chiningilles/Flickr
The LA Times recently had a story suggesting 10 simple ways to save. I boiled it down to the best tips and added two of my own. Add yours to the mix!
1. Disconnect your land line. Or find a cheaper plan and call your current provider and ask them to match it.
2. Shop around for home and auto insurance policies. Spend an hour once a year checking if you can get a better price on your home and auto insurance. Do them together so you qualify for a bulk discount. Before you go for the absolute lowest price, check the insurer’s complaint ratio, which will indicate how happy their current customers are.
3. Pay cash (only if you really can’t control your credit spending because you are giving up a lot of perks and cash-back rebates).
4. Adjust your withholdings. The LAT says 70 percent of tax payers get a refund – which means we are letting Uncle Sam keep our money for a year, interest free! Instead, you could be earning interest or paying down debt.
5. Pay off high-interest debt. Focus on paying off your credit cards. It’s hard to get ahead when you’re paying 15-30 percent in interest.
6. Pay into your 401 (k). Making a $100 contribution costs you $70 because of the tax benefits, and if your company matches you are making even more for the same $70.
7. Set up an automatic savings deduction. It will force you to stash cash for a rainy day (which, in Los Angeles, is today).
8. Take care of yourself. Preventive health care really does pay off. Some health plans will reduce your premium if you quit smoking and if you reinvest that money on doctor’s bills and cigarette into your 401 (k), you stand to be $250,000 richer at retirement, the LAT story says.
9. Volunteer. Seeing how others live will no doubt making you feel better about what you have in life.
10. Budget! Check out my simple 15-minute budget. It really does work.
11. Exercise. Going for a walk, run, or bike ride is a cheap activity that can energize you and save you trips to the mall$.
Dru Bloomfield/Flickr
I’m taking another luxuriously long weekend to ring in the New Year. Don’t you wish these four-day weekends came around more often?
Next week I’ll be sharing a special download so you can use my 15-minute easy peasy budget to start the year off right. Seriously. Get your finances under control in 15 minutes.
God, I sound like an infomercial. But it’s true!
Also coming up in 2010: expect a week of amazing giveaways to celebrate BargainBabe.com’s one-year anniversary in January. Thanks to all my wonderful readers for helping me come a long way.
See you in 2010!
~ Julia
aka Bargain Babe
Yay! The last day of the Bargain Babe Gift Guide is here. I’m looking forward to getting back to my normal money-savings tips. A bit ironic that I’m closing the gift guide with gifts when you are NOT on a budget. Mostly this is for all of us to ohh and ahh over, then head to Target to budget shop.
A pint-sized computer known as a netbook is a great gift for any one who craves being connected. Prices range from $200-$600 for the top of the line. Not sure how to pick out the right netbook for you? Check out my netbook buying guide.
I’m an iPhone devotee and I make no bones about it. Some say the Android Google phone is gaining steam, but do you really want a phone that croaks “droid!” every time you turn it on? The best feature is that the iPhone is so intuitive there’s no need to read the manual. Plus, new apps make it possible to read books on it so no need to invest in a Kindle. $99-$499. Buy it!
J.Crew’s cashmwere sweaters are renown for their quality and comfort. Expect to pay upwards of $100 or more unless you get one on sale. Also check Nordstrom’s, Bloomingdale’s and Macy’s for sales. Buy it!
A set of fancy olive oil and fig-infused balsamic vinegar is a super versatile gift that works for relatives, distant friends or family, your boss, or even a neighbor. The two tall Italian glass bottles come tucked into a sturdy cardboard box with packaging that oozes luxury. Two 200ml bottles are $40 from Global Gardens in Santa Barbara. Buy it!
I was putting up flyers for the Frugal Fe$tival last weekend when I noticed two thrift stores on Sherman Way just west of Owensmouth in Canoga Park had gone out of business. To my shock Out of the Closest was a discount a furniture store and Aaardvarks Odd Ark was dark.
If anything, in a recession thrift stores should be thriving! Are people not even buying used clothes? My goodness.
I looked online to see how thrift stores across the country are faring. Perhaps the two I saw closed were a fluke. I found these headlines:
Billerica consignment stores hit hard by recession (MA, 7/20/09)
Salvation Army store to close (Mt. Vernon, VA) (7/17/09)
Economy closing Noble Road thrift store (Cleveland, OH 7/9/09)
Helping Hands thrift store closes its doors (Wetaskiwin, Canada 7/7/09)
St. Vincent de Paul closing its doors – seeking small headquarters (Sault Ste Marie, MI 6/26/09)
Thrift shops expect increase due to closing of Salvation Army (Norwich, CT 6/25/09)
And that is just going back one month!
