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** PENNY PINCHING **
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If you often feel as though your money runs out
before the month ends, you may need to look a little harder for ways to
save a buck or two. Obviously, expenses such as increased health care
costs and home heating bills are out of your control.
But there are plenty of places you can control your cash flow, areas
that you may not have realized were eating up such a large chunk of your
budget. The Early Show financial advisor Ray Martin highlights a few of
them:
Food
"One of the first places people cut when they need to manage with less
money, is eating out," Martin says. According to the U.S Bureau of
Labor Statistics, the average household (average = income of $44,650)
spends over $2000 eating out each year That's about 4.5 percent of the
family budget. You can only assume that households who earn more than
this spend more.
Martin figures the average couple spends $50 on a restaurant dinner.
"If a couple cuts their weekly dining out down to once a month, they can
save $150 or more," he says. "This could also be good for the
waistline."
Yearly Savings: $1800
His advice is to bring your lunch to work as well. Even if you only
spend $5 a day, that adds up to $100 a month. Keep in mind that this
tactic also calls for some smart grocery shopping. For instance, don't
buy pre-packaged cheese and crackers, you'll save money by buying a
block of cheese and a box of crackers.
Yearly Savings: $1200
Finally, don't waste money buying bottled water every day. Assuming
your bottle is $1.50, you could wind up spending $360 a year on this.
Martin buys one bottle and then fills it up at home or the office water
cooler.
Yearly Savings: $360
Banking
It's key to avoid those nasty ATM fees charged when using another
bank's machines. Bankrate.com estimates that consumers paid $2.27
billion in surcharges in 2002. (MarketWatch.com)
The average bank hits non-members with a $1.50 service charge; that's
on top of the charge your own bank often charges when you use an
out-of-network ATM. So, each time you use an ATM that's not your own, it
costs about $3. These numbers continue to increase.
Yearly Savings: $150
To make matters worse, one in four banks levy a fee each time a
customer chooses "debit" and punches in her PIN at store checkout
counters. Typically, this fee is .50; a variety of newspapers report
that more banks are considering adding this charge.
The average consumer uses a debit cards 14 times a month. At .50 a
pop, that adds up to $84 a year. Always choose to use your bankcard as
"charge" instead of "debit."
Yearly Savings: $84
Also use your bank's online bill-paying service - you direct the bank
to write and mail checks to pay your bills. This saves you the cost of
postage, about $6 a month, and the cost of checks, about $18 a year.
Yearly Savings: $90
Insurance
"The average cost of insuring cars is expected to rise 9 percent
nationally in 2003. That will follow increases of 8.5 percent this year
and 6 percent in 2001, said the Insurance Information Institute, a
national trade organization." (Associated Press)
You can fight these increases in a couple of ways. Companies often
offer a discount if you buy both your homeowners and auto insurance from
them. Even more significantly, raise your deductible on your insurance
to $500 or $1000. You can save up to 10 or 15 percent.
Yearly Savings: $200 +++
Gas
Less than 10 percent of cars on the road actually require "premium"
gas but 20 percent of all gas consumed is premium. Premium gas does not
improve fuel economy or boost power, so don't think you're squeezing
something "extra" out of your engine when you spend more on gas.
Thanks to so many technical advances, only high-performance vehicles
(meaning high-end BMWs or Mercedes) really need high-octane gas. So read
your owner's manual and only use premium gas if the manufacturer
specifically calls for it. Some older cars may also need a gas upgrade.
Yearly Savings: $200 +++
Heating Bills
"Turning the thermostat down five degrees for four hours a day can
save 10 percent on your heating bill," Martin says. "In the northern
part of the country, that can save $150 to $300 this winter. You can do
this yourself or buy a programmable thermostat to do it for you."
Also consider wrapping your hot water heater with insulation and using lower watt light bulbs or florescent light bulbs.
Yearly Savings: $150
None of the above tips are groundbreaking, or totally unreasonable.
That's what makes the savings seem even more incredible. Anybody can do
this. Just make sure the money ends up in a savings account or other
investment, Martin suggests.
$4418.00
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Take a look at where
you spend your money and you might be surprised to find that your budget
has more money leaks than the federal government.
It doesn't have to be that way. You can live well for less. Without
much pain and effort, you can make some simple financial moves and can
squeeze out a few hundred, even a few thousand dollars in savings each
year.
One of the first places people cut, when they need to manage with less
money, is eating out. If a couple cuts weekly dining out down to once a
month, they can save $150 a month, or more. This could also be good for
the waistline.
Another savings tip in this area is to bring your lunch to work. I do
it and I figure this saves me over $100 a month in cafeteria food and
beverage costs.
I don't smoke so I can't comment on the addiction. But with a
pack-a-day habit running $120 a month, let alone the other health
related costs, I'd put this at the top of the list to cut if you want to
save some real money each year.
