MONEY credit cards

5 Ways Your Credit Card Can Be Stolen Right Under Your Nose

woman using ATM machine at night
Maciej Toporowicz—Getty Images/Flickr

Card thieves have many techniques for stealing your data without you noticing.

There are several things people freak out about when their wallets or purses have been stolen: knowing a thief has your ID (and your home address), losing irreplaceable gift cards or cash, and having to cancel your credit cards. That’s usually the first thing people do — call their banks — but it’s easy to act quickly when you realize you’ve been robbed. Sometimes, it’s not that simple.

Thieves steal credit and debit cards all the time without taking the physical card. The most common kind of card theft results from data breaches. Last year, millions of U.S. consumers had their cards replaced after their information was compromised in one of the massive cyberattacks on retailers, even if their cards didn’t show unauthorized activity. People have gotten used to the idea that data breaches are inevitable, but there are lots of daily activities that put your cards at risk for theft, without you noticing.

1. Drive-Thru

A Pennsylvania woman was recently arrested for allegedly swiping customer cards on a personal card reader while she worked the drive-thru at a Dunkin’ Donuts, WFMZ reports, reportedly using the information to create duplicate cards and charge more than $800 to the accounts.

That’s not the first time a story like this has popped up, and it’s likely to happen again, because the situation presents an easy theft opportunity to drive-thru workers: Customers hand over their cards and usually can’t see what the cashier is doing with it on the other side of the window. It’s not like you should avoid the drive-thru for fear of card theft, but it’s one of many reasons to regularly check your card activity for signs of unauthorized use.

2. Restaurants

How often do you see your server process your dinner payment? Usually, he or she takes your card away from your table and completes the transaction out of your sight. Many restaurant workers have taken advantage of this situation to copy customers’ cards and fraudulently use the information.

3. On the Phone

People are pretty trusting when making orders over the phone, assuming that whoever takes the order is entering the credit or debit card number, expiration date and security code into a payment system, not just copying it down for their own use. On the flip side, it might not be the person on the other end of the call you should worry about — plenty of people read their card information aloud within earshot of strangers, making it easy for someone nearby to write down the numbers.

4. RFID Scanners

Most radio-frequency identification (RFID)-enabled credit and debit cards have a symbol (four curved lines representing a signal emission) indicating the card has the technology for contactless payment. If you have one of these cards, you have the ability to use tap-and-pay terminals found at some retailers, because your card sends payment information via radio frequencies, received by the terminal.

That same technology also allows thieves to use RFID scanners to copy your card data if they get close enough to it and your card isn’t protected. If you’re not sure your card has RFID technology, call your issuer, and if it does, use signal-blocking materials and products to protect it.

5. Card Skimmers

Thieves have been installing copying devices at gas pumps and ATMs for years: They tamper with card readers to install skimmers that copy your card data when you swipe it, so a thief takes your credit or debit card information while you complete an otherwise routine transaction. Experts advise you look closely at card readers for signs of tampering, use ATMs serviced by your bank and check your card activity regularly for signs of fraud.

That’s really the best way to combat credit card theft: Watch closely for it. With online banking and mobile applications, it’s easy to check your accounts every day, making it more likely you’ll spot something out of the ordinary than if you only looked at card activity once a week or so. You can also check your credit score for sudden changes, which can be a sign of fraud or identity theft. You can get two of your credit scores for free every 30 days on Credit.com.

MONEY The Economy

Why These 5 Companies Are Laying Off Thousands of Workers

eBay Inc. office building, San Jose, California.
Kristoffer Tripplaar—Sipa USA

The economy is on the mend. Unemployment rates are down. So what's up with all these companies slashing jobs by the thousands?

Here’s some explanation—note we used the word “explanation” not “justification”—for why a handful of companies are laying off large chunks of their workforces even as the economy is on the upswing and unemployment is falling month after month.

eBay: 2,400 jobs
On Wednesday, eBay announced it would be cutting 2,400 jobs in the first quarter of 2015. The company says that the layoff figure includes positions that are unfilled, so the actual number of people losing their jobs will be less than 2,400. What’s more, eBay points out that the figure represents only 7% of the company’s total workforce. (Are we the only ones surprised to hear that eBay currently employs 34,600 people?)

