Spring 2008 - Lotus Connections

Living Frugal to Save, by: Theresa Hundley

Spring is now upon us, and along with our spring cleaning and enjoying the nicer weather, we should also take the time to organize our finances. It is especially important for those of us who are saving for an upcoming large expense (a Homeland Heritage Tour perhaps), to notice of the smallest areas of where we can save money daily, monthly and annually.

In every expense of your life, you have many opportunities to save money. Whether it is opting to brew your own coffee instead of running to your local coffee house, or switching to CFL lights instead of the regular bulb, everyone has opportunities to save money without having to change much of their daily routine. Even by taking an initiative to be more conscious of what you are spending, you too will save money and realize that the pair of shoes that you "must have" aren't necessarily worth 3% of your monthly income or the same amount that you should be spending on your cable, internet and cellular plan combined.

Like many twenty-somethings, I too have fallen victim of ignoring the true value of a dollar; spending more on clothing and entertainment than my rent, utilities and other living essentials; and ignoring the fact that a credit card isn't "free money". It is the harsh lesson that many of us face or have faced at this age that our checkbooks aren't invincible and we must take responsibility for our spending habits. After learning my lesson, and taking action, I came across several ways to save money in every aspect of my budget. These helpful tips paid off my debt and put forth money to save and invest into my future travel, extracurricular and retirement expenses.

The first step to any obstacle is to examine the road ahead of you and create a budget. For some where it has been an extended period of time without looking at your financial plan, it may be best to reserve an entire Saturday afternoon for this project. If you have kids, plan a play-date with some friends or even if you have to, hire a babysitter to take them to the zoo for a few hours. Find a quiet place, turn off your cell phone, shut the door, and breathe a sigh of relief because you are on your way to making your life more financially organized. It should be just you, a calculator, your bills and a notepad.

Separate your bills into different categories that apply to yourself and your family's monthly expenses. With a calculator, add up your total amount spent in each category. Although this may be difficult, look at the reality of the past six months of your spending habits. What was helpful for me to realize my spending habits was that I used a pie chart to show me actual percentages of what I was spending in each category monthly. Although I wasn't terribly bad some months, there were other months were I went to dinner with friends most nights and I'm sure the store clerk at my favorite clothing store knew me by name. With the help of reading insightful articles on budget planning and advice from a friend who had gone through something similar, I created a new budget and began to save for my future. Below you will find a general budget plan with the suggested percentage of income used for each category:

• Housing (30%): Mortgage, Maintenance, Dues, Property Taxes
• Utilities (10%): Water, Sewer, Garbage, Electricity
• Food (10%): Groceries, Eating out
• Transportation (10%): Auto loans, Gas, Maintenance
• Health (3%): Gym, Medical expenses
• Entertainment (3%): Extracurricular activities
• Insurance (3%): Auto, Home and Life
• Shopping (3%): Clothing, Toiletries, Gifts
• Communications (3%): Cable, Internet, Telephone, Cellular Phone
• Savings (20%): IRA; 401K; Stocks and Money Markets
• Debt (5%): Credit Cards, School Loans, Personal Loans

Now that you have organized and realized your financial status, it is time to do your homework and research. When I first realized how expensive my cable and cell phone bill were in comparison to the rest of my budget, I suspected that I was paying for services, options and even minutes that went unused. I took to the internet in search of different ways I could save in my budget categories below:

