Simply Saving

A budget is a tool to help you plan, prioritize, and manage your income and expenses. Review your budget often and update it when you are experiencing a change in income and expenses.

1. Write down your monthly take-home pay. Or if you’re out of work, your unemployment compensation. If you’re in sales – or work on commission – you may have to estimate, since your income may vary from month to month. List income you receive from any source, like a part-time job, a tax refund, gifts, unemployment, public assistance, dividends, and alimony or child support. Add the entries to determine your actual income for that month. Keep in mind, some of these amounts may fluctuate.

2. List how much you deposit in savings each month from your take-home income, even if it’s only a small amount.

3. List your fixed monthly expenses – the predictable, set amounts for the must-have items and services that you pay for each month – like rent or mortgage, car payment, and telephone, cable, or Internet access.

4. List your variable expenses – the amounts that change, as well as the expenses you pay weekly, monthly, quarterly, semi-annually, or every year – like groceries, clothing, haircuts, property taxes, auto and homeowners insurance, and gas and electric.

5. List estimates for once-in-a-while expenses – like birthday and wedding gifts, or holiday gifts and entertainment.

6. Total your fixed and variable expenses and divide by 12 to get a monthly estimate.

7. If after paying your bills and putting money in savings, you still have funds, you can carry over the balance for the next month or use it for unexpected expenses. If this month’s balance is negative, look for ways to cut back on the variable expenses.

Tags: budget, Budgeting, budgeting tips, groceries, monthly expenses, tips

Spending money is easy. Spending money wisely is another thing altogether. If you ever wonder where your money goes, here’s how to find out:

If you’ve ever heard the advice, “never go to the grocery store without a list or when you’re hungry,” chances are you know why: you’re likely to buy more than you need and spend more, too. Regardless of where you’re shopping and how you pay for your purchases, remember to:

1. Shop around. A “sale” price isn’t always the “best” price. Some merchants may offer a sale price on the item you want for a limited time; other merchants may offer items at a discount everyday. Other merchants may offer a deep discount on one item – but only if you agree to spend a minimum that is several hundred dollars more. Also, check your local dent and bent stores for good deals on paper and plastic items.

2. Go online. Check out websites that compare prices. If you decide to buy from an online merchant, keep shipping costs and delivery time in mind.

3. Look for price matching policies. Some merchants will match, or even beat, a competitor’s prices.

4. Clip coupons. Coupons are useful when they save you money on what you’re already planning to buy. You can find some coupons in the Sunday paper or often, at coupon exchanges at your local library. Or you can download others – full coupons or simply codes – from manufacturer and retailer sites online. If you are shopping online, you simply enter the code at checkout.

5. Use debit and credit cards sparingly. To minimize interest and other charges, try to limit credit card purchases to an amount you can pay 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. When you leave your house, carry only the card you may need to use rather than all your cards “just in case.”

6. Keep track of your spending. Incidental and impulse purchases add up. Jotting down what you spend after every purchase helps keep you mindful of your limits. At least once a month, use credit card, checking, and other records to review what you’ve bought. Then ask yourself if it makes sense to reallocate some of this spending to an emergency savings account.

Tags: debit and credit, Save Money With Coupons, spending money

You know it’s important to save money, whether it’s for an emergency fund, your retirement, or to buy something special. But it’s not always easy to stash any spare cash.

1. Consider yourself a creditor. When you pay your bills, write a check to yourself. Decide on a realistic amount. Deposit the money into a savings, investment, or retirement account. Then, pay your other bills as usual. If you find that you don’t have enough money to cover all your expenses, write down the amount you are short and look for ways to trim your budget: Borrow books from the library rather than buying new; brew your own coffee rather than buying it; consider raising the deductible on your auto insurance; buy store brands instead of name brands; cancel subscriptions to magazines you don’t read or can find at the library or online.

Once you establish a regular savings plan, consider increasing your monthly deposit if you get a pay raise, or when you pay off a debt. For example, once you pay off your car loan, student loan, or other installment debt, deposit that amount into a savings account. Once your toddler is out of diapers, deposit the amount you spent on diapers into savings. You won’t miss the money if it’s put into savings, but more than likely, you’ll find a way to spend it if it’s in your checking account.