I wonder what the National Association of Resale and Thrift Shops has to say about this. An April press release begins, “The resale industry is one of the few recession proof segments of retailing…”
Not anymore. The recession has gone on long enough that the wave of consumers who turned to thrift stores to cut their budget a year ago has washed out.
A friend invited me to a happy hour Friday and I instantly said yes. Having a drink with friends is one of life’s great pleasures. Then I remembered my spending moratorium. Ug.
I could bail, but this presents exactly the type of situation that makes the moratorium a worthy experiment. The point is not to sit at home for an entire month holding my breath until August when I can spend. The point is to live my life as normally as possible while not making an discretionary purchases. That means socializing with friends.
So far I have found plenty of free activities to do with my friends, including a game of pick-up Ultimate Frisbee, a picnic on the beach, and yoga (I buy classes in bulk to get the best price so it’s already paid for).
But going to a bar is going to directly confront my non-spending initiative. Luckily, I have a plan.
1. Eat before I go so I can honestly say I’m not hungry.
2. Leave my wallet home, except for my ID. No cash = no temptation.
3. Be very engaging so nobody notices I’m sipping water.
Apparently many folks are joining me on my spending moratorium. This morning news outlets reported retail sales are worse than the dismal expectations. GAP is down 10%, JC Penney is down 8%, Target is down 6%.
A reader named Emily, who joined me on the spending moratorium, wrote in with this update:
One purchase that I did make an exception for myself is a used copy of the South Beach Diet cookbook for use at home as I am redoing phase two at present and my father, who is a diabetic, should be eating fewer carbs anyway. As I considered it a health investment, I figured the $2.00 the store was asking for made it a worthy purchase. I’m glad to see your moratorium is still happening, albeit slightly challenging.
Who else is observing the moratorium this month? Email me an update, please.
Here’s one way to lower your wedding costs: go on a road trip instead. Jaime Case and Chris Hodges, a 30-something couple from San Francisco, dreamed of a destination wedding in Mexico but they couldn’t stomach asking their guests to spend $3,ooo apiece to celebrate with them. Instead, they are bringing the wedding to their guests. I spoke to Jaime on week three of the six-week pre-marital road trip adventure.
Why are you having a road trip wedding?
It started off as a trip to go visit everyone so they can save money by not coming to the wedding. And it’s become more of an odyssey of learning about marriage. It’s like premarital counseling but more intensive and all encompassing. The idea is to save more money for other people. On the whole we are still spending less than the average wedding, which is about $30,000. That doesn’t include the rehearsal dinner, the dress, and the honeymoon.
How much did the recession play a role in your decision to have a road trip wedding?
If we got married in 2008, we would have done what our friends did: a week-long destination wedding. We absolutely would have done that. But in my heart I could not stomach asking people to pay to go to Mexico.
How much is your road trip wedding costing?
Everything we’re doing…will be less than the average cost of a wedding, about $27,000 dollars. The road trip is only costing us about $2,000. The gas itself is $1,100-1,200, plus a few nights at hotels. We’re not adding food because we would eat anyway and a lot of people are buying us dinner! We are staying with family and friends and eating cheaply. Ford donated a Fusion and is covering car insurance. We pay for the gas.
How much are you saving?
A traditional wedding would have cost us about $27,000. The trip is saving us $25,000, some of which we are using to throw a dinner at a restaurant for family and close friends when we return. That’ll cost about $12,000. But our guests are also saving a lot of money, which is more of our point.
How much are you saving your guests?
It would cost our 200 friends in other states about $20,000 to come visit us. Plus, we get to spend a lot more time with them than we normally would at a standard wedding.
Are you having a ceremony?
We are having a ceremony and small dinner in Ventura, Calif. It’s going to be about as non-traditional as you can get. No flowers, no wedding party, no wedding cake. Just dinner at a restaurant. You can call it a wedding or whatever you want, but that’s more for my parents. We didn’t mind spending money on serving people dinner. But we wanted to spend money on spending time with people.
Did you get a dress?
I got a sample dress at Saks bridal, which was closing. I’m probably going to sell it afterward. My Mom bought it. If you have any debt at all, there’s no need to spend $2,000 on a dress. But I wouldn’t position us as the cheapest wedding around.