• Electricity: Switch from regular light bulbs (60watts) to energy saving compact florescent bulbs (CFL) (13watts); Unplug large appliances when unused (i.e. television, microwave, computer plug); Set your computer to hibernate after 10 minutes of unused; During the winter, shrink-wrap the windows; When purchasing new appliances, opt for energy saving appliances.
• Water/Sewer: Home improvement and hardware stores carry low-flow shower heads and faucet caps that will save on water; check your home for leaks and running toilets.
• Garbage: On garbage day, take note of how much trash is in the can. You may be paying for a larger disposal amount than your family actually needs. Separate recycle from your trash, this will save room in your trash can for more unrecyclable waste, and you will be doing your part for the environment.
• Transportation: Check online, rather than driving around or waiting until your vehicle in on empty, for local gas pricing. You may be paying 10-20 cents more per gallon by not looking for lower pricing. Clean out your car, additional items can weigh down your vehicle making your mileage per gallon go down. Keep your maintenance up to date, by having your vehicle up to date you run a less risk of a serious problem taking place causing unforeseen costs. You may also want to look into carpooling with a co-worker or utilizing the public bus system, this cost may be minimal in comparison to the bulk cost of you driving yourself to and from work daily.
• Gym: Compare other gym pricings with your current membership costs, you may find that you are overpaying by $40 per month. You may even be able to negotiate with your current gym to match or beat the pricing of a competing gym.
• Cable and Internet: Consider the amount of time that you actually spend using your home cable and internet service, you may realize that you don't need 500 channels and you could downsize to 50, or that you spend your entire day on the computer at work so when you come home the internet is the last thing on your agenda. Investigate your current plan and compare to other cable or DSL companies in your area, speak with your current provider to match or beat a lower price with a competing company or switch service providers all together. If internet is a must have, ask about slowing down your service for a lower price. Be sure to ask about bundling discounts.
• Telephone and Cell Phone: Ask yourself, do you really need to have a landline? By nixing the whole telephone scenario all together, and relying on your cell phone, you will have one less bill to pay. Be sure to check your used cellular and landline minutes before cancelling to be sure that you have enough cellular minutes to support the change. While you are checking on your minutes, look over your bill or even call your cellular phone provider to make sure that you are not over-paying for unused services and minutes.
• Insurance: Bundle your home, auto and life insurances. Get a discount by paying semi-annually. Make your deductible higher for a lower rate. Speak with your insurance representative to make sure that you are receiving the best rate.

The small changes that I made to the services that I utilize, added up to over $150 in savings per month and I didn't have to do much more than research and make a few phone calls. Trust me; the calling becomes easier, sort of like a game. No matter what, it helps to keep in mind that it doesn't hurt to ask for a lower rate, and the smallest amount saved is more money towards your future expenses.

Besides your utility, transportation, insurance and communications savings, a big place to save money in the long run is your debt. Request a reduction in the interest rate for your home equity line of credit, student, private or auto loans and your credit cards. It never hurts to ask, and especially if you have had a recent rise in your credit score it could work to your benefit. Speak with your mortgage lender and ask about a possible refinancing of your current mortgage. You may qualify for a better interest rate by going through the refinancing process. Of course, by paying your credit cards in full each month, you will nix the payment of interest entirely. Be sure to send in the payment check ten days to a week early to avoid the hassle of forgetting which is subject to late fees and possible rise in interest rates.

The next step along with your new financial diet is to put your household items on a diet. Go through your closet, garage and other areas of the house to sell any unused items: clothing, toys, equipment and electronics. During the summer months, you can have a garage sale or if that is not an option you can post your items for sale on the internet. Not only will you be deep cleaning your entire house, but you will be making money off of unused purchases that are taking up room and losing their value.

With your house and finances organized, when it comes time to be entertained, utilize free resources. The library is a great free resource for reading books, watching DVDs (instead of renting or going to the theater) or listening to music. Check with your city's calendar to see if they have any upcoming events to participate in, during the summer you may find live music in the park or even movies are being played at local parks. Your local community center may even have free dancing, crafts and art lessons.

In addition to finding alternatives to your regular entertaining activities, it is important to stop eating-out as often. By the time that you have figured out what type of food you want to eat, driving to the restaurant, waiting to be seated, deciding what item you want to eat, and have someone else make the food for you, you could have spent 30-60 minutes in the kitchen putting together a meal for a quarter of the price you paid for the meal, gas and time wasted.

If you do end up eating out, or doing something special with your family, be sure to become a coupon fiend. What I mean by this is that you should not pass up any opportunity to save even $1.00 off a frequently visited restaurant or used product in your household. These savings may be few in comparison to the entire price of the product; however, a dollar saved here and there will eventually add up to several hundreds of dollars at the end of the year.

By trying these simple daily tasks, you too will be able to save money in the long run and pay for that upcoming Homeland Heritage Tour without changing much of your normal routine.