to find your own disability coverage, look for a guaranteed-renewable or noncancellable policy. While these options differ slightly, insurers in both cases must continue coverage without messing with your benefits—provided that you pay your premium on time. (However, your rates can still go up with guaranteed-renewable coverage.) To find a policy, check with the companies that sell health insurance in your state and make sure that the policy covers both accidents and illnesses. Costs vary widely, depending on your health, occupation, and level of coverage, but your monthly premium could be as low as $20 a month.

After shelling out for your first home, you don’t want to see it or its contents submerged under inches (or—ack!—feet) of water. However, if a megastorm strikes your area, not only will you be left with a pile of waterlogged wreckage but, potentially, you’ll be underwater financially as well. That’s because homeowner’s insurance generally excludes losses from floods.

If you have a federally backed mortgage on a house in a government-designated flood zone, you must obtain flood insurance. (Lenders will inform you if your home falls into that category.) And if you live within a mile or two of a body of water, even a small lake, it’s generally a good idea to get flood insurance, which costs an average of $650 a year.

Single? Feel free to skip it. But if someone else relies on your income—a spouse, a new baby, or an aging parent—you should sign up. The insurance money will go directly to your beneficiaries tax-free if you die, helping to protect them from financial misfortune. At the very least, buy a policy that’s equal to five to eight times your annual salary.

There are two types of life insurance: term and whole life. You want to sign up for term, which charges an annual premium over a predetermined time frame, rather than a whole life policy, which is (a) more expensive and (b) confusing—so much so that it’s not worth explaining here. Also, sign up for the longest term possible (30 years is usually the max) to get the cheapest rate.

You would do anything for Buster and Mittens. And that devotion costs you just over $500 annually, according to the U.S. Bureau of Labor Statistics. Which is why you might want to consider pet insurance, especially if you don’t have money set aside for routine vet bills and the occasional “my Schnauzer ate a sock” visit to the doggie ER. Coverage can significantly reduce the price of many treatments and surgeries (with some policies reimbursing up to 100 percent of the cost), and you can choose any licensed veterinarian you wish.

Comparing policies side by side is difficult (these things never seem to be written by humans), so be aware that most plans will not cover charges related to a preexisting condition, such as diabetes or the hip dysplasia afflicting your Lab. And the issuer could drop your coverage or raise your premium unless you have a plan that specifically offers “continuing coverage.” But if you’re worried about how you’ll pay the bill if your pooch gets sick, opting for a plan with a high deductible and a low monthly premium that will cover catastrophic events can be worth it.

Getaways don’t always go off without a hitch, as anyone who has been waylaid by a tropical storm knows. Travel coverage can soften the (financial) blow, since a comprehensive package—which costs 4 to 10 percent of your prepaid, nonrefundable trip expenses—will reimburse you for unexpected hotel stays, medical emergencies, charges for interrupted or canceled trips, and lost or damaged luggage.

Consider buying travel insurance any time you’re required to make a big deposit—like $1,000 or more—or prepay for travel services that come with a big cancellation penalty. (We’re looking at you, airlines!) Compare rates from independent insurance providers online and buy a policy within 7 to 21 days of your first trip payment. Note: If you decide to forego the coverage, you may still have a minimum level of protection through your homeowner’s or renter’s insurance or the credit card you used to book the vacation.

After shelling out several hundred dollars for an iPhone, you don’t want to be forced to buy a new one if you drop it in the toilet or if it gets stolen. These plans, however, aren’t worth the dough you have to spend on them. Here’s the reason: The replacement model provided to you might be a refurbished (not new) one, and it might be a completely different device than your original. And on top of the $8 to $10 you spend monthly on your policy, you will also have to pay a deductible of about $200. Bad deal.

Even though plane crashes dominate news headlines when they occur, the chances of being a victim of one are close to zero. So go ahead and say no to this coverage—it pays only in the highly unlikely event that you are injured or killed in an airline accident. A life insurance policy is a much better buy. Or consult your credit-card issuer to see if it automatically provides flight insurance when you charge a ticket. Discover, for example, provides up to $500,000 of flight accident insurance when you purchase an airline ticket with its card.