Among the factors influencing the layoff decision: “Weak holiday sales” and revenues that have been lower than analysts expected, as well as a company restructuring in anticipation of the spinoff of eBay’s online payment service PayPal. The company said it may also spin off a third division, eBay Enterprises, which runs e-commerce operations for other companies, explaining in a statement: “It has become clear that [eBay Enterprise] has limited synergies with either business, and a separation will allow both to focus exclusively on their core markets.”

As for weak sales, one reason eBay is suffering is that, unlike Amazon—which effectively uses its Amazon Prime membership program to create legions of shoppers who make the vast majority of their purchases at its site—many eBay customers use the site randomly and haphazardly rather than habitually. “It’s the infrequent shopper that comes two, three, four times a year,” eBay CEO Donahoe told USA Today. “They didn’t come back at the rate we thought.”

American Express: 4,000 jobs
During the course of 2015, AmEx plans on cutting costs by trimming 4,000 jobs after failing to meet long-term revenue growth target of 8%. The Wall Street Journal pointed to “a stronger dollar, a weak December for retail sales and the sharp drop in gas prices” as forces that hurt the company’s fourth quarter results—which actually showed revenue and profits increasing, just not enough to satisfy investors. The 4,000 layoffs represent 6% of AmEx’s total workforce of roughly 63,000.

Baker Hughes & Halliburton: 8,000 jobs
The two energy companies agreed to merge last autumn, and both ended the year strongly, with Halliburton posting revenues up nearly 15% and Baker Hughes achieving record revenues for the quarter. Nonetheless, in light of plunging crude oil and gas prices, oilfield services provider Baker Hughes announced plans for layoffs of 11% of its workforce, roughly 7,000 employees, while Halliburton plans for about 1,000 job cuts of its own.

“This is really the crappy part of the job, and this is what I hate about this industry frankly,” Baker Hughes CEO Martin Craighead said this week in a conference call with analysts. “This is the industry, and it’s throwing us another one of these downturns, and we’re going to be good stewards of our business and do the right thing. But these are never decisions that are done mechanically.”

Schlumberger: 9,000 jobs
Another oilfield services company, Schlumberger also reported surprisingly strong fourth quarter results despite the steep drop in oil and gas prices—and it too recently announced big-time layoffs. Last week, the company said it had laid off 9,000 employees worldwide in late 2014 as profits fell and demand for oil retreated.

Read next: Here’s What You Really Need to Advance Your Career

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MONEY consumer psychology

7 Ways to Trick Yourself into Saving More Money in 2015

piggy bank in various clamps and a vice
Steve Greer—Getty Images

These simple strategies can help you squeeze more out of your budget—and end the year with a lot more cash socked away than you started with.

If your New Year’s resolutions included growing—or starting—your savings, you’re already ahead of the pack.

Only about a third of Americans recently surveyed by Fidelity made any kind of financial resolution this year; and of those who did, just over half were aiming to stash more cash.

Kudos to you for taking this important step toward financial security.

Want to make sure your good intentions aren’t derailed before the month is out? The key is taking initial actions that will make repeating good habits easier, says University of Chicago economist Richard Thaler.

“We tend to revert to our long-run tendencies,” says Thaler. “To effect real changes, you have to make some structural change in the environment.”

With that wisdom in mind, the seven life changes that follow will help you save more money this year.

1. Use Inertia to Your Advantage

Research by Thaler and others has shown that people are victims of inertia: If you aren’t used to saving money with regularity, it’s likely going to feel like such a chore to start that you’ll never bother—or, you’ll quit after one account transfer.

But when your money is already being saved automatically, inertia works in your favor, since it’ll take more effort to stop saving than to do nothing. That is why a growing number of 401(k) plans offer automatic enrollment with a default monthly contribution rate.

Still, you may need to stick a hand in the machine if you want to have financial freedom in retirement, since the default rate (often around 3% of salary) won’t get you far in your golden years. Most planners recommend saving at least 10% of income.

Even if you set up your own plan, you probably haven’t touched your contribution rate since; more than a third of participants haven’t, according to a TIAA-CREF survey.

You can benefit from another relatively new feature called “auto-escalation.” Offered by nearly half of companies, auto-escalation lets you set your savings rate to bump up annually at a date of your choosing and to an amount of your choosing.

For other savings accounts, harness your own “good” inertia by setting up automatic transfers on payday from checking to savings (if you don’t see the money, you won’t get attached to it). Better yet, ask your HR department if you can split your direct deposit to multiple accounts.