Where to save
Here is a list of more penny-pinching moves and their estimated
monthly or annual savings. You might be surprised see how the savings
can really add up:
Avoid ATM and transaction fees by using only in-network ATMs and
avoiding PIN-based debit cards. Keep your bank balance above the minimum
to avoid additional account fees. This can save you $150 to $250 per
year in ATM and bank fees.
Use a no annual fee credit card if you don't carry a balance. If you
carry a balance each month, use a low rate card. This can save you $75
per year in fees and over $150 a year in interest charges even if your
average balance is as low as $1000. See Bankrate.com for a list of
available no-fee and low rate credit cards.
Use your banks on-line bill payment service - they write and send your checks according to your on-line direction. This can save you the cost of checks and $80 to $150 in postage per year.
Raise your deductible on your auto and homeowners insurance to $500 or $1,000. Buy these policies through the same insurance company. This can save you ten to 15 percent, or $200 to $350 a year on these costs.
Compare costs at the gas pump and use regular grade gas. This can save $4 to $6 per fill up, or $200 to $300 per year. Also, keeping the engine tuned, your tire pressure up and your speed down can save an additional $100 a year.
Turning the thermostat down five degrees for four hours a day can save ten percent on your heating bill. In the northern part of the country, that can save $150 to $300 this winter. You can do this yourself, our buy a programmable thermostat to do it for you.
Wrapping your hot water heater with insulation can save an additional $50 to $100 a year. Using lower watt light bulbs can add to the savings.
Whoever said talk is cheap never looked at a phone bill. Drop optional services such as answering services (buy a $25 answering machine instead) and don't use directory assistance. This can save you $75 to $100 per year. Also, cancel that extra cell phone, reevaluate your calling plan, or call only during nights and weekends when costs are lower - this can save you $250 to $500 a year.
While you're at it, dropping that extra phone line can save $35 a month. You won't need it for Internet access if you upgrade to cable or DSL Internet connection. Pay for the cable internet connection by dropping premium cable programming channels and dropping your dial-up web service subscription - how much TV are you watching when you are at work anyway.
You can save a bundle when you buy food in bulk, avoid prepackaged items such as deli meats and cheese and don't be brand loyal. Also, fill a water bottle and bring that to work instead of buying bottled water and soda. These tips can save $30 to $50 a month, or $360 to $600 a year.
Cancel unnecessary magazine subscriptions. Instead, ask friends which magazines they subscribe to and drop the ones you both buy. Then swap magazines with each other every month. This will save you $15 to $30 per cancelled subscription per year.
When clothes shopping, check the care instructions and try to avoid "dry clean only" items. If conditions permit, hang work clothes up at the end of the day and wear again before taking to the dry cleaners. At home, wash your clothes in cold water and only do full loads. This extra attention can reduce your cleaning and laundry costs by $20 to $50 a month.
If you plan a trip this winter, make sure to book your trip in advance and plan the return on a weekend. This can save over 60 percent on the cost of round trip airfare. Also, if you will need to rent a car, shop around, prices can vary as much as 20 to 50 percent among the car rental companies for the same car. Also, fill the tank yourself and avoid the insurance add-ons to save even more.
How does this penny-pinching add up? Let's see...
Assuming a family of four, in a typical house, in the northeast....
the total savings could be over $8,200 a year. Even if you don't smoke,
already limit dining out and bring your lunch to work, the rest of the
tips add up to $3,785 a year. That's not too shabby.
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Hunt, who plunged her family into massive debt
over 12 years before finally getting it under control, is a proponent of
what she calls 'Debt-Proof Living'. The key factor? Save 10 percent of
everything you earn each month, while you're still employed.
"When you're saving 10 percent of everything -- salaries, bonuses,
birthday money -- you build a contingency plan," said Hunt. "It's
specifically designed to fill in the gap when you and your income part
company. A job is not forever and nowadays that's true more than ever."
Build three months of living expenses and then aim to build six
months, she said. Park it away from your other retirement and savings
plans and set it up to be automatically deleted from your check so you
don't miss it. Be sure and put it somewhere that offers growth, but also
gives instant liquidity, such as a passbook savings account or a money
market savings account.
Another part of her debt-free living advice involves giving away 10
percent, or even 2 or 3 percent. "By doing that, people stay balanced
and not so drawn to the glitz and glamour credit can give." The bonus is
not only philanthropic, but there are also tax benefits of gift
giving.
Jonni McCoy, author and founder of the 8-year old site,
Miserlymoms.com, suggests to her readers that no matter how tight the
budget, they try to put something aside. "Even if it's $10 a week or $10
a month. You really have to do something for a rainy day or
retirement."
Start in the kitchen
Want to cut your budget quick? Check out your food bill, say frugal
experts. Restaurant and fast or instant food is a staple in the lives of
many, said McCoy. "They have no clue how to shop or cook. They have to
start from the very beginning."