2. If you need some fast cash, consider selling items around the house you no longer use, either online, at a garage sale, or at a local consignment shop. When you sell online, you may use an auction or classified ad site. Check the sites for policies and procedures. When you agree to consign items to a shop, you’re a consignor. You still own your stuff, but you give the shop the right to sell it. The shop becomes the consignee. When the items sell, you get a percentage of the selling price that you agreed to in advance. A profit split of 50/50 or 60/40, with the higher percentage going to the shop, is typical.

3. Avoid payday lenders. A payday loan is a cash advance secured by a personal check or paid by electronic transfer. It is very expensive credit. How expensive? Say you need to borrow $100 for two weeks. You write a personal check for $115; $15 is the fee to borrow the money. The check casher agrees to hold your check until your next payday. When that day comes around, either the lender deposits the check and you redeem it by paying the $115 in cash, or you roll-over the loan and are charged $15 more to extend the financing 14 more days. If you agree to electronic payments instead of a check, here’s what would happen on your next payday: the company would debit the full amount of the loan from your checking account electronically, or extend the loan for an additional $15. The cost of the initial $100 loan is a $15 finance charge, which works out to an annual percentage rate of 391 percent. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

Tags: emergency fund, garage sale, retirement, save money, saving money, tips

Airline Fares

1. Compare low-cost carriers with major carriers that fly to your destination. Remember, the best fares may not be out of the airport closest to you.

2. You may save by including a Saturday evening stay-over or by purchasing the ticket at least 14 days in advance. Ask which days of the week and times of the day have the lowest fare.

3. Even if you are using a travel agent, check airline and Internet travel sites, and look for special deals. If you call, always ask for the lowest fare to your destination.

Car Rental

4. Since car rental rates can vary greatly, compare total price (including taxes and surcharge) and take advantage of any special offers and membership discounts.

5. Rental car companies offer various insurance and waiver options. Check with your automobile insurance agent and credit card company in advance to avoid duplicating any coverage you may already have.

New Cars

6. You can save thousands of dollars over the lifetime of a car by selecting a model that combines a low purchase price with low depreciation, financing, insurance, gasoline, maintenance, and repair costs. Ask your local librarian for new car guides that contain this information.

7. Having selected a model and options you are interested in, you can save hundreds of dollars by comparison shopping. Get price quotes from several dealers (over the phone or Internet) and let each know you are contacting the others.

8. Remember there is no “cooling off” period on new car sales. Once you have signed a contract, you are obligated to buy the car.

Used Cars

9. Before buying any used car:

* Compare the seller’s asking price with the average retail price in a “bluebook” or other guide to car prices which can be found at many libraries, banks, and credit unions.
* Have a mechanic you trust check the car, especially if the car is sold “as is.”

10. Consider purchasing a used car from an individual you know and trust. They are more likely than other sellers to charge a lower price and point out any problems with the car.

Auto Leasing

11. Don’t decide to lease a car just because the payments are lower than on a traditional auto loan. The leasing payments are lower because you don’t actually own the car.

12. Leasing a car is very complicated. When shopping, consider the price of the car (known as the capitalized cost), your trade-in allowance, any down payment, monthly payments, various fees (excess mileage, excess “wear and tear,” end-of- lease), and the cost of buying the car at the end of the lease. A valuable source of information about auto leasing can be found in Keys to Vehicle Leasing: A Consumer Guide, which is published by the Federal Reserve Board and Federal Trade Commission.

Gasoline

13. You can save hundreds of dollars a year by comparing prices at different stations, pumping gas yourself, and using the lowest-octane called for in your owner’s manual.

14. You can save up to $100 a year on gas by keeping your engine tuned and your tires inflated to their proper pressure.

Car Repairs

15. Consumers lose billions of dollars each year on unneeded or poorly done car repairs. The most important step that you can take to save money on these repairs is to find a skilled, honest mechanic. Before you need repairs, look for a mechanic who:

* is certified and well established;
* has done good work for someone you know; and
* communicates well about repair options and costs.