2. Keep Your Eye on One Prize

Setting up automatic savings works well if your income and expenses are predictable; but what if either or both aren’t set in stone? You can save money as you go, but you’ll be more successful if you narrow your objectives.

Research from the University of Toronto found that savers often feel overwhelmed by the number of goals they need to put away money for—a stress that can lead to failure. Thinking about multiple objectives forces people to consider tradeoffs, leaving them waffling over choices instead of taking action.

One solution? Prioritize your goals, then knock out one at a time. If you know you need to contribute $5,000 to your retirement funds this year, focus on completing that first. Once it’s done, move on to saving for that dream home.

Another strategy is to think about your goals as interconnected; participants in the Toronto study were also able to overcome their uncertainty about saving when they integrated their objectives into an umbrella goal. So, for example, if you are saving for both a car and a vacation, consider setting up a “road trip” fund.

3. Focus on the Future

A part of what keeps people from saving is that we don’t connect our future aspirations with our present selves, research shows.

One way to get around that is by running some numbers on your retirement using a calculator like T. Rowe Price’s. When participants in a study by the National Bureau of Economic Research were sent exact figures showing how retirement savings contributions translated into income in retirement, they increased their annual contributions by more than $1,000 on average.

Another easy trick? Download an app like AgingBooth, which will show you how you’ll look as a geezer. One study showed that interacting with a virtual reality image of yourself in old age can make you better at saving.

This trick can work for more than just retirement. Another study found that when savers were sent visual reminders of their savings goals, they ended up with more cash stored up. Consider leaving photos of your goal (e.g., images of your children or dream home) next to the computer where you do your online banking to cue you to put more away.

4. Ignore Raises and Bonuses

As Harvard professor Sendhil Mullainathan has said, the biggest problem with getting a bonus is it’ll likely make you want to celebrate and spend it all—plus some.

The windfall creates an “abundance shock,” which gives you a misleading sense of freedom.

The simplest solution to this problem is to pretend you never got the raise or bonus in the first place, and to instead direct that new money into savings right away. (Remember the 401(k) auto-escalation tip? Set your contribution to bump up the week you get your raise.)

The same goes for when you return an item to a store for a refund or get a transportation reimbursement check in the mail. The faster you put extra cash into savings, the faster you’ll forget about spending it.

5. Make it Contractual

Carrots and sticks work.

One study asked smokers who were trying to quit to save money in an account for six months; at the end of the period, if a urine test showed them free of nicotine, the money was theirs. If not, the cash was donated to charity.

Surprise, surprise: People who participated in the savings account were more likely to have been cigarette-free at the six-month mark than a control group.

If you’re the type who responds to disincentives, enlist a buddy who can help you enforce upon yourself some kind of punishment if you don’t live up to your savings goal (e.g., you might promise a roommate that you’ll clean the bathroom for six weeks).

Maybe you respond better to positive feedback? Simply having a supportive friend or relative to report to on a set schedule may help you achieve results, as many of those who have participated in a group weight loss program like Weight Watchers can attest. Or you might look for some (non-monetary) way to reward yourself if successful.

You can use the website Stickk.com—inspired by the aforementioned study on smokers—to set up a commitment contract that involves incentives or disincentives.

6. Keep Impulses from Undoing Your Budget

Setting aside cash is only half of the equation when it comes to saving more: It’s just as important to keep spending under control.

Most people know to shop carefully—and early—for big-ticket items like cars or airline tickets (which are cheapest 49 days before you’re due to fly). But the premium for procrastinating on smaller items can also add up: Studies show that people spend more on last-minute purchases partly because shopping becomes a defensive act, focused on avoiding disappointment vs. getting the best value.

So give yourself plenty of time to research any item you’re planning to buy. And always go shopping with a list.

When you see an item that tempts you to diverge from your list, give yourself a 24-hour cooling-off period. Ask a sales clerk to keep the item on hold. Or, put it in your online shopping cart, until the same time tomorrow (chances are, that e-tailer will send you a coupon).

Or you could try this trick that MONEY writer Brad Tuttle uses to determine whether an item is worthy of his dough: Pick a type of purchase you love—in his case, burritos—and use that as a unit of measurement. For example, if you see a $120 shirt you like, you can ask yourself, “Is this really worth 10 burritos?” Likewise, you could measure the cost of an item in terms of how many hours of work you had to put in to earn the money to pay for it.

