Posted: May 22nd, 2012 | Author: Joe | Filed under: Lifestyle, Saving | No Comments »
Simple money saving tips are scattered about the Internet from hell to breakfast. They usually focus on small things you can do to find small amounts of cash. They often look like:
- sell your junk on eBay
- sign up for free customer rewards programs
- never go grocery shopping without a list
- never pay retail price
…and so on.
They’re OK as money saving tips go, but you’re going to need a lot of them to make a big difference in your finances.
I’ve decided to share what I believe to be a more significant money saving tip. It’s actually more of a concept, or a change in the way you think about spending than a straightforward money saving tip.
Incidentally, this is also my entry to the $500 Financial Highway giveaway, sponsored by Life Insurance Finder – the easiest place to compare life insurance quotes.
That giveaway inspired me to share this money saving tip, but I probably would have gotten around to sharing it eventually. I’ve found it to be a solid benefit to my own finances, and has helped blaze a path from debt to prosperity for my family’s finances.
The Only Money Saving Tip You Need!
My absolute best money saving tip is this: Trade recurring expenses for one-time expenses where you can, and limit the rest.
Yep that’s it. Simple. But how many people actually think about this when the make a purchase or sign up for a service?
Take a look at all your expenses for a given month. You’ll likely see things like, cable television, auto insurance, car payment, gym membership, credit card bill and more.
Let’s consider the credit card bill for a moment. People decide to take action and pay down their credit card debt when that monthly payment becomes too large, not because they see a double digit interest rate. But it’s that interest rate and monthly balance that cause the payment to increase. Pay off the credit card in full every month, and you can save thousands.
Cars are another great example because the cost is usually so high. It’s more difficult to buy a car with cash, but doing so eliminates the monthly bill entirely. Since I’ve paid off my car loan, I don’t worry about maintenance costs as much as when I had a car payment. The money that used to go to pay off the car now goes in my bank account every month. I sleep better at night. I’ve gone from feeling that the unexpected car repair was some act of financial sabotage to my budget, to feeling like it’s something I can manage. All because I got rid of that monthly car payment.
Even little things like the gym membership bleed your income from you. The great thing about being debt free is that your take home pay actually is your take home pay!
Reconsider things you thought you needed. If you can live without it, then why are you spending money on it month after month.
Consider a one time expense of gym equipment instead of the monthly membership due.
There are alternatives to cable television. You can cut the cord and still see your favorite shows for a fraction of the cost of cable, if not free.
Most retailers and service providers know if they can hook you on a recurring payment or payment plan, they can get more out of you over time without you even batting an eye. Some even charge you more while doing it. My car insurance provider is one example. They actually charge $3 a month extra for recurring payments, but that fee is waived if I pay in one lump sum.
I still make payments – to myself. I take the money that used to go to the car insurance every month, and put it in a bank account for the car insurance. I save on the fee and earn interest while doing it.
I know it’s not easy to come up with the extra cash needed to make the switch from recurring payments, but following this single money saving tip will save you more than most of the little things combined – and you can use it forever – there’s only so many times you can sell your junk on eBay.
My advice is to follow those smaller money saving tips, stockpile the extra cash from those and use it to get off the recurring payment treadmill.
Following this money saving tip also has an added benefit – it will make your finances simpler. Less transactions per month means less to track, which makes managing your finances quicker and easy. That means you’re more likely to stay on top of things and know where your money is going. That’s a win in my book.
What are some of your money saving tips (large or small)?
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Posted: March 5th, 2012 | Author: Joe | Filed under: Debt, Saving, spending | Tags: Income, money, Saving, Single Income, spending | No Comments »
How can $50,000 seem like minimum wage? According to the Social Security Administration’s National Average Wage Index, the national average income for the USA in 2011 was $41,673.83. That means that to half the country, $50,000 a year would be a $8,326 raise, and yet this woman says $50,000 feels like minimum wage !
Well, if you read her story it makes a lot of sense.
Basically, she went from working at home to a full time office job and once she totaled the change in her spending she realized she was making about $7.50 per hour.
Here are some of the things she attributes to lowering her effective income:
- Commuting costs – increased wear and tear on her car, the cost of gas, etc…
- Childcare expenses
- Eating out more – less time to prepare meals at home means eating out or buying take out more frequently, which is more expensive.
- Increase in clothing and personal care expenses (i.e. hair and nail care, proper office attire, etc..)
- Coping with stress by spending more on vacations, or entertainment.. buying more wants than needs.
Her change in lifestyle brought about a change in spending with no increase in saving. It happens to a lot of people and it’s not always easy or even possible to fix. She could do some things differently. She probably doesn’t need to spend $40 a week on clothes, and she could plan ahead to prepare more meals at home, but that takes work too.
This is the kind of situation my wife and I work very hard to avoid. We avoid debt whenever possible to keep as much of our income as possible. I work hard to secure a steady income, and she works hard (sometimes harder) to make that income go as far as possible.
She’s the coupon clipper and meal planner. She’s turned comparison shopping into a competitive sport. She scours thrift shops and consignment stores for children’s clothes, and puts a healthy low cost meal on the table every day of every week all year long.
It’s not easy, but it’s cheaper than if she went back to work full time. And we believe it’s better for the family. Living on a single income is not easy, but it is possible and I believe better in most cases for families. The key is twofold: 1) limit expenses as much as possible, and 2) increase income.