Where have you gone so far?
We have been to 19 states, including CA, OR, WA, ID, CO, WY, UT, NM, LA, MI, AL, FL, GA, SC, NC, TN, KY, W.VA, IN, OH, PA, MD and D.C.
Has anything unexpected happened?
Some of the people we spent time with we’re going to become even better friends with, like a guy who I was on the swim team with in junior high school. We would not have invited him to the wedding, but he heard about our road trip on Facebook and invited us to stay in their guest house in Salt Lake City. We stayed with them and had an amazing time. I feel we’ll actually go back and go skiing sometime. If they had come to the wedding I would have shook their hands and that would be it.
They say planning a wedding is the first test of a marriage. How is going being on the road together?
We’ve only been doing this for 20 days, and we have thought about breaking up. Imagine talking about your marriage and what it’s going to be for 45 days straight. Fundamentally I know Chris is a good person. He is a gem amongst men in that he can talk about anything. I don’t have to deal with, what are you thinking? I don’t have to wonder. I know because I can ask. That makes him very attractive.
I’m more driven. Chris likes to enjoy life a little more. It’s my personality to wake up and have a to do list. During an interview, there was a question about Chris not being as passionate as me. It hit me at the wrong time and I shared more info than I should have. Later, Chris brought it up. He said, This seems like an issue. This keeps coming up. We need to solve this, he said. When we talked it through we just have different way of looking at it. We both want the same things but we have a different approach.
For more check out the Wedding Road Trip blog. Thanks, Monica!
Once again, my readers are keeping me honest. Earlier this week I came up with three very good reasons why I should not go on a spending moratorium, but you all rejected my pleas and voted overwhelmingly to put myself through this wacky experiment.
As of Friday morning there were 112 votes. About 45 percent want me to go on a spending moratorium, 27 percent say it’s silly, and 13 percent (15 readers) agreed to go on the spending moratorium with me!
It’s nice to know I’ll have company. 
Three readers in particular encouraged me to take the plunge.
Katie said:
I challenge you to go on a complete spending moratorium! Don’t buy ANYTHING (except phone, utilities, rent) for 30 days. See how long you can live off of the groceries you already have on hand. You will be surprised. Be extra careful about how much electricity & gas you use–unplug appliances, play a game instead of watching TV or read a book, don’t leave the light on when not in the room, etc.
Kristin at makingcentsoutoflife.blogspot.com said:
I think that if your hubby is willing, you should do it jointly if you are going to do it at all. Kind of like a diet, it’s easier with support. I think it’s a very worthwhile experiment that anyone who does it will benefit from because it will save you a ton of money as well as force you to be content with things you already have. By not spending, you focus your efforts on other parts of your life and can make those things better. Heck, if I could stay out of Walgreens I might get more done.
Sarah said:
I’m doing this in June. It’s a really interesting experience. I’m still buying food, gas, and other things I consider necessities (like a new filter for my PUR–though I stretched the old one farther than I thought possible). I’m also have a budget plan but this really is making me consider and evaluate every single purchase. What’s fun is how other people respond: I’ve had more offers to buy me lunch than ever before!
So here are the ground rules for my spending moratorium.
Allowed purchases include rent, one tank of gas, groceries, utilities, my Internet and cell phone bill. My automatic monthly savings withdrawal remains unchanged.
Business expenses, such as flyers or postage, are allowed.
During the moratorium I’m allowed to use any gift cards I have currently have in my possession (either previously purchased or received as gifts).
I’m allowed to receive gifts as long as they are a true gift and not a way around the moratorium. (This is a gray area I’ll try to define later.)
The 15 readers who voted to go on the moratorium with me should send me an update about how they are doing at least once a week. Don’t think you can get away with not participating just because, ahem, I have no idea who you are! Participating readers, let me know if you are using my ground rules or setting your own (and what they are). I’ll regularly write about what we are struggling with, our creative solutions, and lessons learned on BargainBabe.com.
The moratorium starts July 1 and ends July 31, 2009.
I’m considering going on a spending moratorium for one month, which means not buying anything except groceries and gasoline. The experiment would push me to find creative ways to get around purchasing things. What can I reuse or repurpose? What can I do without? I think forcing myself to not spend anything would increase the perceived value of certain items and decrease the value of others.