Also, since gift-shopping procrastination undoes a lot of people’s budgets, you might think about starting a spreadsheet where you can jot down ideas for presents year-round. That way, someone’s birthday rolls around, you can shop for a specific item on price rather than spending out of desperation.

Finally, remember that “anchor” prices can bias us to be thrifty or extravagant. So when you are shopping for products that range widely in price (like clothes or cars), start by inspecting cheaper items before viewing pricier ones. That way your brain will stay “anchored” to lower prices, and view the costlier options with more scrutiny.

7. Force Yourself to Feel Guilty

Surveys show that about a third of people don’t check their credit card statements every month.

That’s a problem, and not only because vigilance is your best defense against extraneous charges or credit card fraud. Seeing your purchases enumerated can also help reign in spending by making you feel guilty—one of many reasons people avoid looking.

Another perk of staying up-to-date with your bills: It makes you more aware of paying for redundant services, like Geico and AAA car insurance or Netflix and Amazon Prime and Hulu Plus.

Keep in mind that shaving off a recurring monthly payment gives you 12x the bump in savings. So a few of these expenses could boost your annual savings by a few hundred bucks. That’s a lot of burritos.

More on resolutions:

Read next: These Types of People End Up More Successful and Make More Money

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MONEY Fundraising

Crowdfunding for a Good Cause Gets Cheaper

Ball picking up money
Websites can help you turn small donations into a life-changing gift. Getty Images

A growing number of sites will help you raise big money for a friend in need. But watch for high fees.

The week before Christmas, a fire gutted the Beverly, Massachusetts home shared by Kevin Wagner, his fiancée and their four young children. Most of their basic possessions were destroyed along with their Christmas presents.

While insurance will cover much of the rebuilding, friends stepped in right away with cash to fill the gap until the claim is settled. As is becoming more common these days, they started crowdfunding campaigns on popular sites—one on DreamFund.com, which holds money in an FDIC-insured savings account, and another on GoFundMe.com, which is linked to a personal bank account. Both sites collect a 5% fee from the donations and pass along a credit card processing fee of about 3%.

For the $25,000 Wagner’s friends raised on DreamFund, that amounts to $2,000, and another $800 went to GoFundMe and its credit card processors for the $10,000 raised on that platform.

A few people were put off after learning about the fees, Wagner says, and simply handed him checks, which added another $10,000 to the effort.

Nevertheless, raising money for personal causes through crowdfunding sites is a skyrocketing business—GoFundMe says such fundraising campaigns increased by 291% between 2013 and 2014, after rising by more than 500% the year before. But the fees make it clear the platforms themselves are, indeed, businesses rather than purely charitable efforts.

More than 2,000 crowdfunding sites have sprung up to try to catch the wave of this rapidly growing industry, says Howard Orloff, vice president of Zacks CF Research and founder of Crowdfunding-Website-Reviews.com. Of those, many are start-ups with little staying power and many are aimed at businesses seeking capital rather than personal causes. Some, like Kickstarter, one of the best known sites, don’t allow personal fundraising.

Regardless of type, the sites make money by taking a percentage of pledges, which results in either a donation being reduced when it reaches the recipient or a surcharge added to the donor so the recipient gets the net amount pledged.

But when it comes to raising money for charity, that may be changing.

On Dec. 15, popular crowdfunding site Indiegogo, which typically charges 4% to 9% (plus fees for PayPal or credit card processing), decided to drop the fee for personal fundraisers. Users of its new IndiegogoLife service only have to sacrifice the 3% taken by the credit card processors.

Indiegogo co-founder Danae Ringelmann says the company didn’t want those who were in need of charity to be subject to the same charges as those trying to launch a business.

“Every dollar counts—we’ve heard that again and again and again,” she says.

Dropping that platform fee is a “game-changer” in the world of crowdfunding, Orloff says. “Smaller sites [like YouCaring.com and Tilt.com] have offered no-fee crowdfunding for a while but none with website traffic, and public trust, anywhere near Indiegogo.”

By contrast, collecting the old-fashioned way—by accepting cash in person or checks to be deposited in a bank—usually involves no extra costs, although some banking fees may apply depending on the kind of account you choose.

