FROM THE DESK OF DENNIS RICHARDSON
Article Courtesy of AmericaSaves.org
- Save your loose change. Putting aside fifty cents a day over the course of a year will allow you to save nearly 40% of a $500 emergency fund.
- Keep track of your spending. At least once a month, use credit card, checking, and other records to review what you’ve purchased. Then, ask yourself if it makes sense to reallocate some of this spending to an emergency savings account.
- Never purchase expensive items on impulse. Think over each expensive purchase for at least 24 hours. Acting on this principle will mean you have far fewer regrets about impulse purchases, and far more money for emergency savings.
- Use debit and credit cards prudently. To minimize interest charges, try to limit credit card purchases to those you can pay off in full at the end of the month. If you use a debit card, don’t rely on an overdraft feature to spend money you don’t have. With either approach, you’ll have more money available for emergency savings.
- Are you looking for an effective way to establish a budget? Beginning on the first day of a new month, get a receipt for everything you purchase. Stack and review receipts at the end of the month, and you will clearly be able to see where your money is going.
- It pays to practice preventative dental care, since a good cleaning routine helps prevent fillings, root canals, and dental crowns, which are expensive and no fun.
- Most people don’t track what they spend and may not realize when expenses add up to more than their budget can handle. To keep track of what you spend, put what you think you should spend for the month on transportation, food, entertainment, etc., into envelopes. This will help you avoid buying things you don’t need, and what’s left over can go into saving.
- Take advantage of discounts and/or incentive programs provided through your employer. For example, if the company you work for offers discounted rates for computers, fitness center memberships, movie tickets and passes to summer festivals, take advantage! Check your corporate intranet or talk to your human resources representative. And don’t forget the best deal of all – investing in your 401(k)!
- One way to establish a savings discipline is to “save” an amount equal to whatever is spent on nonessential indulgences. Put a matching amount in a cookie jar for expenditures for beer, wine, cigarettes, designer coffee, etc. If you can’t afford to save the matching amount, you can’t afford the $4 super almond low-fat latte.
- Take the amount the item costs and divide it into your hourly wage. If it’s a $50 pair of shoes and you make $10 an hour, ask yourself, are those shoes really worth five long hours of work? It helps keep things in perspective.
- Aim for short-term savings goals, such as setting aside $20 a week or month rather than long term savings goals, such as $200 over a year. People save more successfully when they keep the short-term goal in sight.
- Save money by buying items online, in bulk. Some companies even offer free shipping on large orders. Clearance items are sometimes available, and good savings can be found on non-perishable groceries and diapers. This saves time and money!
- Substitute coffee for expensive coffee drinks. The $2 a day you could well save by buying a coffee rather than a cappuccino or latte would allow you, over the course of a year, to completely fund a $500 emergency fund.
- Bring lunch to work. If buying lunch at work costs $5, but making lunch at home costs only $2.50, then in a year, you could afford to create a $500 emergency fund and still have money left over.
- Eat out one fewer time each month. If it costs you $25 to eat out, but only $5 to eat in, then the $20 you save each month allows you to almost completely fund a $500 emergency savings account.
- Shop for food with a list and stick to it. People who do food shopping with a list, and buy little else, spend much less money than those who decide what to buy when they get to the food market. The annual savings could easily be hundreds of dollars.
Prescription and Over-the-Counter Drugs
- Ask your physician to consider prescribing generic drugs. Generic drugs can cost several hundred dollars less to purchase annually than brand-name drugs.
- Find the lowest-cost place to purchase prescription drugs. Make sure to check out not only your local pharmacist but also local supermarkets, area discount centers, and mail-order pharmacies.
- Purchase storebrand over-the-counter medications. Storebrand medications often cost 20-40 percent less than nationally advertised brands. The savings could easily exceed $100 a year.
- Avoid bouncing checks or overdraft fees each month. The $20-30 you save by not bouncing a check each month would save you enough money to nearly fully fund a $500 emergency savings account.
- Reduce credit card debt by $1,000. That $1,000 debt reduction will probably save you $150-200 a year, and much more if you’re paying penalty rates of 20-30%.
