REVERSE THE CASH FLOW
“Where did all my money go?” It’s a question you’ve asked yourself too often as you peer into your purseor your bank statement and notice all the numbers on the wrong side of the ledger.
There’s an answer to your question: The money went where it always goes – to bills, mortgage payment, home improvement costs, health care – and also to that amorphous category of “miscellaneous.”
That miscellaneous spending is harder to account for: the extra charge for a service you aren’t using, food spending inflated by lunches out, the shopping cart of impulse purchases while at the store for light bulbs or cat food. Instead of miscellaneous spending, call them what they are: money leaks. They suck the cash right out of your pocket and leave you wondering where it went. On their own, they’re not big draws on your resources, “but remember, it’s always the little things that will drain the pool,” says Dave Ramsey, author of The Total Money Makeover. Start plugging those day-to-day money leaks instead.
BEWARE OF IMPULSE BUYS
That retail outlet that carries everything is great for saving time and money. But on your way to what you really need to buy, you’re going to pass displays for tempting gadgets and doodads, and pretty soon you may succumb to an impulse purchase or three, says Ramsey, who has his own collection of gadgets to prove it. Now he writes a list before he leaves the house. “And I don’t buy anything that’s not on the list period,” he says.
SHOP THE SPECIALS
Check out websites that help you plan your grocery buys around weekly specials – you’ll save about 20 percent, says consumer advocate Clark Howard, co-author ofGet Clark Smart: The Ultimate Guide to Getting Rich from America’s Money-Saving Expert. If you spend $200 a week, that’s $2080 each year. Two of Howard’s
picks: Cool savings.com and CouponMom.com.
BUY OFF LABEL
Try store brands on prepackaged items. Many times products are made by the name-brand makers, but the prices are usually lower, says Ephraim Leibtag, economist with the U.S. Department of Agriculture. Example: cereal, for which store prices are usually 10 to 20 percent less.
At restaurants, the profit margin is the highest on dessert, says Howard. “Something that might cost a quarter to make, they will sell to you for $5.95 or $6.95,” he says. If you and your spouse normally eat out with dessert twice a week and abstain instead, you’ve saved $1,248 in a year. Can’t beat the thought of doing “without”? Order one and split it. You’ll still save
RECLAIM THOSE REBATES
Next time a manufacturer offers you a rebate, take it. Most of us factor a rebate into the price when we buy. But only 21 percent of us actually claim that money, according to a study by the Promotion Marketing Association.
ESTIMATE AHEAD OF TIME
When Paul Brown picked up his car after buying four tires; he discovered the garage had added $44 for an extended warranty, and $15 for chrome valve stem covers. “It was more than I had estimated in my head,” says Brown, a consumer advocate for the U.S. Public Interest Research Group. He made his garage remove the charges. His advice: Figure in advance what something’s going to cost. Better yet, have the store or service provider figure an estimate for you – in writing. This gives you leverage to lower the price if it comes in higher than projected.
Your bank levies a $35 “insufficient funds fee,” and yes, that little math error might have been your fault. But many financial institutions – from banks to credit card companies to your local utility or cable TV provider – may waive the charge if you ask nicely, especially if you’re a first-time or infrequent
offender. The same goes for companies that assess fees for letting you talk to a human being, such as banks and other companies with customer support lines.
DEMAND A DEAL
Phone, cable, and Internet service providers often give specials to attract new business yet do nothing extra for the loyal customer who’s been a subscriber for years. You can change that, says Edgar Dworsky, founder of
ConsumerWorld.org, an online public resource guide. Dworsky’s phone/cable/Internet package cost $105 and he knew the company was offering a better rate to new customers. He called and requested the same deal. His savings: more than $30 a month. If the company won’t play ball, become a new customer elsewhere.
Pick just one or two different bills each month and go through them line by line. Look especially for small, unexplained charges,fees, and add-ons. Many of these will be for services you never requested, but the terms of service allow the company to bill you automatically until you complain or request the charge of service be removed. Do it. It may only amount to $6 or $7 a month, but it’s one more leak that, once plugged, saves you a lot over time.
ASK “WHY”? Several months after buying a fixer-upper home in Harrisburg, Pennsylvania, Daniel Butler noticed that his gas bill, normally $60 to $80, had climbed to almost $200. He did a quick tour of his home and found that a window hidden behind a curtain had opened just enough to let in the cold air. Sometimes your money leak can be as simple – but as costly – as that.
THREE SIMPLE MANAGEMENT TIPS CAN HELP YOU REDIRECT YOUR MONEY
Put your financial goals in writing, says money expert, Dave Ramsey. “Something happens when you write it down,” he says. Be specific. “Saving for a boat or vacation gives me focus – and keeps me out of the mall.”
PAPER – TRAIL IT
For the next month, jot down everything, from your biggest bill to your smallest daily expense (carry a notebook and keep track). Seeing your money “spent” on paper is the first step to budgeting and controlling cash flow.
ALLOW YOURSELF “FUN MONEY”
When you do your spending sheet, set aside an amount you can afford to spend in cash in an envelope. “When the envelope is empty, you have to quit,” says Ramsey. It’s a handy spending safety valve.