Tuesday, January 25, 2011

Money Saving Tips: Part 2

Happy Tuesday everyone. 

I recently read an article on blunder.com about the 20 best money moves that you can make for this year.  Here is the link: Money Savers - you can also find it in the DIY Everything Section of this blog, under money saving tips.

I wanted to list and give a quick summary of the 20 topics here today, along with some personal insight.  Sorry that there aren't any pictures, and this is a text heavy post, but there is some great information here!  Enjoy.

Image: Link

1. Put your pay-down-debt plan on Auto Pilot:  Essentially this is about automatically taking money out of your paycheck to pay down your credit card debts - more than just the minimum each month, so that you get rid of that balance more quickly.  Something that always amazes me on my credit card bill is a quick chart that they have on the bottom of each bill.  They have a "pay the minimum" category and "pay $150" category.  The minimum payment takes three years to pay off, but the $150 payment takes 12 months.  And that's only on a $800 bill.  THREE YEARS to pay it off when you only pay the minimum.  I can see where this is an item that will save you a ton of money in the long run instead of immediately.

2. Enjoy your 2% bonus:  Because of the recent tax cut, we are all getting an extra 2% in our paychecks.  They recommend investing that 2% instead of spending it.  That way you will never miss it and things like your 401k will benefit in the long run.

3. Make the Most of your 401k Match:  Sort of in line with number 2, they recommend that you max out your 401k to what your company is matching.  Our office hasn't matched our 401k in the past three years, so I cut my contribution back a bit when we took our salary hit, but I didn't quit putting money in all together.  That extra $60 a month for the past two years will make a difference, eventually.

4. Aim for 15%:  They recommend that you put 15% of your salary into a retirement account.  Right now that isn't possible for us, but it's definitely a goal that we can strive for.

5. Put your money in a Roth IRA:  Because this money is pre-taxed, you will not lose a chunk of it when you go to take it out at retirement time.  I started one of these years ago... haven't been able to contribute, but it's started.  I believe that the max you can put in is $4000 a year in my tax bracket, however if you put the money in between January and April, you can double your contribution.

6. Adjust your withholding:  This one is tough for me.  They say that letting the government hold your money all year is a loss for you, but I have to admit that I love getting a big check after tax time.  This one is up to you!

7. Refinance your home:  Again, this one is another wishy-washy one.  First, you have to plan on staying in that house for a while for this to make sense.  You will have to pay an additional closing cost.  This can be lumped into your new mortgage, but doesn't make sense if you are only planning on living there for another 3-5 years.  Also, if you don't have 20% equity in your home, you can also end up owing PMI with a new mortgage, where you may not owe it now.  There is also the gamble that your current mortgage is worth more than your house is.  Because home values have taken a dive for the past three years, our home is actually worth less than the balance of our mortgage.  This is called an upside-down mortgage, and refinancing will do no good.  They won't give you a new mortgage for more than your home is worth.  You also will have to pay for an appraisal of your home.  This may or may not be refunded.  Again, this is a personal judgement call.

8. Write an annual budget:  Not everything can be included in a monthly budget, and as much as we try to predict a monthly amount for home repairs, car repairs, holiday spending, vacations, etc. - it's hard to do with a monthly budget.  They recommend making a yearly one to include all of the overall spending.

9. Automate your Savings:  Have your bank automatically withdraw a set amount from your checking each month and put it into a savings or retirement account.  You need to have a very good grasp of your monthly spending, automatic payments & when checks are deposited to do this, but it's an easy way to save.  When things were better, what I liked to do was have a base amount in my checking account - say $500.  At the end of each month, when all bills were paid, I would take any amount over $500 and put it in the savings.  We haven't been able to do it lately, but it gave me a little more freedom to move what we had left each month, rather than a set amount.

10. Try Cash Only:  You really realize exactly how much you spend when you spend cash.  That $150 at the grocery store is much more real, when it's being paid in cash.  It might make you think twice about that large latte if you can't just throw it on your credit card & you only have $5 left for the week.  This is a difficult one, and you have to be okay with carrying large amounts of cash around each week.  I try using my ATM card at the grocery store and using cash for parking, coffee and a lunch here or there to modify this one for me.

11. Pass on 0% Interest Loans:  Essentially they are saying that if you CAN put down a payment, do it.  You end up financing less.  This is the old school mentality of saving for something before you buy it, instead of paying interest on something you didn't have the money to buy.

12. Get Paid to Shop:  The site recommends a couple of websites to check out, giving cash back for online purchases.

13. Boost your Insurance Deductibles:  Your car insurance payment can go down drastically if you are willing to up your deductible from $500 to $1000.  This is the same for home insurance.  Are you willing to replace your television if it gets stolen as opposed to filing a claim for it?  If so, this might be a way to go.

14. Buy an Umbrella Policy:  They recommend having an umbrella policy for your home, car and any other insurances that you might have.  This can kick in where your liability insurance ends.

15. Save for emergencies:  In this day an age, this is a great one to stick to.  They recommend having 6 months of living expenses in a savings account in case things change financially in your family.  Should someone get laid off, or have to go on medical leave, it's important to have that money available until you can begin working again.

16. Get Life Insurance:  If you have children, this is a must.  Or if you have large amount of debt, you don't want to leave your loved ones with that debt should something happen.  If you are young and healthy, these plans are fairly inexpensive.  We have decided that when we decide to have kids, we'll look into getting more life insurance.

17. Rebalance your Investments:  Take a look at your portfolio, talk with your financial person, and make sure that you have the right amounts allocated in stocks, bonds and cash.

18. Plan for the Uninsured Guy:  They say that a lot more people are cutting car insurance in this tough economic time, and the likelihood that you would get hit by one of these guys goes up.  They recommend raising your coverage to at least $250,000.

19. Save for College: They recommend stocking as much as you can into an interest-free 529 plan for your childrens' college funds.  Even $100 a month could turn into $30,000 after 18 years.

20. Visit a Financial Planner:  This is a great recommendation to get all of your ducks in a row.  Talk to friends and find someone that is well liked.  Getting along with the person handling your investments is of the utmost importance... believe me.

Hope that these tips help - even if you can't do some of them now, it gives you a benchmark of what you should try to achieve.

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