But real-world collecting like that has limitations of reach, and not much possibility of the campaign going viral.

With crowdfunding, if the cause is popular enough to land on the home page of one of the more popular sites “it can go pretty wild,” Orloff says. “It can change somebody’s life.”

Indeed, the campaign to raise money for Wagner and his family went far beyond the $5,000 he imagined—the $50,000 raised so far may actually be more than they need.

“We didn’t expect this at all,” Wagner says. “If there is extra , we want to help others. We hope to pay it forward.”

MONEY Debt

You’re Going to Spend $280,000 on Interest in Your Lifetime

Sorry.

The typical American consumer will fork over an average of $279,002 in interest payments during the course of his or her lifetime. So says a new report from Credit.com, which analyzed the lifetime cost of debt in all 50 states and the District of Columbia, based on average mortgage balances, credit card debt, and credit scores.

The size of the nut varies dramatically from state to state. Residents of Washington, D.C.—where average new mortgages are $462,000 and the average credit score of 656 falls squarely in the “fair” range—can expect to pay $451,890 in interest, the highest in the nation.

Concerned D.C. residents might want to consider hitching a ride to Iowa, where the average new mortgage is the nation’s lowest, at $120,467. Add in an average credit card debt of $2,935—also the lowest in the country—and a credit score of 689, and residents of the Hawkeye State have a lifetime cost of debt of “only” $129,394.

Along with 30-year fixed-rate mortgages, Credit.com also considered an average auto loan balance of $22,750 (assuming nine cars over a lifetime) and 40 years of revolving credit card debt when calculating its findings.

Here’s a breakdown of the top 10 states with the highest cost of debt:

  1. Washington, D.C. ($451,890)
  2. California ($368,745)
  3. Hawaii ($312,747)
  4. New Jersey ($309,500)
  5. New York ($300,031)
  6. Maryland ($294,720)
  7. Virginia ($280,516)
  8. Washington ($267,964)
  9. Massachusetts ($261,220)
  10. Colorado ($255,232)

And the lowest:

  1. Iowa ($129,394)
  2. Nebraska ($137,174)
  3. Wisconsin ($144,127)
  4. Maine ($154,340)
  5. North Dakota ($157,011)
  6. South Dakota ($157,136)
  7. Montana ($160,849)
  8. Pennsylvania ($163,513)
  9. West Virginia ($166,232)
  10. Vermont ($167,042)

See the full state-by-state list.

MONEY interest rates

4 Smart Moves for Borrowers and Savers in 2015

What rising interest rates could mean to you.

Most experts expect U.S. interest rates to rise in 2015, but no one knows when and by how much.

Rate increases rarely happen with great velocity, though. The last time the Federal Reserve raised the federal funds rate, which banks use to lend money overnight, was in June 2006. It brought the rate to 5.25% — after 17 increases.

By 2008, in the midst of the financial crisis, the federal funds rate was down to zero, where it has stayed.

A jump in interest rates in 2015 could have a big financial impact, however, especially if you are looking to buy a home, have credit card debt or own bonds.

Here is what to expect:

Consumer Loans

Rates for consumer loans, which include mortgages and automobiles, are bouncing around 3.75%, a quarter percentage point above historic lows reached in May 2013. Greg McBride, chief financial analyst for Bankrate.com, expects a series of rate hikes in the year ahead.

“This is going to be a very volatile year,” says McBride.

Overall, however, the net change will probably be within one percentage point.

For a car buyer, a change from 4% to 5% would be almost imperceptible. The average auto loan is $27,000, and borrowing that much over five years would mean a difference of just $12 a month.

Home loans are another story, so plan accordingly. Over 30 years, that one percentage point difference in interest rates on a $100,000 mortgage would mean you would pay about $22,000 more, according to an example provided by Quicken.

Credit Cards

Consumers looking to roll over credit card debt to a zero percent balance transfer should act fast, because offers have never been more generous.

“We don’t expect offers to get better,” says Odysseas Papadimitriou, chief executive officer of CardHub.com, which rates credit card offers. Duration of deals is at an all-time high, at an average of 11 months, and the average balance transfer fee is only 3%.

These deals could disappear if the Fed raises rates significantly or a tanking economy causes default rates to surge, Papadimitriou adds.