- Make your monthly credit card payment on time. The $30-35 you save by not being charged a late fee each month on one card would save you most of the money you need for $500 in emergency savings
- Use only the ATMs of your bank or credit union. Using the ATM of another financial institution once a week could well cost you $3 a withdrawal, or more than $150 over the course of a year.
- Shop around for auto and homeowners’ insurance: Before renewing your existing policies each year, check out the rates of competing companies (see the website of your state insurance department). Their annual premiums may well be several hundred dollars lower.
- Raise the deductibles on auto and homeowners’ insurance: Being willing to pay $500-1,000 on a claim, rather than only $100-250, can reduce annual premiums by as much as several hundred dollars.
- Assess your need for life insurance coverage. If your children are now on their own, or if your spouse works, you may not need as much life insurance protection. The annual premiums on a term life policy would typically fully fund an emergency savings account
- Consider dropping credit insurance coverage on installment loans. Many consumers don’t need credit insurance because they have sufficient assets to protect themselves in the event of death, disability, or unemployment. Terminating this coverage often reduces financing costs by three percentage points, a savings of about $1,000 on a four-year $20,000 installment loan.
- Keep your car engine tuned and its tires inflated to their proper pressure. Doing both can save you up to $100 a year in gas.
- Shop around for gas. Comparing prices at different stations and using the lowest-octane (recommended by the car owner’s manual) can save you hundreds of dollars a year.
- When driving, avoid fast start-ups and stops. Over time, you will save hundreds of dollars on lower gas and maintenance costs.
- Take fewer cab rides. Using public transit instead of cabs can save you $5-10 per trip or more. If you’re a frequent cab user, the savings could complete ly fund your emergency savings account.
- Check all airlines for cheap fares. Since no website lists all discount carriers, also check out the websites of discount carriers like Southwest and Jet Blue, possibly saving you hundreds of dollars.
- Don’t pay for space you don’t need. Americans have relatively large houses and apartments. Think about more efficiently using space so you can purchase or rent less square footage.
- Live relatively near your workplace. While this isn’t always possible, driving 5,000 miles less a year can lower transportation costs by more than $1,000.
- Refinance your mortgage to lower interest charges. Consider refinancing your mortgage to lower the rate and term. On a 15-year $100,000 fixed-rate mortgage, lowering the rate from 7% to 6.5% can save you more than $5,000 in interest charges over the life of the loan. For each $100,000 you borrow at a 7% rate, you will pay over $75,000 less in interest on a 15-year than a 30-year fixed rate mortgage. And, you will accumulate home equity more rapidly, thus increasing your ability to cover large emergency expenditures.
- Choose home repair contractors wisely. Favor contractors who have successfully performed work for people you know. Insist on a written, fixed-price bid. Don’t make full payment until satisfactory completion of the work.
Home Heating and Cooling
- Ask your local electric or gas utility for a free or low-cost home energy audit. The audit may reveal inexpensive ways to reduce home heating and cooling costs by hundreds of dollars a year. Keep in mind that a payback period of less than three years, or even five years, usually will save you lots of money in the long-term.
- Weatherproof your home. Caulk holes and cracks that let warm air escape in the winter and cold air escape in the summer. Your local hardware store has materials, and quite possibly useful advice, about inexpensively stopping unwanted heat or cooling loss.
- Use window coverings to block or let in sunshine. In summer, use these coverings to block sunlight, keeping your house cool. In winter, open the coverings to let sunshine warm the house. You could easily save more than $100 annually while being more comfortable.
- Look for sales at discount outlets. There are huge price differences between clothing on sale at discount stores and that sold regularly at many department and specialty stores, though keep in mind that prices at the latter are often deeply discounted.
- Consider purchasing previously-used clothes from Good Will, second-hand stores, or school or church thrift sales. With a little effort, you can find low-priced, high-quality used clothing items that can be worn for many years.
- Assess clothing in terms of quality as well as price. An inexpensive shirt or coat is a poor bargain if it wears out in less than a year. Consider fabric, stitching, washability, and other quality related factors in your selection of clothes.
- Clean clothes inexpensively. Wash and iron clothes yourself. If you use a cleaner, compare prices at different establishments. A 50 cent difference in cleaning a shirt, for example, can add up to $100 a year.