Auto Insurance

16. You can save several hundred dollars a year by purchasing auto insurance from a licensed, low-price insurer. Call your state insurance department for a publication showing typical prices charged by different companies. Then call at least four of the lowest-priced, licensed insurers to learn what they would charge you for the same coverage.

17. Talk to your agent or insurer about raising your deductibles on collision and comprehensive coverage to at least $500 or, if you have an old car, dropping this coverage altogether. This can save you hundreds of dollars on insurance premiums.

18. Make certain that your new policy is in effect before dropping your old one.

Homeowner/Renter Insurance

19. You can save several hundred dollars a year on homeowner insurance and up to $50 a year on renter insurance by purchasing insurance from a low-price, licensed insurer. Ask your state insurance department for a publication showing typical prices charged by different licensed companies. Then call at least four of the lowest priced insurers to learn what they would charge you. If such a publication is not available, it is even more important to call at least four insurers for price quotes.

20. Make certain you purchase enough coverage to replace the house and its contents. “Replacement” on the house means rebuilding to its current condition.

21. Make certain your new policy is in effect before dropping your old one.

Life Insurance

22. If you want insurance protection only, and not a savings and investment product, buy a term life insurance policy.

23. If you want to buy a whole life, universal life, or other cash value policy, plan to hold it for at least 15 years. Canceling these policies after only a few years can more than double your life insurance costs.

24. Check the National Association of Insurance Commissioners website (www.naic.org/cis) or your local library for information on the financial soundness of insurance companies.

Checking Accounts and Debit Cards

25. You can save more than $100 a year in fees by selecting a free checking account or one with no minimum balance requirement. Request a complete list of fees that are charged on these accounts, including ATM and debit card fees.

26. See if you can get free or lower cost checking through direct deposit or agreeing to ATM only use. Be aware of charges for using an ATM not associated with your financial institution.

Savings Products

27. Before opening a savings account, find out whether the account is insured by the federal government (FDIC for banks or NCUA for credit unions). Financial institutions offer a number of products, such as mutual funds and annuities, which are not insured.

28. Once you select a type of savings account, use the telephone, newspaper, and Internet to compare rates and fees offered by different financial institutions-including those outside your city. These rates can vary a lot and, over time, can significantly affect interest earnings.

29. To earn the highest return on savings (annual percentage yield) with little or no risk, consider certificates of deposit (CDs) or U.S. Savings Bonds (Series I or EE).

Credit Cards

30. To avoid late payment fees and possible interest rate increases on your credit cards, make sure you send in your payment a week to ten days before the statement due date. Late payments on one card can increase fees and interest rates on other cards.

31. You can avoid interest charges, which may be considerable, by paying off your entire bill each month. If you are unable to pay off a large balance, pay as much as you can. Try to shift the remaining balance to a credit card with a lower annual percentage rate (APR). You can find listings of credit card plans, rates, and terms on the Internet, in personal finance magazines, and in newspapers.

32. Be aware that credit cards with rebates, cash back, travel awards, or other perks may carry higher rates or fees.

Auto Loans

33. To save as much as several thousand dollars in finance charges, pay for the car in cash or make a large down payment. Always get the shortest term loan possible as this will lower your interest rate.

34. Make certain to get a rate quote (or pre-approved loan) from your bank or credit union before seeking dealer financing. You can save as much as $1000 in finance charges by shopping for the cheapest loan.

35. Make certain to consider the dollar difference between low-rate financing and a lower sale price. Remember that getting zero or low-rate financing from a dealer may prevent you from getting the rebate.

First Mortgage Loans

36. Although your monthly payment may be higher, you can save tens of thousands of dollars in interest charges by shopping for the shortest-term mortgage you can afford. For each $100,000 you borrow at a 7% annual percentage rate (APR), for example, you will pay over $75,000 less in interest on a 15-year fixed rate mortgage than you would on a 30-year fixed rate mortgage.

37. You can save thousands of dollars in interest charges by shopping for the lowest-rate mortgage with the fewest points. On a 15-year $100,000 fixed-rate mortgage, just lowering the APR from 7% to 6.5% can save you more than $5,000 in interest charges over the life of the loan, and paying two points instead of three would save you an additional $1,000.