But there are three major loopholes that make me wonder if this experiment is worth conducting.
First, by turning on the lights I am buying electricity. By cooking I am buying gas. I’m not willing to give up electricity and gas for a month. Same thing goes for my rent, cell phone, and a few other built-in expenses. So really what I am proposing is going on a discretionary spending moratorium. I’ve done a good job paring down my discretionary spending with my forward-looking budget system. Is it useful to cut back further?
Second, there are ways to get things without spending, like when Hubby and I go to our weekly dance class. Afterward he takes me out for dinner, which I enjoy immensely. I’m not paying for the meal per se because he is using his own discretionary dollars, but the money comes out of our joint checking account. If I go on a spending moratorium, am I obligated to say no to items purchased on my behalf?
Lastly, the duration of the moratorium – one month – is short enough that I can basically hold my breath on a lot of purchases. Is one month long enough to really feel the effect of a spending moratorium? Or am I just practicing delayed gratification?
Well folks, I’ve practically talked myself out of this experiment. But before I make my final decision I’d really love your input.
Loading ...Here’s another option altogether. YOU go on a one-month spending moratorium and submit a blog post about the experience. The fame! The glory! The saved money! Email me if you are interested.
Most budgets look backwards. You pull out your bills and receipts from the past month and add up what you spent. That number indicates how much you will spend this month, right? Wrong!
A better budget looks forward.
But first, let me tell you why traditional budgeting drives me batty by looking backward!
- The past is no indication of the future. Just because you spent $97.21 on gas last month, doesn’t mean you are going to spend the same amount next month.
- Expenses vary widely each month (excluding fixed bills like housing, cell phone, or car payment). A plane ticket eats up your cash one month, while gifts or a new outfit may eat up your dollars the next.
- Most non-fixed expenses are hard to predict, and thus are hard to budget for.
We all know budgeting is smart. But for years I struggled with it. I spent hours pushing paper and writing down what I spent, trying to make the income number bigger than the outgo number. I used a fancy excel spread sheet that a financial planner gave me that automatically summed built-in categories. It even had a plan of attack for “irregular expenses” that had me chasing after all the one-time expenses from the past year and dividing them by 12 and depositing that much each month into a special account. At first, I was so thrilled with this system I pushed it on others.
But it, too, failed.
The spread sheet was extremely good at helping me figure out where my dollars went. But it made no attempt to keep my spending in check. And it couldn’t predict what I needed to save money for – airfare? wedding gifts? bicycle repairs?
When I left my steady job to launch BargainBabe.com I had to do something. Namely, figure out if Hubby and I could survive on one salary. We weren’t going to have enough regular income to cover our past spending habits, so I focused on absolute necessities and bills we were going to have to pay no matter what. This included:
- rent
- gas and electricity
- Internet and cell phone service
- gasoline (two full tanks only)
- doctor visits
- medicine
- savings to max out our 401(k)s and IRAs
I subtracted these necessities from our income.
Then I made a second group of expenses for all the irregular items that come up, including car insurance, car registration, car repairs, dental visits, Christmas presents, magazine subscriptions, charitable donations, vacations, yoga passes, and oil changes. I looked at what we spent on these categories last year and estimated how they would change in the coming year, then I divided by 12. (Okay, looking backward is occasionally necessary – and useful).
I set up an automatic withdrawal from checking to a special ING savings account to cover our irregular expenses when they come up.
After subtracting the absolute necessities and irregular expenses from our take home income, I’m left with our discretionary income. This number is very important because it represents the actual dollars we have to spend each month. All my other dollars are spoken for.
Discretionary dollars go toward:
- groceries
- clothing
- bus fare
- extra gas
- movie tickets/entertainment
- vitamins
- toiletries
- meals out
- hair cuts
- travel
- home maintenance
- gardening supplies
- and everything else!
Once you figure out your discretionary income you are nearly done. The last step is to grab an index card and put this number at the top. Each time you spend, subtract it from the total. In lieu of an index card, use SmallSpend.com on your mobile Internet device.
This way you know exactly how much money you have left each month and do not spend more than you earn. The first month I tried this forward looking budget, my credit card bill dropped by more than $2,000. Hallelujah!
This system is also MUCH less time consuming because once you calculate your discretionary income, you only have to write down each purchase. And that makes it easy to say no or wait for a better price!