Consumers tend to focus on the length of the balance transfer deal, which can be up to 24 months, but Papadimitriou says you must also consider the monthly payments, annual and transfer fees and the interest rate after the introductory period ends.

To learn how much you will save each month, use an online calculator like Cardhub’s. It will tell you, for instance, that if you have average credit card debt of $7,000 and are paying the average rate of 14%, you would save enough to pay off your debt two months faster if you transferred it to a zero-percent card with no fee.

Most bank’s websites also provide some suggestions. For example, the Citizens Bank Platinum MasterCard offers a zero-percent balance transfer for 15 months with no balance transfer or annual fees.

Savings Rates

If you are a saver looking for higher yields, life is not about to get rosier in 2015.

“Rates are brutal,” says Morgan Quinn, feature writer for GoBankingRates.com. The yield on the typical savings account is less than 1%.

Good news in this category amounts to rates tipping over 1% on some CDs and savings accounts with high balances.

Interest rates on savings accounts probably will not head toward 3% until 2020, according to GoBankingRates latest report.

In the meantime, the highest rate Quinn was able to find was 1.4% at EverBank for “yield-pledge” checking with a $1,500 minimum opening deposit and an ongoing balance of between $50,000 and $100,000.

Bonds

The benchmark 10-year U.S. Treasury yield fell to 1.89% on Monday, its lowest since May 2013.

If interest rates go up, “it will be a tough year for bond investors,” Bankrate’s McBride says.

You can mitigate this risk with individual bonds by simply holding them to maturity, he says. But if you invest in bond funds, either directly or through target-date or managed funds in your retirement accounts, the value will probably decline.

That is not all bad news if you just stay the course. McBride’s advice: “Buckle your seat belt and hold on.”

MONEY Debt

7 Ways to Free Yourself From Debt—for Good!—in 2015

How to pay off debt
PM Images—Getty Images

These smart and easy strategies can get you back in the black before you know it.

If you’re in debt, getting out may seem impossible.

One in eight Americans don’t think they’ll ever pay off what they owe, according to a survey by CreditCards.com.

But it’s a new year and a new balance sheet. And the seven steps here can help you put hundreds more towards your bills every month—while still living the kind of life you want.

Can you taste the freedom?

1) Know What You Owe

It may sound easy, but this can be the hardest part, says Gail Cunningham, spokesperson for the National Foundation of Credit Counseling. “A disturbing number of people come to our offices with grocery bags filled with bills,” she adds.

After you’ve tallied up your total debt, make a “cash-flow calendar” to track how much money is going in and out of your accounts, and when, Cunningham says. When do you get your paycheck, and how much do you get net taxes and benefits? When is each bill due every month, and what is the typical cost? How much do you spend on each of your other expenses, and when?

The more you want to procrastinate on this step, the more you need to do it.

“People resist doing this,” Cunningham says. “I think that’s because they’re afraid of what they’ll find. There’s nothing like seeing your spending staring back at you. That could force a behavioral change.”

2) Follow the 10×10 Rule

If you want to create a debt-repayment plan you can follow, you need to set reasonable and sustainable goals. Curb rather than cut your spending, advises Kevin R. Weeks, president of the Association of Independent Consumer Credit Counseling Agencies.

“Just like a New Year’s resolution to get in shape, it’s very difficult to go cold turkey and say, ‘I’m going to do all this, this week, or today,'” Weeks says. “People bite off more than they can chew, with good intentions.”

Start slowly by following Cunningham’s 10×10 rule: “If you could shave $10 off 10 disposable spending accounts, you’d never miss it, never feel it, never feel deprived—and you’d have another $100 in your pocket,” she says. “Little money adds up to big money.”

3) Spend Cash

Researchers have found that when people shop with credit cards and gift certificates, they are more likely to make impulse purchases on luxury items because they feel like they’re using “play” money. If that sounds like you, cut up the plastic.

And force yourself to feel the pain associated with spending real money by going on a cash-only diet.

“People who live on a cash basis typically save 20% over their previous spending, without feeling deprived,” Cunningham says. “It’s because using cash creates a heightened sense of awareness. You are more contemplative, and you realize you’re going to have to pay for things with hard-earned cash. Something clicks in that allows you to feel better about not buying the item.”

4) Tackle Christmas First

There are two possible ways you can go when it comes to prioritizing your debts: You can pay off your highest interest-rate balance first to cut your financing charges the most or you can pay off a small debt first to build confidence and momentum.

