The truth is, we don’t always pay attention to the little things we can implement in our financial lives that can save money. Consider implementing one of these tips a week for fifteen weeks and enjoy the savings.
- Always maximize contributions to your company savings plans (401K). If they match 50% , you have an investment that provides a 50% return even before considering the advantages of tax deferral and that you are investing before-tax dollars.
- Consider signing up for automatic monthly withdrawals from your checking account to the mutual fund of your choice! If the money is taken out automatically you will not see it and will not spend it. Also when you receive a raise consider devoting half of the amount to the monthly withdrawal.
- Pay all credit card debt off before investing. If your credit card rate is 18%, paying off the card provides an immediate, return of 18%, with no risk. Most credit card companies will rescind their annual fee if you are persistent in asking!
- Evaluate the financial circumstance of raising your deductibles for all of your insurance coverage’s including auto, home and health. We typically recommend $1,000 deductibles for auto and home and possibly $1,000 for health.
- Carry cash and budget your ATM withdrawals. It is harder to overspend if you have to pay with hard currency rather than a credit card. Establish a reasonable weekly cash budget and hold to it. Too many people lose track of what they actually spend on sometimes-silly items by dipping into the pot at the ATM!
- Consider a recently new car rather than a new car. Let the other guy take the immediate depreciation loss that occurs as soon as the car leaves the showroom. Such cars may be purchased at 60-80% of the cost of the same car purchased new and may also have low mileage. Try to pay cash for big-ticket items like automobiles and generally you will buy less car. Do not buy service programs for cars or major appliances. That form of insurance is usually a bad deal.
- Purchase rather than lease vehicles unless there is a business reason (the lease payments are deductible). The cost is high: the car must always be fully insured at the high coverage costs associated with new cars. You may need to purchase gap insurance, and at the end of the lease you own nothing and must purchase or lease another vehicle.
- Do not buy insurance you do not need. Life insurance is a bad deal (almost always) for people whose death does not impact anyone else financially. If you have a young family, buy term insurance.
- Try to vacation in the off-season. If the time you choose is only a month or two away from the beginning of the peak season (usually summer months for northern locales and winter months for southern locales) you will find plane fares, hotel charges and other costs may be 20-40% lower than at peak. Everything is far less crowded! For vacations longer than say a week, consider renting a small home instead of staying in hotels. The cost per night may be significantly less and you save on meals Rent a place centrally located to the different areas you want to visit. As an added benefit for overseas vacations, you really experience the country and its people in a home.
- Try not to buy any new product when it first appears (unless you absolutely need it). Many manufacturers utilize a pricing method known as “skimming.” They price the product at a very high level initially knowing there is always a segment of the market that will pay top dollar for anything. Wait until the product is more “commoditized,” competitive pressures, or the need to expand the market leads to lower prices. Hewlett-Packard uses this approach to price new products.
- Use technology to compare and shop. Retail trade on the Internet is expanding quickly. You can quickly compare competitors’ pricing. Always hunt for the lowest price for big-ticket items. Start thinking of a sales discount as the equivalent to percentage returns on your money.
- When buying a home, consider a thirty-year mortgage rather than a fifteen. If you are in a 28% bracket and your mortgage rate is 7.5%, you have use of the banks money at a net interest cost of only 5.4% after taxes. If you invest properly you can average at least 10% return. The net interest spread works to your advantage and will increase your net worth long term.
- Whenever you save money at the supermarket by using coupons or on a purchase through good research, consider writing a check for an amount equivalent to the savings to your favorite investment. A sure and painless way to increase savings.
- Save money on clothes and toys for babies and young children by shopping at thrift shops. Babies and children outgrow toys and clothes so fast that in many cases the items never wear out and may be in near new but at a substantially lower cost! Instead of throwing away items that are unnecessary outgrown, or obsolete consider selling them on consignment to thrift shops or donating them to charity and taking a reasonable deduction if you itemize on your taxes.
- Buy used books not new! These days such web retailers as www.amazon.com have enormous selections of used books (and CD’s). The sellers usually rate the condition of the item. Typical savings ranges from 5-60%. You can sell unwanted books over Amazon also.