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Saturday, November 3, 2007

Money Saving Tips That Aren’t Boring

Sometimes I feel like a broken record with the repetitive nature of posting on debt-reduction tips. After all, how many times do you care to read the same underlying message that cutting back on some of the things you love can put more money in your proverbial pocket? This is why I was particularly amused when I stumbled upon a blog post by Selena Maranjian that began with the following:
Money-saving tips can be boring, especially since we often don’t want to do them.
She had my attention! She goes on to say:
Giving up smoking is a classic one. If you smoke a pack a day and each pack costs you $5, you’re spending nearly $2,000 per year on tobacco. Invest that for 25 years and, if you earn an annual average return of 10%, you’ll end up with nearly $20,000 at retirement — just from that one year’s worth of not smoking. Imagine how much you could accumulate if you gave it up for several years!
Quitting smoking is much easier said than done, though, and that’s where the problems begin.
Consider this …Here are some ideas from advisors Dayana Yochim and Robert Brokamp that aren’t quite so difficult to impliment:
• Give your cash a shot of adrenaline. If your current checking or savings account pays anywhere near the national average APY of 0.34%, stop letting your short-term money languish. On a $5,000 balance, you could easily earn 2.13% to 4.05% (that’s $106.50 to $202.50 over the next year) just settling for the national average rates.” You could do even better than that — some banks are offering more than 5% interest on savings accounts (which could net you $200 more than you’re currently getting). Savings: $200.
• Overlooked deductions, credits, and itemization opportunities [on tax returns] cost the average taxpayer more than $400 a year. Yikes! This can be a biggie. Every situation is different, so some people could end up saving $1,000 or more by being more comprehensive with their tax returns. For example, you may be able to deduct your job-search expenses, charitable contributions, and medical expenses. You may even qualify for $1,000 or more in education-related credits. (Learn much more here: Tax Center.) Savings: $1,000.
• Slash your car and homeowner’s insurance by as much as two-thirds. Raise your deductible to $1,000 from $250 (15% to 30% savings), purchase auto and homeowner’s insurance from the same company (15%), and keep a claim-free record (5% to 35%) for $245 to $560 in savings on a $700-a-year policy.” Wow — got that? These savings (which could amount to $1,000 or more for someone like me with a policy that costs more than $1,000 a year) are there for the taking and will only cost you a few phone calls. No long-term suffering, no subsisting on salads made of lawn clippings. Understand that a higher deductible will cost you more out-of-pocket during the years when you have a claim, but most of the time, you’ll end up ahead of the game. Savings: $750.
• Save on airfare with Farecast.com, a free service that predicts the direction of prices for travel from most major airports. Farecast touts an accuracy rate of roughly 75% and, for $9.95, allows you to lock in low fares. If you save just $100 each on four flights this year, that can make a big difference. And this, too, is painless money saving with little inconvenience. Savings: $400.
• Tend to your credit rating. Be diligent about paying your bills on time and using credit responsibly. Check your credit report regularly to make sure that there aren’t any errors (if there are, you can fix them). By having a super-duper credit score, you’ll likely be able to snag the best interest rates available when you borrow money. On a $200,000 mortgage, getting a 6.5% 30-year loan instead of an 8% one can mean you pay $1,264 per month instead of $1,468 — a savings of about $200 per month, or $2,400 per year. That’s a big deal. Savings: $2,400.
• Look for small ways to save, too. For example, I rarely buy sodas when I dine out. If I dine out four times per week and forego four $2 sodas, that’s $8 per week not spent, at little inconvenience to me. For the year, it’s a whopping $400. Savings: $400.

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