To decide which path is best, you need to know what drives you, Weeks says.

Whichever way you choose to go, Cunningham recommends beginning with a goal of paying off all your holiday spending debt by the end of the first quarter of 2015.

“That will keep you from dragging that debt along with you all the way through 2015,” Cunningham says. “You’ll be back to where you were debt-wise before the holidays.”

No matter what, expect a series of small steps. “It’s going to take time,” Weeks says. “If you’re looking to lose 50 pounds, you should focus on losing the first five and then you move yourself forward. It’s the same thing on the financial side.”

5) Reduce Your Rates

Don’t do all the work yourself. Get your lender to cut your interest rates.

One way to do that is a balance transfer. Many credit cards offer promotions of 0% interest for a year or more if you transfer your debt from an old card and pay a small fee.

You can save $265.48 on a $5,000 debt with a typical balance transfer, according to a new report from Creditcards.com. That’s assuming a 3% balance transfer fee, a 12-month 0% intro APR, and the debt being paid off within the year.

You could do even better than that if you used Money’s pick for a balance transfer card, the Chase Slate, which currently offers a 0% APR for 15 months, no balance transfer fee in the first 60 days, and standard APR of 12.99% to 22.99% after the promotional period.

If you won’t be able to pay off your debt in the promotional period, however, this might not be the best option. You don’t want to move your debt only to possibly get stuck with a higher APR than the one you already have. A better choice: Move your debt to the Lake Michigan Credit Union Prime Platinum Visa, which has no balance transfer fee and an ongoing APR starting at an ultra-low 6%.

Or, simply call your issuer and request that your APR be reduced. In another report, CreditCards.com found that two-thirds of people who asked for a lower rate got it.

6) Stop lending so much money to the IRS

The average household got a $3,034 tax refund last year. In other words, every month, an extra $253 was taken out of your paycheck and loaned to the IRS interest free!

Sure, you’ll get it back after you file your taxes, but don’t you need it now?

“I don’t want anybody to receive an income tax refund—that $250 a month can make a major, life-changing difference,” Cunningham says.

Rather than paying interest on your debt every month while the government gets your money, you should be funneling that cash toward your balance. On a $5,000 debt at 16%, adding $250 a month to a payment of $200 a month, you’d save $675 in interest and get your debt paid off in just over a year vs. two and a half.

You can put your money back in your pocket by adjusting your withholding on a W-4 tax form.

Of course, you don’t want to owe money at tax time, so use the government’s withholding calculator to figure out exactly how many allowances you should take. File your new W-4 with your human resources department and give yourself a raise.

7) Ask for help

If you can’t stop taking on debt or are really unable to make payments on what you owe, you may need professional help. Credit counseling can be especially useful if you’re struggling with student loan debt or medical debt, not just credit card debt.

Find a nonprofit credit counselor through the National Foundation of Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. Financial counseling should be free, though agencies can charge an enrollment fee for a debt management plan, which will consolidate your debt into one payment with a more reasonable interest rate, Weeks says.

If you don’t need professional help, but you need someone to keep you honest, ask a friend to be your accountability partner, Cunningham suggests. Share your debt repayment plan and check in periodically about how you’re doing. Leverage the positive power of peer pressure.

“People don’t want to let somebody down,” Cunningham says. “They don’t want to have to admit that they weren’t as committed to their plan long-term.”

More on paying off debt:

More on resolutions:

MONEY Millennials

How to Set Financial Priorities When You’re Young and Squeezed

man counting coins
MichaelDeLeon—Getty Images

You have a lot of demands on your money—and not a lot of it. Here's what to do first.

The most financially challenging state of life is not retirement, it is early career.

That’s the time when your salary is still probably low, but you have the longest list of expenses: career clothes, cell phone bills, your first home furnishings, cars, weddings, rent—need I go on? You probably don’t have enough money to pay for all of that at once, unless your parents have set you up very well or you are a junior investment banker.

The rest of us have to make choices with our limited “discretionary” income. Here is a rough priorities list for newbies who have shopping lists that are bigger than their bank accounts.

First, feed the 401(k) to the match, not the max. If your employer matches your contributions, make sure that your paycheck withdrawals are high enough to capture the entire company match. That is free money. If you have enough money to contribute more to your 401(k), that is a good thing to do, but only if you’re able to cover other key expenses.