It’s really no different than what most people should be trying to do regardless of their employment situation, but as the Yahoo! article makes clear, it’s so much easier to lose control of your spending when both people work out of the house. Those little money leaks turn into an effective loss of income over time.
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Posted: October 4th, 2011 | Author: Joe | Filed under: Saving, Tips | Tags: Banking, high Yield Savings, How To, online banking, Saving, Tips | No Comments »
The Federal Reserve has recently announced that it will be keeping interest rates that banks pay to borrow money at 0 – 0.25% for the foreseeable future. This is done in the hopes of encouraging borrowers and spenders, but punishes savers. This makes it harder than ever to find the best place to let your emergency fund grow. But just because it’s difficult to find a place to make your money work harder for you doesn’t mean you should let it sit idle in a low yield bank account!
While it’s easy to find places to stash your cash that pay more than the average bank savings account (currently 0.08%!), high yield isn’t the most important thing when looking for a home for your emergency fund.
The two most important factors to determining where to keep your emergency cash are:
- Safety
- Liquidity
“Safety” is a measure of short term risk. Putting your emergency fund in the stock market is foolish because stocks can lose money on any given day, and you need to be able to count on your money being there when you need it.
Certificates of deposit are safe. They are FDIC insured, so you cannot lose principal. But this is where liquidity comes into play. CD’s are safe, but you don’t want your emergency fund tied up in a 5-year CD when you need that money now.
Because of these two factors, the most common places to store your emergency fund money is in a high yield savings account and sometimes a short term certificate of deposit (CD). You could put some of your savings in a savings account, and the bulk of it in a CD. This way you have immediate access to what’s in the savings account, but the bulk of your fund would be in a CD earning higher interest.
Ideally, you’d put the money you would need for repair bills on the house or car in the savings account, and you’d use the CD for that part of your savings you would tap only in the event of a loss of income or some larger emergency.
In the current economic environment however, it makes sense to use only the high yield savings account and skip CDs. Here’s why…
High yield savings account vs. a 1 year CD.
A quick look at yields on 1 year CDs shows that the highest yielding CD (currently offered by Sallie Mae) only offers a tenth of a percent more that the highest yielding savings account, but you wouldn’t have access to your money for an entire year (without penalties). That’s simply not worth tying up your money like that.
So, on to high yield savings accounts…
How to Find The Best High Yield Savings Accounts.
First, head over to BankRate.com and check out their list of high yield savings accounts. Sort by APY (the yield you can expect if you leave your money in the account for a full 365 days), and work down the list. Be sure to read the details of the terms and look for a star rating of 4 or 5.
That star rating is Bankrate’s rating system which rates a financial institutions solvency and safety, not customer service or satisfaction. It’s meant to give an indication of the likelihood of the bank being closed by the FDIC.
For the record, neither of my banks is on the list (ING direct or HSBC)*, so it’s not the only resource you can use but it is a good place to start. If there’s a bank or credit union you’re interested in, you can search Bankrate’s safety ratings.
They also offer a checking account search.
* I’ve been a happy customer of both HSBC and ING Direct for over five years now. I’ve kept the bulk of my savings at HSBC direct, but they have recently decreased their rate. It’s still much higher than the average though. ING direct has been very good to me, and they still sport one of the highest rates and easiest to use website in online banking. They’ve recently been acquired by Capital One though, and a lot of people are not happy about that. I haven’t seen any changes yet though, so I’m taking a wait-and-see approach. Plus there’s the ever popular $25 ING Referral codes that give you an extra $25 free when you open an account with $250 . (that’s an immediate 10% return on your money, for those of you playing along at home)
Look for special deals.
It’s also a good idea to check out online forums, like the FatWallet finance forum and see what people are saying about various banks and account offerings. You can also search for discussions on high yield savings accounts and learn about the most recent perks for signing up with various banks. Sometimes they offer introductory rates that are higher than normal, or cash back when you open an account. Public forums like FatWallet’s are a great source for getting the experience of real customers, instead of marketing execs.
Please share any tips, tricks or experience you may have in the comment section below.
Happy Saving!
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Posted: September 20th, 2011 | Author: Joe | Filed under: Saving, Tips | Tags: Games, money, Teaching Children, Tips, video | 1 Comment »
One thing that seems to be universally agreed upon is that if more people learned how to manage their money at a younger age, the country would be in a far better place as a whole, financially speaking.
How young is “young”, and is there such a thing as “too young” to learn about money?
I personally believe that there is no such thing as “too young”, which is why I wrote about games to teach children about money a while back. That post focuses on the toddler and elementary school age kids, but I don’t think you’re ever too old to learn about money either.
So that post was about role-playing style games to play with your children, but here’s a video about websites that can help your older children to learn money basics like budgeting and delayed gratification.
The video (above) profiles 10-year old Evan Lipset who’s used a site called ThreeJars (Allowance Made Easy) for 10 months. He claims to have saved $500 in allowance over that time. Not bad for a kid who only wanted enough for an iPad.
ThreeJars creates the incentive for the child to prioritize and set financial goals, and allows the parent to approve or deny various goals or money moves. It makes tracking easy, and visually appealing. The downside is that it cost $30 a year.
Two other, similar sites offer free levels of membership. They are FamilyMint (Helping kids appreciate money) and Zefty (Online Allowance and Money Management for Kids & Parents.
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