Deal of the Week
Find 20/20 bargains at 1800800lens.com.
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your banking fees to zero
radical ways to save money
Want to really save? Take a look at how you spend and
change it. Quit smoking, take in a roommate, park the car -- and
you'll save as much as $12,000 a year.
harder to blame savings shortfalls on your measly pay
In fact, how much you
save has little to do with your income, research by economists
Steven Venti and David Wise shows. It has more to do with whether
you want to save and are willing to adjust to boost your saving.
Venti’s and Wise’s 2000 study, "Choice, Chance and
Wealth Dispersion at Retirement," found a wide range in how much
people at the same income levels were able to save for retirement.
The study also pointed out that it wasn't just the higher income
folks who managed to save the most. Indeed, people in the lowest
income groups were able to save more than some of their
middle-income peers -- by about $100,000. (See link at left to read
the complete study.)
conclusion? "…Persons with little savings on the eve of retirement
have simply chosen to save less and spend more over their
The key, then, is
spending less than you earn.
Tahira Hira would agree with this conclusion. A
professor of personal finance and consumer economics at Iowa State
University, Hira has spent more than 25 years studying how and why
people spend, and why some people get into financial trouble.
"We don't stop and think that
earning money is only one part of financial health," Hira says. "The
other part is learning how to manage money."
Many people don't have a clue
A big source of money problems, Hira says, is that
people just don't know enough about their own financial reality.
"They don't know what they earn, they don't know what it takes to
live, and they don't know their discretionary
Deal of the week
the sites focused solely on selling corrective contact lenses, I
spotted the best prices at 1-800-800-Lens.com. The site offers a
variety of lens types from name brands such as Johnson &
Johnson and Bausch & Lomb. Though it had good deals on
standard products like Johnson & Johnson's Acuvue lenses --
about $20, or 50% off retail -- it really left the other sites
behind with its prices on toric lenses, those used for
astigmatism. At $55, Acuvue Toric lenses cost about $10 less at
1-800-800-Lens.com than the lowest price I found
Her advice? Educate yourself. Sit down
with your monthly bills and statements and figure out your income
and outgo. Then, decide if you like the picture you see. If not,
you'll need to create a plan for changing it.
To help with the process, Hira recommends asking
your self these three questions:
your money like you would any other household task and allot enough
time for it every month.
- Who am I? What's my current financial picture?
- How do I want to live? How do I want to use my money?
- How can I make the best use of my money?
Hira notes that
many of the financial tools that have made life more convenient --
such as credit cards -- can promote bad financial habits and prolong
debt when misused. Credit cards should be used as the
cash-management tool they are, not a borrowing tool, she says.
"We're spending tomorrow's
money when we put things on a credit card," she says. "You keep
locking yourself up and losing your freedom."
Her bottom line on financial health? "Stop
7 radical savings
To help curb the consumer in
you, we've come up with a few of admittedly drastic savings
strategies, along with some ballpark figures of their savings
potential. (If you're looking for a real no-brainer way to save,
arrange to have a certain amount of your paycheck automatically
deposited into a savings account. Then, sit back and watch it grow.)
really ambitious and follow all the above tips, you could be looking
at savings of nearly $12,000 a year. Figuring you can invest it at
the historical rate of return at 10% your savings will start to
compound nicely -- and rapidly.
- Hold the mother of all garage sales. Cast a critical
eye on the stuff at the way back of your closets. If you haven't
used it in six months, chances are you can do without. Same goes
for all that junk in storage. (See "The
hidden costs of too much stuff." ) Annual savings? Depends on
how much junk you have, of course, but one coworker guessed he had
at least $5,000 worth of stuff he could get rid of. I'd put my own
garage sale potential down at around $1,000. That’s a good number.
- Quit smoking. Pack-a-day habit? In Washington state,
that's easily $5 a day -- or about $1,800 a year -- that can go
right into your savings, not to mention what it saves you on
insurance and health care.
- Tame your driving addiction. In other words, carpool or
use public transportation. This saves on gas, insurance and
maintenance costs -- not to mention any money spent on aspirin.
Using the IRS's 2002 mileage reimbursement rate of 36.5 cents per
mile as a proxy for the cost of commuting, you could save $1,141 a
year by driving half the time for 50 weeks a year (based on a
25-mile roundtrip commute). For an even more drastic approach,
consider getting rid of your car if you live in the city. Some
cities are now implementing progressive programs that allow you to
have access to a car without the ownership hassles (e.g. "Flexcar"
in Seattle, Portland and Washington, D.C. For more on Flexcar, see
link at left.)
- Buy used. The average consumer spends about $1,850 a
year on clothing and its upkeep, according to the U.S. Bureau of
Labor Statistics' most recent Consumer Expenditure Survey. You can
potentially cut that in half by shopping at consignment shops and
auctions, though the life of the goods may be less than buying
new. To account for that, the annual savings may only amount to
25%, or $462.
- Become a homebody. At just over $1,800 a year on
average, entertainment spending has a way of quickly eating
through the best-planned budgets. Consider the library for books,
music and movies. Eat out less often. The average person spent
about $2,100 a year on eating out in 2000. Try cutting your
spending in half on both areas for annual savings of $1,950.
- Cut your housing expenses. While a move across the
tracks may save some money, moves are expensive in themselves.
Consider renting out a room. The average housing costs per person
in 2000 were just over $12,300. In metropolitan areas such as
Seattle, rooms easily go for $400 a month. Figure about $20 of
that goes to increases in utility costs, and you've still got an
annual savings of $4,560 before any income taxes.
- Cut up your credit cards. Build an emergency fund first
to handle most unexpected expenses. This allows you to become your
own lending agency. (OK, if you're chicken, try cutting up all but
one.) Credit cards can be a cash-flow management tool, but paying
only the minimum will keep you in debt for years. If you're the
average American with at least one credit card, you probably have
close to $8,523 in credit card debt, according to industry
research group CardWeb.com. At an average APR of 14.4%, it could
cost you as much as $1,100 a year in interest alone. By simply
waiting until you've saved enough money to make purchases, you
could eliminate those interest payments entirely.