Invest in items that will improve your lifetime earning power. A good interview suit. An advanced degree. The right electronic devices and services for the serious job hunt.

Pay off credit card balances. Chasing those “balance due” notices every month will kill just about any other financial goal you have. If you’re carrying significant credit card balances, abandon all other extra savings and spending until you’ve paid them off, in chunks as large as possible.

Put money into a Roth individual retirement account. The younger you are and the lower your tax bracket, the better this works out for you. Money goes in on an after-tax basis and comes out tax-free in retirement. You can withdraw your own contributions tax-free whenever you want. Once the account has been in existence for five years, you can pull an additional $10,000 out, tax-free, to buy a home. It’s nice to have a Roth, and the younger you start it the better.

Save for a home down payment. Homeownership is still a smart way to build equity over a lifetime. New guidelines will once again make mortgages available to people who make downpayments as low as 3%. Even though interest rates are still at unrewarding lows, it’s good to amass these earmarked funds in a savings or money market account.

Pay down high-interest student loans. If you had private loans with interest rates over 8%, find out whether you can refinance them at a lower rate. If not, consider paying extra principal to burn that costly debt more quickly. Don’t race to pay off lower-interest student loans; the interest on them may be tax deductible, and there are better places to put extra cash.

Buy experiences, not things. Still have some money left? Fly across the country to attend your college roommate’s wedding. Take road trips with friends. Spend money to join a sports team, theater group, or fantasy football league. Focus your finances on making memories, not acquiring things—academic research holds that you get more happiness for the dollar by doing that, and you’ll probably be moving soon anyway.

Buy a couch. For now, make this the bottom of your list. Sure, everyone needs a place to sit, but there’s nothing wrong with living like a student just a little bit longer. If you defer expensive things for a few years while you put money towards all the higher priorities on this list, you’ll be sitting pretty in the future.

UPDATE: This story has been updated to clarify that Roth IRA holders can withdraw their own contributions at any time and do not have to wait until the account is five years old.

MONEY Financial Planning

5 Simple Questions that Pave the Way to Financial Security

Analyzing 20 years of data, the St. Louis Fed found that five healthy financial habits are the key to future wealth.

Want to know how your bank account stacks up against that of your neighbors? You’ll get an idea by asking yourself five simple questions, new research shows.

The St. Louis Fed examined data from the Federal Reserve’s Survey of Consumer Finances between 1992 and 2013 and found a high correlation between healthy financial habits and net worth. In the surveys, the Fed asked:

  • Did you save any money last year? Saving is good, of course. Just over half in the survey earned more than they spent (not counting investments and purchases of durable goods).
  • Did you miss any credit card or other payments last year? Missing a payment isn’t just a sign of financial stress; it may trigger late fees and additional interest. An encouraging 84% in the survey made timely payments.
  • After your last credit card payment, did you still owe anything? Carrying a balance costs money. In the survey, 44% said they carried a balance or recently had been denied credit.
  • Looking at all your assets, from real estate to jewelry, is more than 10% in bonds, cash or other easily sold, liquid assets? If you don’t have safe assets to sell in an emergency, you are financially vulnerable. Just over a quarter of those in the surveys have what amounts to an emergency fund.
  • Is your total debt service each month less than 40% of household income? This is a widely accepted threshold. A higher percentage likely means you are having trouble saving for retirement, emergencies, and large expenses.

The average score on the 5 questions was 3, meaning that the typical respondent—perhaps your neighbor—had healthy financial habits 60% of the time. That equated to a median net worth of $100,000. Those who scored higher had a higher net worth, and those who scored lower had a lower net worth.

In general, younger people and minorities scored lowest, while older people and whites scored highest. Education was far less relevant than age. “This may be due to learning better financial habits over time, getting beyond the financial challenges of early and middle adulthood and the benefit of time in building a nest egg,” the authors wrote.

It should come as no surprise that healthy financial habits lead to greater net worth over time. But the survey suggests a staggering advantage for those who ace all five questions. One of the lowest scoring groups averaged 2.63 out of 5, which equated to median net worth of $25,199. One of the highest scoring groups averaged 3.79 out of 5, which equated to a median net worth of $824,348. So these five questions not only give you an idea where your neighbors may stand—they pretty much show you a five-step plan to financial security.

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