How to Save Money When Money Is Tight
by Jonathan Burton
Tuesday, March 31, 2009provided byMarketWatch (Yahoo ! Finance)
You can have that latte -- and your cake -- if you make smart spending choices
Like many people nowadays, Christopher Pollard is facing some tough financial challenges. For one, his fiancée recently got laid off. Still, they're both excited about their coming European vacation.
How are they managing that luxury even in these difficult times? Pollard is choosy. A partner in a Minneapolis design studio, he's creative when it comes to saving money. He takes advantage of discounts and deals, thinks about what he's buying and why, itemizes expenses and talks with his fiancée and teenage daughter about their spending and his own.
"Once you get hold of where your money is going, then you can have a better handle on where you want it to go," Pollard said. "It's a mindset. You try to do your best to spend wisely and waste as little as you can."
Becoming a better saver is more than just cutting out the morning latte. It's changing your entire relationship to money. Some 12.5 million Americans were unemployed at the end of February, including 2.9 million who've been jobless for six months or more. From the market's October 2007 peak through January, U.S. shareholders lost almost 85% of the capital gains they'd amassed in stock mutual-funds since 1990. And while stocks rallied in March, we're not out of the woods yet.
It's time to get a grip on your money. Here are five suggestions on where to start:
1. Prioritize
Understandably, it's hard for many families to make ends meet, let alone save. But you might be surprised at what you can accomplish.
Take control of your household budget by logging every dollar you spend in a 30-day period. Once you face a month's worth of grocery receipts, lunch tabs, parking charges, highway tolls, cell-phone and utility bills, mortgage payments, insurance statements and impulsive splurges, you can begin to prioritize expenses and find ways to save.
Think big-ticket. Here's how to save hundreds of dollars a month: Set a higher deductible for home, automobile and health insurance. Refinance your mortgage. If you get a pay raise, use the windfall to trim debt and boost your bank account. After you've established priorities, that $4 latte might be worth it after all.
"At virtually every income level, every lifestyle, there's room for adjustment," said Brian Kompelien, a financial adviser in Minneapolis. "It may not be a quality of life adjustment, but more of a habit change. It's not easy to change habits, but focusing on what you're doing with your money can reveal opportunities to save."
2. Build an emergency fund
Put savings into a special account to be tapped only in a crisis, such as losing a job. You'll want quick access in a pinch, so stick to a high-yield savings account, not a locked-in CD or the stock market. A list of banks offering the nation's highest savings yields is at personal-finance Web site Bankrate.com.
This safety net brings peace of mind and can soothe other parts of your life. How much do you stuff into this cushion? Six months of living expenses is a rule of thumb -- longer if you're self-employed or the family's sole breadwinner, said Greg McBride, a Bankrate.com senior financial analyst.
3. Be creative
"When times get challenging, people get more creative," said Nathan Dungan, founder of Share Save Spend, an educational program that encourages healthy financial habits. "Be more attentive not only to how much you're saving, but where."
The Internet is a great resource. Take advantage of online retailers' discounts posted on shopping Web sites such as CouponCabin.com, DailyDeals.com, RetailMeNot.com and CoolSavings.com. Visit price-comparison sites including Bizrate.com, Shopzilla.com, PriceGrabber.com, BillShrink.com and Google.com's "Product Search" function to find bargains.
You can also save and give at the same time. BiddingforGood.com runs online charity auctions for schools and nonprofit groups nationwide. Donated items often sell well below retail.
4. Pay yourself first
You can't spend what you don't see. Send automatic deductions from your paycheck directly to a savings account -- one not linked to a checking account -- and cover monthly bills with electronic transfers. Even $50 a month of forced savings pads that emergency fund.
Moreover, do all you can to reduce household debt. Eliminating a 14% credit-card interest payment is like getting a 14% risk-free investment return, and lifts a heavy emotional weight as well.
5. Walk the talk
Live by example. Recession sales are everywhere, but you don't have to buy. "You're up against a consumer culture telling you to spend money you don't have," Dungan noted. "Make sure your actions support what you're saying."
Communication is key, especially in these trying, tense times. Talk with your spouse and family about money values and short-term and long-term savings goals, then decide how to fulfill them. These discussions don't have to be lengthy -- just regular. Review expenses and look for new savings avenues every month. Be open and honest, and you'll build a strong base for more than just family finances.