38. Check the Internet or your local newspaper for mortgage rate surveys, then call several lenders for information about their rates (APRs), points, and fees. If you choose a mortgage broker, make certain to compare their offers with those of direct lenders.

39. Be aware that the interest rate on most adjustable rate mortgages (ARMs) can vary a great deal over the lifetime of the loan. An increase of several percentage points might raise payments by hundreds of dollars a month, so ask the lender what the highest possible monthly payment might be.

Mortgage Refinancing

40. Consider refinancing your mortgage if you can get a rate that is lower than your existing mortgage rate and plan to keep the new mortgage for at least several years. Calculate precisely how much your new mortgage (including points, fees and closing costs) will cost and whether, in the long run, it will cost less than your current mortgage.

Home Equity Loans

41. Be cautious in taking out home equity loans. The loans reduce or may even eliminate the equity that you have built up in your home. (Equity is the cash you would have if you sold your house and paid off your mortgage loans.) If you are unable to make payments on home equity loans, you could lose your home.

42. Compare home equity loans offered by at least four reputable lending institutions. Consider the interest rate on the loan and the annual percentage rate (APR), which includes other costs, such as origination fees, discount points, mortgage insurance, and other fees. Ask if the rate changes, and if so, how it is calculated and how frequently, as this will affect the amount of your monthly payments.

Home Purchase

43. You can often negotiate a lower sale price by employing a buyer broker who works for you, not the seller. If the buyer broker or the broker’s firm also lists properties, there may be a conflict of interest, so ask them to tell you if they are showing you a property that they have listed.

44. Do not purchase any house until it has been examined by a home inspector that you selected.

Renting a Place to Live

45. Do not limit your rental housing search to classified ads or referrals from friends and acquaintances. Select buildings where you would like to live and contact their building manager or owner to see if anything is available.

46. Remember that signing a lease probably obligates you to make all monthly payments for the term of the agreement.

Home Improvement

47. Home repairs often cost thousands of dollars and are the subject of frequent complaints. Select from among several well established, licensed contractors who have submitted written, fixed-price bids for the work.

48. Do not sign any contract that requires full payment before satisfactory completion of the work.

Major Appliances

49. Consult Consumer Reports, available in most public libraries, for information about specific appliance energy star logobrands and models and how to evaluate them, including energy use. There are often great price and quality differences. Look for the yellow Energy Guide label on products, and especially for products that have earned the government’s ENERGY STAR®, which can save up to 50% in energy use.

50. Once you’ve selected a specific brand and model, check the Internet or yellow pages to learn what stores carry the brand. Call at least four of these stores to compare prices and ask if that’s the lowest price they can offer you. This comparison shopping can save you as much as $100 or more.

Heating and Cooling

51. A home energy audit can identify ways to save up to hundreds of dollars a year on home heating (and air conditioning). Ask your electric or gas utility if they audit homes for free or for a reasonable charge. If they do not, ask them to refer you to a qualified professional.

52. Enrolling in load management programs and off-hour rate programs offered by your electric utility may save you up to $100 a year in electricity costs. Call your electric utility for information about these cost-saving programs.

Telephone Service

53. Once a year, review your phone bills for the previous three months to see what local, local toll, long distance, and international calls you normally make. Call several phone companies which provide service in your area (including wireless and cable), to find the cheapest calling plan that meets your needs. Consider a bundled package that offers local, local toll and long distance, and possibly other services, if you heavily use all the services in the bundle.

54. Check your phone bill to see if you have optional calling features or additional services, such as inside wire maintenance, that you don’t need. Each option you drop could save you $40 or more each year.

55. If you make very few toll or long distance calls, avoid calling plans with monthly fees or minimums. Or consider disconnecting the service altogether and use dial around services such as 10-10 numbers or prepaid phone cards for your calls. When shopping for dial around service, look for fees, call minimum, and per minute rates. Treat prepaid cards as cash and find out if there is an expiration date.

56. If you use a cell phone, make sure your calling plan matches the pattern of calls you typically make. Understand peak calling periods, area coverage, roaming, and termination charges. Contracts offered by most carriers will provide you with a trial period of 14 days or more. Use that time to make sure the service provides coverage in all the places you will be using the phone (home, work etc.). Prepaid wireless plans tend to have higher per minute rates and fees but may be a better option if you use the phone only occasionally.

