Wednesday, September 05, 2007

Thursday Thirteen #32 -- Tips for hanging onto more of what's yours


as humbly suggested by


I spend my workdays thinking about money. My client is a venerable insurance and financial services provider, and I write their marketing materials. Through my work I’ve learned a lot about money … not all of which I’ve taken to heart. (Any of you familiar with Sophie Kinsella’s Becky Bloomwood? I see charming, albeit smaller scale, similarities between the Shopaholic and myself.)

At any rate, I’d like to share 13 of the things I’ve learned while working on this account. These tips are smart, simple, and they can make a difference. Do as I say, not as I do, and adopt as many as you can.

1. You’re not alone. Nobody feels they save enough money. I’ve sat through focus groups and read testimonials from people of all ages who believe they have made unwise decisions when it comes to saving for tomorrow. So let yourself off the hook. Forget the past and instead concentrate on your future.

2. Establish an emergency fund, and then use that for emergencies. Retirement savings tend to be tax-deferred, so you lose both interest and tax benefits if you take money out of your IRA to repair the roof or buy a new furnace.

3. Pay yourself first. Save a little extra each month, no matter what. One way to build your incremental savings fund is with US Savings Bonds. You can buy them online, any time, day or night. They pay competitive interest, and it’s tax-deferred (which means you get to keep more of it). And if you absolutely must, you can cash bonds in after just 12 months.

4. Yes, you can so come up with extra money every month! Don’t dismiss a savings idea because it’s “only a few cents” or “just a dollar.” Cut coupons and then put the 35¢ you saved on Barilla Pasta into a cash jar. Go to a movie matinee instead of the evening movie, again dropping the difference into the money jar. Pass on a single latte each week … limit yourself to just one beer at happy hour … switch to the store brand catsup … With a little discipline, you’ll find the change in your cash jar can rapidly turn into incremental savings. (This is one where I fall short. I save the money, but I don’t stash the savings away; I buy more purses.)

5. Walk the extra block and only make withdrawals from your network ATM. Eliminating the fees charged by both your bank and the out-of-network ATM can save the average consumer $150/year.

6. If your employer has a savings plan, participate! The money is deducted from your check so you won’t be tempted to spend it, plus you’ll be lowering your federal taxes.

7. Know how much you pay in credit card interest every month. Don’t work on paying off the card with the biggest balance, even though that’s the account that may require the largest payment. Instead concentrate on paying off the account with the highest APR. In the long run, that will save you more money.

8. Make sure you’re actually going to use your bonus points, airline miles, etc. Most of the credit cards that offer rewards charge an annual fee. If the miles expire before you can use them, you may have just wasted that $50/year fee. Better to switch to a card that doesn’t pay you back … but also doesn’t cost you anything.

9. Emergencies really do wipe people out, so make sure you have the right kind, and right amount, of insurance. Health, disability, renters/homeowners, auto are a good place to start. As I inch closer and closer to 50, I’m taking a closer look at long-term care insurance, too.

10. On the other hand, don’t carry insurance you don’t need. For example, whole life insurance doesn’t make a whole lot of sense for most singles, parents of grown children, or homeowners whose homes are paid off. If all you need is enough to put you in the ground (the Gal said delicately), less expensive term life insurance can cover those final expenses just as well. Yes, whole life does earn equity you can borrow against, so it’s never a BAD idea. But you must have the policy quite a while before you can do that, and if you put the difference between a whole life premium and a term premium in a savings or investment account, you could very well make more money. (Of course, you have to have the discipline to do that, and discipline is not always my greatest virtue.) Discuss this with an accountant, or a financial planner, or your friends. Just don’t discuss it with your insurance company. Trust me, I know which one type of policy they will recommend you buy: the whole life because it makes more money for them.

11. Keep your cancelled checks and receipts. Qualifying charitable contributions are tax deductible, and there’s no reason to leave that money on the table. Cutting a check to the a veterans’ organization or dropping that bag of clothes off at Goodwill are nice things to do, so why not reward yourself with a (legally) lower tax bill? Just make sure you have the proper documentation.

12. Switch to Energy Star appliances and lightbulbs. It’s the “green” thing to do in more ways that one. You’ll be helping the environment, and you’ll make a dent in your monthly utility bill. (I’ve been good about this one, and my new Energy Star ac and refrigerator use so much less power that they completely neutralized the rate increase my neighbors complain about.)

13. Track your phone and viewing habits. It may sound silly, but it’s not. You might be able to save every month with a more appropriate cell phone or cable plan. Do you go over on your minutes every month? A more inclusive calling plan may actually save you money. Are you paying for cable channels you don’t watch? It might be cheaper to just rent movies.

Now, go forth and SAVE! And if you need financial advisors with good, honest faces, I suggest you contact LS and BB.

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