At the rental counter, you’ll be offered collision coverage—and a loss-damage waiver. Oh, and uninsured-motorist protection, too. Pass on all of these if you have a policy for your own wheels. Most regular car insurance protects you when you drive a rental, not just when you’re in your trusty Civic. Additionally, some credit-card companies automatically offer insurance when you use their cards to pay for a rental. So tell the rental-car guy with his high-pressure sales tactics to back off, you’re good to go.

It’s harder to spend what you don’t have access to. Set aside a percentage of your pay in savings before it ever hits your pocketbook. Have your employer withhold money from each paycheck for your retirement account. (Turn to page 149 for details on the different types.) If you use direct deposit—and you should—you can also request to have most of your paycheck funneled into a checking account and the remainder into a savings account.

Another easy option is to have an automatic withdrawal that transfers money from your checking to savings. (How much is ultimately up to you.) Schedule this transaction for a day or two after you’re paid so that the money goes away before you’re aware of it—and you’re not tempted to spend it on a new pair of yoga pants. Focus on fully funding your emergency account (a.k.a. your savings account) so that it has enough cash on hand for six months’ worth of your most vital expenses (housing, transportation, food, utilities). Once you’ve achieved that, set aside at least $25 per paycheck to bulk up your savings even further.

In college, coffee not only woke you up for that 8 A.M. chemistry class but also sustained you during too-numerous-to-mention all-nighters. Now, though, that venti-a-day habit is instead more likely to produce what’s referred to as the “latte effect.” This is the phenomenon whereby you fritter away small amounts of money on frivolous things and are barely aware of the cumulative cost until you add it all up. (This is why one classic piece of financial advice is “Brew at home.”)

To eliminate—or, more realistically, reduce—mindless expenditures, look at your credit-card and bank statements several times a year. For each purchase, ask yourself, “Do I regret buying that?” You may be shocked to realize that you spent a disturbing amount on extra moves in Candy Crush. Then keep a list of any purchases that make you wince on your smartphone. Seeing where you spend too much can help prevent you from making the same mistakes again.

Maybe you wish that you could afford a new tablet. Or you’re hoping to ditch that secondhand sedan for a new one. One easy move can make it more likely that you’ll succeed: creating a new savings account with a name that specifically refers to your goal (such as “Elinor’s Tablet Fund”). “Saving money is an abstract concept, but doing this taps into the emotional part of your brain,” says Brad Klontz, Psy.D., a financial psychologist and a coauthor of Mind Over Money. Increase your resolve by posting photos that symbolize your goals somewhere you’ll see them daily—like on the refrigerator or your work computer. When you save toward a clear goal that you genuinely want to achieve, you’re more motivated—and less likely to feel as if you’re doing without.

MONEY-SAVING SECRET

AVOID YOUR REFLECTION—IN THE COMMUNAL MIRROR, THAT IS

HERE’S WHY: When you’re trying on clothes, entering that communal space just outside the changing rooms makes you more likely to buy.

“That area is there to get people talking about the merchandise,” says Paco Underhill, the author of What Women Want. “The store owner hopes that you’ll get a compliment from a stranger, which is more powerful than a salesperson’s.” Such praise doesn’t just make you feel good about yourself; it also helps you forge an attachment to the product. If someone gushes over the top you’re wearing, you’re more likely to “become emotionally invested in the item and have more trouble leaving it behind,” says Kristina Durante, an assistant professor of marketing at the San Antonio College of Business, at the University of Texas.

The smart money move: Stay behind closed doors when you try something on, and if you must venture out, be wary of the kindness of strangers.

You’re a long way from 65. But the reality is, now that you’re earning, you should be investing in your retirement. Go ahead—your future self will thank you.