57. Before making calls when away from home, compare per minute rates and surcharges for cell phones, prepaid phone cards, and calling card plans to find how to save the most money.

58. Dial your long distance calls directly. Using an operator to place the call can cost you up to $10 extra. To save money on information calls, look the number up on the Internet, or in the directory.

Food Purchased at Markets

59. You can save hundreds of dollars a year by shopping at lower-priced food stores. Convenience stores often charge the highest price.

60. You will spend less on food if you shop with a list, take advantage of sales, and purchase basic ingredients, rather than pre-packaged components or ready-made items.

61. You can save hundreds of dollars a year by comparing price-per-ounce or other unit prices on shelf labels. Stock up on those items with low per-unit costs.

Prescription Drugs

62. Since brand name drugs are usually much more expensive than their generic equivalents, ask your physician and pharmacist if a less expensive generic or an over the counter alternative is available.

63. Since pharmacies may charge widely different prices for the same medicine, call several. When taking a drug for a long time, also consider calling mail-order pharmacies, which often charge lower prices.

Funeral Arrangements

64. Plan ahead, making your wishes known about your funeral, memorial, or burial arrangements in writing to save your family or estate unnecessary expense.

65. For information about the least costly options, which may save you several thousand dollars, contact a local Funeral Consumer Alliance or memorial society, which are usually listed in the Yellow Pages under funeral services.

66. Before selecting a funeral home, call several and ask for prices of specific goods and services, or visit them to obtain an itemized price list. You are entitled to this information by law.

Tags: save money, ways to save money

Building up an emergency fund, if you haven’t already, is one of the most important things you can do to help your finances.

But you knew that.

It’s common financial advice, actually, but what’s not so common is how to actually do it. Obviously those who haven’t saved up an emergency fund have a difficult time saving money, even if they know they should.

So today we’ll look at some strategies for building up an emergency fund, for those of us who don’t have it so easy.

Why It’s So Critical
I don’t like to use the word “critical” often, because it’s often an exaggeration. But in this case, when we’re talking about the health of your finances, an emergency fund is definitely critical.

If you are having financial problems, the most important steps you can take immediately are 1) reduce your spending by being more frugal; 2) stop getting into debt; and 3) build an emergency fund of $1,000 (and later you can increase that to the standard 3-6 months of income).

Here are a few reasons an emergency fund is critical to your financial health:

1. Stop getting into debt. When an emergency comes up, if you don’t have an emergency fund, the first thing that will be cut from your budget is your debt repayment. You’ll use your credit card to pay for the emergency, and then you’re deeper in the hole. An emergency fund stops the need to use credit to pay for emergency expenses.
2. Smooth out your budget. If unexpected things come up, you don’t have to continually re-factor your budget to pay for these things. With an emergency fund, it makes budgeting much easier.
3. Prevent late fees. If you are living paycheck-to-paycheck, you will come up with times when you have to pay a bill late, or overdraw your bank account. With an emergency cushion, you avoid these financial hits.
4. Get ahead. If you can get a month ahead, your financial stress will drop way down. Instead of always playing catch-up, you can pay your bills ahead of time and sit back and relax.

21 Strategies for Creating an Emergency Fund
If you have trouble saving, it’s not enough to tell you how important it is to have an emergency fund. You need some strategies for doing it.

Please note that you should choose the strategies that work best for you, and perhaps combine some of them if that works better.