When she decided to stay home with her kids and live on her husband's
income, she was forced to drastically cut her grocery budget and
eventually sliced 60 percent off it by cooking simple meals from
scratch. Her book, 'Miserly Meals' offers 200 recipes that cost less
than 75 cents a serving.
Gary Foreman, publisher/editor of The Dollar Stretcher, suggests
keeping a "price book" handy when you shop, to write down the lowest
prices you pay for each item you buy frequently, noting the store, the
date and units.
"Do this for a period of time and you'll quickly be able to tell when
you're really getting a good price on an item or not. When you get a
real deal for something you use frequently, which won't spoil, you can
stock up. You can save 15 to 20 percent."
His other favorite is freezer meals, simply doubling up whenever you
cook, for example, making two lasagnas instead of one. "I find so often
that families get to the end of the workday, and take everybody out to a
restaurant or a drive-through." Not only is that expensive, but it's
unhealthy, he said.
Families also spend too much on specially packaged food for kids that
you assemble yourself for cheaper. "For the life of me, I don't
understand people buying pre-packed cheese and crackers and giving them
to their kids to take to school," said Foreman.
Baby boom babies
The temptation for first-time parents to give junior the best is a
strong desire. "A lot of women, who are now mothers, and have been in
the workforce would like to stay home with their kids, but don't know
how to do it," said Foreman.
Do you really need a new stroller and all new clothes? Relatives,
friends, garage sales, charity shops and secondhand stores can offer a
wealth of used clothes, bassinettes and equipment, frugal experts say.
McCoy, who was one of those mothers who decided to stay home and live
on one income suggests new mothers make their own baby food by boiling
meat and veggies, blending with water, pouring in ice cube trays and
freezing.
Of course, mother's milk is also cheaper than formula and she also has
saved money by trying off-brands of diapers, though she notes cloth
diapers didn't help much. "I found that I washed them as many times. Add
in utility and dryer costs and it worked out to be almost as expensive
as a disposable."
If living on one income scares you, consider what you'd be paying in
childcare and saving on dress clothes for work and other expenses, said
Foreman. He and others say if you plan to be a stay-at-home parent,
start living on one salary way before Junior arrives. Check out Baby on a
budget at Dollar Stretcher's site.
Shabby chic
Decorating is an area that frugal livers have turned into an art form.
Nikki Willhite, editor of the Pennypincher Ezine, said many homeowners
trying to save money have managed to decorate their homes for cheap,
something that has caught on in the wealthier classes.
"It's all about finding value in things from the past that have
withstood the test of time. Take things that were once in the attic or
garage and display them in your living room," said Willhite. Examples of
this would be wood furniture that has had four visible coats of paint
on it.
"Things that are chipped, rusting, anything that's old, solid," with
some going as far as beating new furniture with chains to make it look
old, she said. But it's not really about buying new furniture.
"It's cheap things you can find at the curb that, with a little
sanding or varnishing, looks good. All hand-me-downs are good. In the
past you needed pristine furniture, but now slipcovers are in. You can
furnish a whole room for $500."
"You want your room to look like it evolved over time. It's kind of
like a poor man's antique. It's considered really cool to pull together a
house on a low budget."
Check out these Web sites for ideas on cheap home décor: The Rental Decorating Digest and The Budget Decorator.
Odds and ends
Additional tips from the frugal experts:
Half.com by EBay -- Unlike auctions, offers a fixed-price, online
marketplace to buy and sell high quality, new, overstocked, remaindered
and used products like books, CDs, movies, consumer electronics
Down with the debit card -- Cheapskate's Hunt advises her readers to
leave the card at home and just take cash out at the beginning of each
week. "It's a proven fact you will spend between 30 percent and 50
percent more with a debit card."
Cheap entertainment -- McCoy said that families overlook free museums,
tours and a variety of other options for a day out. "It's getting
people to rethink what entertainment is. You don't need the closest
amusement park in order to have a fun day." And before you buy that
book, check out your library and many also offer free or low-cost video
or DVD rentals.
Off the rental track - "We recommend people find a way to buy a house,
even if it's something small. Rent is throwing money out the window,"
said McCoy. This means maybe asking a relative for help with the down
payment. First-time homebuyers have an even easier route, as they're not
required to put down as much of a down payment. Check out FHA home
loans.
Gift Giving -- Homemade gifts are in and not just for Christmas. How
about a homemade scrapbook or homemade cookie mixes or pasta sauces? If
your family went overboard this Christmas, get a system of name drawing
for next year in place.
Health insurance -- A tough one for all the frugal sites, but experts
suggest if you find your family without health insurance, at least try
to get catastrophic illness for the adults. For qualifying families, the
Department of Health for each U.S. state offers a low-cost or free
children's health program.
Articles from CBS Television