“One of the biggest factors in determining how secure you will be in retirement can be how much you save and how early. By funding your retirement early on, you give that money more time to grow,” says Alexa von Tobel, the CEO and founder of LearnVest.com, a financial planning and education website.

Sure, you may pooh-pooh the idea, especially considering how urgent your current expenses are and how many eons it will be before you qualify for AARP. But consider this: If you start saving a small percentage of every paycheck now, you could have a million (or even more!) by the age of 70. Wait until your 40s, however, and you may have to go back to eating ramen noodles in your golden years.

WHO IT’S FOR: People currently working for a public or private company or a small business that offers a 401 (k) plan.

TAX STATUS: A regular (not Roth) 401 (k) is a tax-deferred account, so you won’t pay any taxes (federal or state) on your contributions or earnings until you withdraw the money during retirement.

WHO IT’S FOR: Public-education employees, those who work for nonprofits, and clergy.

WHO IT’S FOR: Anyone with taxable income who is younger than age 70½. It can be used in addition to a 401 (k). There are no income limits for a traditional IRA.

TAX STATUS: Depending on your annual income and whether you have access to an employer-sponsored 401 (k), you may be able to receive a tax deduction. Taxes are paid when you withdraw the money during retirement.

WHO IT’S FOR: Those whose annual gross income is less than $116,000 ($183,000 for joint filers).

TAX STATUS: You pay taxes (state and federal) on your contributions now. When you withdraw the money during retirement, all earnings are tax-free.

ANNUAL CONTRIBUTION: Up to 25 percent of net earnings, with a maximum of $53,000.

TAX STATUS: Contributions are usually tax-deductible. A SEP IRA is a tax-deferred account, so you won’t pay any taxes until you withdraw the money during retirement.

If the financial pros had their way, you would max out your retirement account every single year—regardless of whether you have an individual account or an employee-sponsored one. But if that’s not possible (don’t feel bad—it’s a pipe dream for 98 percent of us), try to contribute up to your employer’s match, if one exists. For example, if your company offers a dollar-for-dollar match for up to 5 percent of your salary and you make $50,000 annually, if you contribute $2,500 to your 401 (k), the company will add $2,500 to your savings. Nice.

If you can’t survive on a paycheck that’s that much smaller, start by putting $50 or even $25 a month into your retirement account, then increase your contributions later on. Or try setting aside 1 percent of your paycheck now and upping it to 2 percent in six months or a year. (Some retirement accounts offer the option of automatically increasing your contributions by 1 percent each year.)

With 401 (k)s and 403 (b)s, you are typically restricted to a predetermined list of mutual funds, stocks, and bonds provided by your employer. Even given those constraints, you can have a diversified portfolio.

One way to achieve that goal is to employ the “rule of 120.” Start by subtracting your age from 120. The number you get represents the percentage of your retirement savings that you should consider investing in stocks and mutual funds. (Generally, the younger you are, the riskier your investments should be.) So if you’re 27 years old, you should invest 93 percent of your retirement savings in mutual funds and stocks. Once a year, do a check-in with your investments and make sure that your portfolio hasn’t fallen out of balance. (Put an alert on your phone’s calendar so you don’t forget.) Don’t keep noodling with your portfolio. “If you reallocate your savings too frequently, you may rack up unnecessary transaction fees and taxes,” says von Tobel.

And if you don’t have an employer-sponsored retirement account, where do you even start? If you feel clueless about all things Wall Street, consider working with a certified financial planner. Planners are either fee-based, meaning they charge a consultation fee and then possibly a commission, or fee-only, meaning they charge by the hour, by a percentage of assets managed, or by a flat fee or a retainer and do not earn fees directly from the companies they recommend.

You can also invest on your own through low-cost providers, such as Fidelity, Vanguard, and TD Ameritrade. They offer lots of investment options without the sky-high transaction fees. required by some brokerage houses. If you’re not sure what to invest in, consider a target-date retirement fund. These mutual funds put investing on autopilot, since they automatically reallocate your holdings based on how close you are to retirement. If you’re decades away, your portfolio is mostly stocks and mutual funds; as you near retirement, the allocation shifts toward bonds. Or consider an electronically traded fund (ETF), another low-cost investment option.