1. Start small. If you don’t have much to save, it doesn’t matter — the important thing is just to start. Even if it’s only $25 per paycheck, just start. It will slowly grow each paycheck, and you will be glad to see at least a little in your savings, and will soon be motivate to try to save more.
2. Automatic deduction. This is common advice, but that’s because it works. Set up an online savings account ING Direct or Emigrant Direct and have it automatically deduct an amount each payday. If you don’t have to think about it, saving will be much easier.
3. Payroll deduction. If you have discipline problems, there are accounts where you can have the amount deducted directly from your paycheck, before it’s deposited into your checking account (or before your employer cuts the paycheck).
4. Treat it as a bill. Every payday, you have a list of bills to pay before you can spend any of your money on variable expenses such as gas, groceries or eating out. Well, add your emergency fund contribution to your list of bills, and pay it at the same time. This makes it non-negotiable, and then what’s left over is what you can spend on other stuff.
5. Reduce an expense, save it. Take a look at how you’re spending money now, and find some things that can be cut back. Magazine purchases, gourmet coffee, comic books, cable TV, gizmos and gadgets. Whatever you decide to cut back on, take that same amount and put it directly into savings each paycheck. Don’t spend it.
6. Round up. I got this tip from J.D. Roth of Get Rich Slowly… actually, it’s a strategy used by his wife, who will log every purchase or check she writes into her checkbook or finance software — but rounds up to the nearest dollar. So if she spends $26.01, she enters it as $27. Over the course of a month, this can add up to decent savings.
7. Double purpose account. This tip is from Trent of The Simple Dollar, who wanted to pay down his debts but still have the financial security of an emergency fund at the same time. So Trent brilliantly used a double-purpose account: he would save money in an account, and after he reached a certain minimum, anything above that amount was being saved to pay off a specific debt. So let’s say the minimum amount is $500. After you pass $500, the money being saved is for a $200 debt (for example). Once you reach $700 in your savings account, you can pay off the $200 debt completely. Repeat the process for each debt.
8. Tip yourself. If you go to a restaurant and tip a waiter 15 or 20 percent, for example, match that tip for yourself. So if your tip is $10, tip yourself $10 as well … and put that directly in savings.
9. Keep paying debt, but to yourself. If you finish making a car payment, or paying off a credit card or smaller debt, take the amount you were paying to that debt and put it directly in savings each month. You won’t feel a difference in your budget.
10. Budget big for groceries, then save the difference. Let’s say you normally spend between $320 and $375 on groceries. Budget $400 for groceries, and whatever you don’t spend of that $400, put it in savings.
11. Quit smoking or drinking. Well, I wouldn’t bet my emergency fund on quitting one of these two addictions, but if you do quit, you should take the amount you were spending (and that’s a considerable amount, I know) and put it into savings. For me, I spent more than $5 a day on smoking — and when I quit in November 2005, it freed up $150 a month for savings.
12. Limit your access. If you are tempted to spend your savings, you should put it in an account that is hard to get to. Put your savings in a money market account or fund, and when it reaches a certain amount, roll it over into a CD or Treasury bond. You might not make as much on a CD, for example, but the point is that it’s hard to access and requires less discipline.
13. Stash a bonus or tax refund. If you get a Christmas bonus, or a tax refund, or some other such windfall, put that directly in the bank and don’t spend it. Use it for your emergency fund. Now start paying off your debt.
14. Save your change. Don’t spend any coins you get. When you get home at the end of the day, empty out your pockets into a jar, and once a month, go to the bank and put it into savings. This can add up faster than you think.
15. Save dollar bills. Similar to the above strategy, get your cash in $20 bills, or $10s or $5s. Don’t carry $1 bills. When you get $1 bills as change, don’t spend them. When you get home, put those $1 bills in an envelope, and save them.
16. Refinance. Refinancing your mortgage or auto loan can save you a lot of money. Take the amount you save and put it in savings.
17. Sell your car. If you have two cars, see if you can live without one of them. That’s what my wife and I do, and it works out fine, even with six kids. Take the amount you were paying on the second car and save it. Or, alternatively, sell your car and buy a cheaper used model. Save the difference in the payments.
18. Cut out dessert. If you’re trying to lose weight, don’t order the dessert or junk food you would normally order. Instead, put the amount you would have spent in an envelope and save it.
19. Stay in. Instead of going to the movies or eating out, cook your own meals and watch a DVD — or do something fun for free. Save the difference.
20. Freelance. Take your skills and market them as a freelancer, or get a second job on the side. Take the extra income and bank it. This was one of my strategies, and it works great.
21. Save on auto insurance. If you can switch to liability insurance, you might be able to save hundreds of dollars. Take the extra amount you would have paid for insurance and save it.

This terrific post was written by Leo Babauta of Zen Habits.

Tags: emergency fund, financial advice, save money, saving money