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| The Basics | 20 ways to save on a shoestring
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How much you save has little to do with how much you make, a study suggests. So forget the excuses; here's a roadmap for finding money you didn't know you had.
By MP Dunleavey
Savings.
When you hear that word, do you feel a clutching sense of guilt and inadequacy? If youre like most Americans, you must. According to a study of saving behavior by economists Steven Venti of Dartmouth and David Wise of Harvard, more than 75% of respondents said they knew that their savings, specifically for retirement, were insufficient.
Thats shocking, but not as remarkable as their discovery that how much you save has very little to do with how rich you are. Venti and Wise divided the 7,700 households they studied into 10 income groups. The top 10% of the lowest income group nonetheless had saved more than $150,000 per household. Meanwhile, middle-income folks, on average, had only $45,000 in assets.
Thats annoying and embarrassing, and it means I have no excuse for my inadequate savings. And neither do you. Because what Venti and Wise found to be the most significant savings factor was no more jaw-dropping than this: Ya just gotta save it.
But hooooow, you whine? How can you save a red cent when you just barely live on what you earn? Well, since you asked: Saving is a two-step process. First you retrain your brain, and then you find all kinds of clever ways to live on less (many of which are conveniently located below).
Step 1: Retrain your brain
Saving money is a state of mind. Before you can start, you have to renounce the spending -- and stop believing you actually need all the stuff youve been spending money on. Just dont. Spend, that is. Sure you want it, but thats no excuse for buying it. The next time you want to buy something, take the $50 or $100 out of your wallet, and stash it somewhere. See? Thats called saving. You dont end up with stuff; you end up with MONEY. A few other tips for the brainwashing youre about to do:
Accept frugality as your savior. Become a closet cheapskate and emulate your frugal friends. Note that they fix the shower curtain instead of buying a new one. Sit down with Depression-era relatives and ask about economizing. Thats what I did. And, yea, did the spirit of saving take hold of me!
Seek inspiration. Get thee onto MSN Search and type in "living cheaply," "frugal living" and "voluntary simplicity." Youll find a gazillion Web sites devoted to living on less, including thefrugalshopper.com and simpleliving.net.
Cry poverty -- with style. Learn handy phrases like, "Lets eat somewhere cheap." And "Shopping? Blech. Lets go for a bike ride." Its less embarrassing than youd think, because more people are in your shoes than you think -- and theyll be grateful you spoke up.
Step 2: Now save it!
There are a thousand ways to live on less. But you dont want to make your life a misery. Here are some of the most painless ways you can economize without losing out on quality of life.
Dont even think about it. Direct deposit is a savers best friend because the money is whisked away into your IRA, 401(k) or money market account -- and you dont have to do a thing. Except drop by your payroll department and/or your bank and fill out the damn forms. Today.
Go veggie. If you can do three meatless days a week (without substituting pricey fish), you could save $25 a week, which equals $100 a month, which equals $1,200 a year! Beans: Ya gotta love em.
Play money games. Whenever you get a $5 bill, put it aside. Or do it with ones, with quarters or all your spare change. Youll have a nest egg before you miss a nickel.
Never spend a windfall. Take your income-tax refund, that holiday money from your folks, the $16.35 overpayment check from the telephone company and any other extras and save em.
Haggle. Youd be amazed at who will drop their prices, fees and interest rates: airlines, hotels, credit card companies, computer/appliance/rug salespeople. (For more on how to haggle, read Liz Weston's column here.)
Re-evaluate. Re-evaluate. Re-evaluate. That dinner out cost more than you spend on groceries in a week. That pair of shoes is worth half a commuter pass. Learn what your money is worth, and you wont be so quick to dispose of it. Use some of the tools here at MSN Money to analyze your spending (See box at left).
Don't overpay your taxes. Sure you love to get a fat refund from the IRS every spring. The fact is, however, you're effectively lending money to the government interest-free. Go through your tax return and see if you can plan your withholding so you get to Dec. 31 maybe getting a $100 refund. That way you can use your money NOW. (And bank the refund when you get it.)
Raise your insurance deductibles. Reassess the deductibles for various kinds of insurance. If you can raise them, your premiums drop.
Get your mortgage costs down. First, look at whether the rate is too high. If it is, look at refinancing -- if youll save money. Next, lets look at the private mortgage insurance (PMI) youve been paying because you didnt have enough money to make a 20% downpayment. Youre protecting the lender, not you. If the equity in your home is greater than 22%, demand that your lender cancel it. Its the law. Lastly, pay ahead on your mortgage. If you can swing an extra $100 per month, you will save thousands in interest costs over the long haul.
Toss the catalogs. The most insidious form of spending temptation known to man or woman. Chuck them straight in the trash. Yes, including Victorias Secret. Sorry, guys.
Dont pay unnecessary fees. Like the $1.50 you pay just because the ATM is right there, right now as opposed to walking two blocks to your bank, where you dont get charged every time you use your cash card. Or the late fees for returning videos. I know a woman who paid $60 in late fees to a video store last year. (It wasnt me.) (OK, it was.) Or those fat charges banks hit you with when you write a check that, well, bounces.
Clean it yourself. Ive discovered a nifty trick: When a clothing label says, "Dry Clean Only," I wash it. Or I dab out that little coffee stain with an old-fashioned cleaning device known as a sponge.
Never pay a pro. If you can fix the neighbors car, and she can paint the bathroom: do it.
Bank your raise. You may find that measly 3% to 5% boost in the paycheck irritatingly tiny. So add that to your direct deposit and live on your previous salary.
Pay less for long-distance. Evaluate your phone bill and see how much you're paying per minute. Some dial-around codes or cheap calling cards (one without a surcharge per call) may give you a better rate. Not only do you save, but you may find you wont need to speak to Al in Schenectady so often.
No pet pampering. Does your dog need those pricey snacks? Does your cat need acupuncture? We didnt think so.
Never pay full price. If you must shop, for pete's sake, discover the online world of discount Web sites. Ebay is still OK, but half.com and craigslist.org are excellent sources of "lightly used" goods -- everything from books to jewelry to office furniture -- to the entire first season of Star Trek on video.
I could go on an on, but lets stop here. If you follow even a few of these tips (as I have) youll end up with a substantial chunk of extra cash every month. Just stay in the savings state of mind, and dont blow it on those post-holiday sales, OK?
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