Copyrighted, MarketWatch. All rights reserved. Republication or redistribution of MarketWatch content is expressly prohibited without the prior written consent of MarketWatch. MarketWatch shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
________________________________________________________________________
Avoiding Recession-Era Faux Pas
by Lauren Sherman - Thursday, April 2, 2009provided byForbes
What not to talk about during the downturn
John Scally isn't a cheapskate, but he felt like one last week.
While visiting an old friend in Portland, Ore., the 39-year-old communications consultant rejected the idea of dining at Ruth's Chris Steakhouse, the restaurant chain where a T-Bone will set you back $41. Instead, Scally suggested a less expensive Italian joint. Afterward, there was a feeling of awkwardness between the two men.
"With times being the way they are and no job safe, I didn't feel right dropping over $100 on dinner," says Scally. His reasoning backfired. "I felt like my friend thought I was being cheap or that I didn't want to have a good time."
Hoang-Uyen N., a 28-year-old advertising executive in Minneapolis, says she's often made to feel uncomfortable by a longtime acquaintance who constantly talks about how much money she makes. "She's always bragging about her latest work bonus, or how she spends without limits," says Hoang-Uyen. "I always wonder, 'Does she even know that we're in a recession?'"
In times of financial trial, socializing gets tricky. Whether you're on Scally's end, trying to save while not looking stingy, or you are one of the fortunate who still has the freedom to spend, it's tough to determine what's appropriate to discuss openly. Indeed, discretionary spending might be down, but it's not dead. There are people out there spending money on everything from beauty creams to eight-course tasting menus. For example, 12.1 million cosmetic plastic surgery procedures were performed in 2008, up 3% from 2007, according to the Arlington Heights, Ill.-based American Society of Plastic Surgeons.
But how do you know what's OK to talk about and what's not?
"Etiquette is really about making people feel comfortable, which means we all have to be a bit more sensitive when talking about money and spending right now," says Cynthia Lett, executive director of the International Society of Protocol and Etiquette Professionals in Silver Spring, Md. "If you're flush enough to go get a facial once a month, that's not something you should discuss, unless you're absolutely positive that the other person is in the same boat."
It's fair to say that recession-era cocktail party conversation should be conducted differently than the banter of the boom years. Casually mentioning that you and your wife recently closed on a second summer home, that you've joined a fractional jet ownership club or that you're planning a private $50,000 African safari vacation this autumn should be avoided.
Unfortunately, for some, that leaves little to say. "Before, everyone was constantly discussing upcoming trips, or how much they were spending on home renovations," says Peter Post, a director at the Emily Post Institute in Burlington, Vt., and author of five books on etiquette.
If you find yourself at a loss for words, Post advises, focus on those around you. Ask them how they're doing, what they've been up to, instead of injecting an anecdote from your latest shopping spree into the conversation.
Regardless of your situation, try not to feel bad about your circumstances. Scally, in eschewing the pricey steakhouse and opting for affordable Italian, did what was right for him, and that's more than acceptable, says Post. "We all have to make choices, and we should try to be a little more understanding in times like these."
Purchases You Shouldn't Talk About Right Now
1. Summer Rentals
Demand is down for summer rentals, which means many properties will be discounted. For example, in parts of Cape Cod, four-bedroom homes that last year went for $15,000 a week can be had for 15% to 20% less. If you plan on taking advantage of the reduced prices, don't make a big deal out of it. Instead, invite your less-fortunate friends down for a weekend of relaxation and inexpensive recreation.
2. Vacations
You're probably still planning at least one vacation for 2009. In fact, 82% of Americans with annual household incomes over $75,000 intend to travel during the first half of 2009, according to a December 2008 survey conducted by marketing firm Y Partnership. However, it's important to be sensitive around those who might be cutting back or skipping a holiday altogether. Only discuss the basic plans for your trip.
3. Spa Treatments
Manicures, pedicures and facials are still popular, according to the International Spa Association, which says that the number of spas operating in the U.S. grew 24%, from 14,600 in 2007 to 18,100 in 2008. However, many consumers have scaled back, visiting the aesthetician every three months instead of once a month. It's best to keep your indulgences to yourself.
4. Jewelry
While some companies in the jewelry industry are faltering--Tiffany, for example, saw a 20% decrease in sales in the last quarter of 2008--the very high end continues to succeed. If a friend inquires about your latest purchase, play down its lavishness.
5. Cars
U.S. sales for Rolls Royce increased by 26.6% over 2008, which means that more of us than ever are investing in these six-figure vehicles. But bragging about your new ride is no longer kosher, because it's likely that many of your friends have traded down in terms of luxury.
No comments:
Post a Comment