Thursday, May 25, 2017

Cutting Expenses -- When You Think You Can't (Part II: Money Steps That Help)

Here we go, on the path to Doing Something about your financial struggles. I'm assuming you've:

*Read Part I of this series, and thought about it.

*Gotten a better idea of exactly:

            --how much your income each month is
            --how much your expenses are

Every place you can cut reasonably painlessly -- or add in the same way -- will improve that bottom number difference between income and outgo. And it will let you pay off your debts more quickly.

     And what better place to start, than your money?

     Remember: these are baby steps you can take right now -- no fancypants hacks or drastic actions.
If these seem silly or too basic to you, that's the point -- they're very easy to accomplish, once you put your mind to it.These are all items the Brick and I have done, particularly during times when income was short. In fact, we use them now.
      They work. And they save money.

 As Financial Samurai points out, "It's not what you make -- it's what you keep."

*Get your income in the bank -- direct deposit, if possible.  Some people deal in cash, using the "envelope method." For us, having the money in our credit union account works best. We pay for nearly everything online, which saves time and postage. (Not to mention questions when your check doesn't arrive promptly.) But here's what also helps --

*Make a separate deposit to a savings account -- preferably automatic. Most people get paid close to the same amount every month. If you fall in that category, it would be fairly simple to make a direct deposit of say, 5% or 10% of that amount, in a separate account. Use that as an emergency fund -- or a quick source, if you absolutely have to, of money to transfer to your regular account.
      If you're really strapped for cash right now, even a small deposit -- $15, $25 or so -- will add up in time.

*Add income tax refunds, raises, bonuses and money gifts to the savings account...until you've got enough for at least a month's worth of expenses. I know -- the experts say 3-6 months' worth. But you're just starting out. Do the best you can.

*Use a bank or credit union account that doesn't charge a monthly fee. Avoid the ATM if it charges you a fee, as well. Sometimes the bank account requires that you keep a minimum deposit, to avoid that monthly charge -- use that as your emergency fund, and "forget" it's there, for now.
    You want to look for accounts that you can use regularly, and still pay you interest, of course. In our experience the past few years, that's well-nigh impossible, unless you count 1% as a 'good' rate. But try, nonetheless.

If possible, make any payments on interest-bearing debts early.  I'm not even talking about extra $$ above what's due. (Though that's good, too.) Make your standard mortgage or car loan payment days, a week or two weeks before you're required to.  Voila -- you'll save a surprising amount of interest in the long run.

*Keep a sugar bowl...which is where my grandma placed loose change. I kept piano lesson money and egg sales in ours -- and yes, as a joke, it was in a sugar bowl. It broke, so I use a tin bank now.
    The Brick likes to empty his pocket change nightly into the top drawer of the bureau. I clean it out periodically, then deposit into the credit union account. (Last time: nearly $50.)

*Apply for a credit card with no annual cash back. 
        To make this work, you should use it wherever possible to pay your bills. (You've got to pay them, anyways -- why not get 1% or 2% of that money back?) Apply the cashback option to the monthly payment...and pay the card off in full every month.

*Use a credit card's billing cycle to your advantage.  My income depends on the teaching and appraising gigs I do. If it's a lean month, I will often delay going to Sam's Club or Wal-Mart until just after the cycle ends. (In our case, it's the 10th or 11th of each month.) Which lands that higher bill due on a prosperous month, instead.

*Don't make any further purchases on a credit card you owe money on. Every additional purchase just collects interest until you pay it! Interest, particularly on credit cards, is the killer. Better to pay cash, instead.

*Don't be afraid to ask when something goes wrong. Politely. (And it will.)  During our 35+ years, we've gotten fees retracted for bounced checks and late payments -- simply because we asked, and had a good reason why it happened. (We were also good customers who rarely messed up.) Our last query got us a $100 gift card. Wouldn't that be worth talking to the bank about?

*Do you really need it?  Then buy it "tomorrow." It won't hurt at all to wait 24-48 hours; sales usually run a week or a month.  Can you buy it online for cheaper, or used? IIf you only need it for a short time, can you rent it -- or borrow one from a friend or neighbor?
      If not -- and you really do need it -- then go ahead.

*If you must replace larger items, like a refrigerator or laptop, find a "buy it in X months, pay no interest" program. If the store doesn't offer this, your credit card may. We use Paypal Credit. But you must make the payments regularly and on time, or they will sock you with hefty interest charges.

*If you're buying for your kids  -- they can often help.  Offer to match whatever they contribute, rather than covering the whole cost yourself.

*Go through the basic list:
      *Do I really need this?
      *Can it wait?
      *Can I get a better price on sale, online or used?
      *Can I borrow or rent one, instead? 

And, of course:

*Use any money saved to pay down debt. Especially if that debt involves interest.

Next time:  Tweak your everyday life to save even more

Start with Part I of this series.

Part III (Everyday Expenses) is here.

Part IV (Food) is here.

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