Well, how complicated is your financial life? In the previous year, if you held several jobs, earned investment income, were self-employed (either part-time or full-time), received an inheritance, or lived in several states that collected income tax, you have a fairly complex tax situation. Verdict: Hire a tax pro.

But if you have a salaried job and receive W-2 income (meaning your employer withholds money from your paycheck) and you rent (so you don’t have any housing deductions), your taxes are pretty basic. So take a stab at figuring them out yourself. That being said, if you wake up in the night freaking out that the Internal Revenue Service (IRS) is going to come after you, use a tax preparer for peace of mind.

If you don’t have too many variables, using a franchised tax service (such as H&R Block) is a good option. But if your situation is complicated in any way, hire an enrolled agent or a certified public accountant (CPA). All CPAs must complete a rigorous accounting education and be licensed in the state in which they work, giving them the ability to prepare taxes. (Although doing so isn’t their only focus.) Enrolled agents, on the other hand, specialize solely in taxes. Licensed by the IRS, they must demonstrate that they are competent in all areas of taxation.

To find someone to take your case, ask your friends or family for recommendations. Hopefully, they will be able to suggest people whom they have confidence in and also give you a ballpark idea of how much the tax prep will cost. If they don’t have any suggestions, go to the American Institute of CPAs (aicpa.org) or the National Association of Enrolled Agents (naea.org) to find someone locally.

Yes. The software will walk you through the entire process by asking you questions that have tax implications. (For example: Do you have a student loan you’re paying off?) Then it directs you toward the forms that might be involved with your situation. “Not everyone is going to be a tax geek, but these programs do help you to learn a little about how taxes work and how to plan better,” says Kay Bell, the founder of the tax blog Don’t Mess With Taxes. For many years, TurboTax ruled atop the Iron Throne of tax-preparation software, but now all the programs (including TaxAct.com, FreeTaxUSA.com, and HRBlock.com) are fairly comparable. Many have mobile-optimized sites and apps that will let you do your taxes on your phone.

Keep receipts for medical expenses, charitable gifts, unreimbursed work expenses, educational or tuition expenses, tax-return–preparation expenses, and, if you’re self-employed, business-related expenses (office supplies, mileage for work travel) for the previous calendar year. Keep them in a folder—physical or digital—so that they’re easy to locate.

You’ve deposited your refund, but that doesn’t mean you should toss your returns and background documentation into the recycling bin just yet. The IRS has the right to review your return for up to three years, so you want to keep all your receipts as proof in case the tax agency hits you with an audit. (Chill: Only 1 percent of taxpayers are audited each year.) Hang on to your returns forever. They don’t take up much space (none, if you save them digitally), and if a lender ever asks to see them, you won’t have to request a copy from the IRS, a process that could take some time.

MISTAKE NO. 1: OMITTING INCOME
Perhaps you worked part-time as a sales clerk to earn some extra money. Maybe you nannied for a few months until you landed your first job post-grad. When you have numerous sources of income, it’s easy to forget about something. “But regardless of how much or how little you earned, you must declare it as income on your taxes, even if you were paid in cash,” says Cindy Hockenberry, the manager of the Tax Knowledge Center, an educational division of the National Association of Tax Professionals. Fail to do so and the Internal Revenue Service (IRS) could want even more money, in the form of penalties, in addition to what you already handed over. Stay organized by keeping a folder on your desk and place all tax paperwork (W-2s, 1099 forms, applicable receipts, pay stubs) inside it.

MISTAKE NO. 2: MISSTATING YOUR SOCIAL SECURITY NUMBER
Significant others may come and go, but this series of nine digits remains steadily by your side throughout your entire life. Although you can probably recite your identification number in your sleep, you may rush through and enter it incorrectly on your return. Double check—or triple-check—that you didn’t transpose digits or leave one number out before submitting. Getting it wrong could mean a longer wait for your tax refund.

MISTAKE NO. 3: OVERVALUING NONCASH CHARITABLE GIFTS
Impressively, you’ve made a massive donation to charity and even remembered to pick up a receipt. Good job. But before you declare on your taxes that your trash bag of discarded clothes was worth $2,000, consider this: There are all sorts of deduction rules from the IRS that must be followed. (For example, that interview suit you bought for $250 may get you only $6 to $25 in deductions.) For a complete list of guidelines, check the Donation Value Guide at the Salvation Army’s website (satruck.org). It’s unlikely that you’ll be hit with a penalty for overvaluing donations, but the IRS might adjust your return. So you could end up with a smaller refund or a larger tax bill than you anticipated.

Abby Larson, the founder and editor of the wedding blog Style Me Pretty, suggests “scouring a flea market for gorgeous vintage barware that any bride would love. Think ice buckets, Champagne saucers, trays, and cocktail shakers.” Etsy and other online marketplaces can also be great, affordable resources for unique, personalized pottery and other serving pieces.

Consider a stock-the-bar gathering, where guests bring their favorite liquor or beverage that can be enjoyed by guests at the party and by the couple thereafter. Or throw a fancy potluck. “Guests bring their favorite dish and a handwritten recipe card that is tucked into a pretty box and gifted to the couple,” says Larson. There’s no need to spend more than $20 or so, says Kellee Khalil, the CEO and founder of Lover.ly, a wedding-inspiration website.

Ask each guest to contribute, say, $25, then “pool it to buy some fun party decor and a seriously wow-worthy lingerie gift for the guest of honor,” says Larson. Increase the fun factor by having everyone bring a bottle of bubbly in a pretty shade of pink.

While the average wedding gift costs between $75 and $150, according to data from TheKnot.com, nothing says that you need to give cash or even a gift that expensive. Khalil suggests “buying something small but special, like a vintage map of the couple’s hometown or a locally made serving tray.” Or if you have a particular skill, offer to help with the wedding (like putting together gift bags for the hotel rooms of out-of-town guests). You can also give cash if that’s customary with your crowd. But include a personal note with a suggestion for how they could use the cash (couples’ massage on their honeymoon).

Just because the happy couple registered at Saks doesn’t mean that you have to buy their salad bowl there. Look for the item at a more affordable store or website and get it there. Then notify the store where they are registered to have the gift list updated to avoid duplicates. Note, however, says Khalil, “that buying a different version of something they registered for is a faux pas.”

Ask the bride if you can do your own hair and makeup. The day-of glam-fest is often seen as a bonding event for the bride and her maids, but it can be stressful if you have to pay for it (on top of the dress, the shoes, and so on). “Consider presenting the bride with a few options: You could find your own stylists who are less expensive, you could do your own, or she could help cover the cost. She’ll appreciate having a say in whatever alternative you end up with,” says Khalil.

MONEY-SAVING SECRET

WEAR HEELS

HERE’S WHY: According to a study published in the Journal of Marketing Research, stabilizing your body can lead you to curb an overspending habit.

How does this work? Imagine a woman shopping while wearing stilettos. As she walks, she must exert effort to remain balanced. Crazy as it sounds, that leads her to be aware, if only subconsciously, of the principle of balance. And that in turn leads her to make more middle-of-the-road buying decisions. So a big spender will be inclined to buy more midpriced goods instead of deluxe items. (Conversely, a penny-pincher may drop a bit more cash than usual.) “Because you’re balancing yourself, you’ll find a more balanced product appealing,” says Jeffrey Larson, an assistant professor of marketing at Brigham Young University, in Provo, Utah, and one of the study’s coauthors.

Use this wacky bit of trivia to your benefit. The next time you’re shopping online, say, and you want to avoid the urge to go for broke, lean back in your chair. In this case, what may be crummy for your posture may be terrific for your bank account.

* Contribution limits can fluctuate from year to year. Check irs.gov for the most recent figures.