Yesterday I contributed to the Washington Post blog Small Change, which wanted to know the difference between being frugal and cheap. Here’s my take:
Being frugal is making choices to conserve money in your own life, like riding a bike instead of driving, renting a movie instead of going to the theater, brown bagging your lunch instead of buying it.
Being cheap is forcing your frugal choices on others: buying a gift on sale even though it is the wrong size for the recipient or insisting on ordering the cheapest bottle of wine at a restaurant.
Being frugal feels good. Being cheap leaves a bad taste in your mouth (and it ain’t the wine)!
What’s your definition?
For readers in Los Angeles, you can meet me at the West Valley Public Library this Saturday, June 6, in Reseda, California.
Starting at 1 p.m. I’m speaking about frugal vacation strategies, Disneyland discounts, and how to negotiate a deal. We’ll also go through the steps to create a simple budget (the same one that saved me $2,000 the first month I tried it).
The West Valley Public Library is located at 19036 Vanowen St. in Reseda, CA 91335. See you June 6 at 1 p.m.!
I wrote a fabulous post about why we overspend and rack up monstrous credit card debt for a blog called Man V Debt. Read my post here.
If that’s not enough to get you to click on the link, I’ll tease you with this. In the post I reveal what food I have ZERO ability to say no to. Hmmm…is it chocolate? Carnitas tacos? Pancakes made from scratch??? Find the answer here.
The average American household that uses credit cards carries a $10,679 balance, which, in the grand scheme of things, is not much debt. The problem is that credit cards have such high interest rates, making a few thousand dollars in debt nearly insurmountable.
Like many bad spending habits, small scale purchases – a new gadget, a few drinks out, a pair of jeans – get us into big trouble.
Let’s take three different looks at this seemingly little problem.
1. Percent markup. If you stopped using your credit and started only paying down the balance, making minimum payments of 3 percent or $25 a month (whichever is more) on a balance of $10,679 at a 15 percent interest rate will take 188 months.
That translates into 15.6 years and extra payments of $7,284. So in the end, $10,679 worth of instant gratification costs you $17,963, or 68 percent more than the original cost. Next time you are oggling a fantastic consumer good that will absolutely complete you ask yourself if you are willing to pay 68 percent more. Makes it easier to say no, right?
Got a slightly different interest rate or balance? Calculate the big picture cost of your minimum payment.
2. Lost buying power. Ironically, the $7,284 you are giving to credit card companies to get the good things in life – STAT! – is money you could have spent on the good things in life…later.
That $7,284 in interest could buy over 15 years:
- One very fancy dinner every three months (at $140 per dinner)
- 145 pairs of new shoes (at $50 per pair)
- 18 months of groceries (at $400 per month)
- Approximately ten percent of your yearly IRA contribution
- 87,408 miles of driving in a car that gets 30 mpg at $2.50 per gallon
3. Dreams deferred. Paying extra interest also detracts from the real American dream – retirement. A couple in their mid-30s that invests the $7,284 in even yearly payments ($485 over 15 years), could earn an extra $9,676 towards retirement in a Roth IRA account. That assumes 10 percent returns over 15 years, which historically is not unreasonable.
Thanks, Dad and Hubby!
Saving and spending money is a deeply personal thing because everyone has items they don’t think twice about buying and items they dismiss as a waste of money. Here are my trade offs. What are yours?
What I do without
1. Sponges – instead I use two quick drying towels (saves $2/year)
2. Garbage bags – we use plastic grocery bags instead (saves $8/year)
3. The newspaper – I read everything online (except for my one weakness, the Sunday NY Times) (saves $1.30/week)
4. Cable TV – I watch TV online at Hulu.com (saves $50/month)
5. Lidded plastic containers – I bought six glass containers with lids for Christmas that will long outlast our plastic ones (saves $4/year)
6. Specialized cleaning products – diluted bleach, baking soda, vinegar and/or lemon do wonders (saves $3.50/year)
7. (Sparingly) Plastic wrap – I wash and re-use plastic packaging from bread, and other products (saves $3/year)
8. Landline – we use Skype (saves $270/year)
9. Take out – we make sure to keep a few frozen dinners at hand to avoid calling in Thai food ($30/month)
What I shell out for
1. High speed Internet service (costs $45/month)
2. Magazine subscription to Newsweek ($20/year)
3. Leather shoes (an expensive, but comfortable habit I learned from my Mom)
4. Massages ($59 approx. every three months)
5. Organic milk ($12/week)
6. iPhones ($50/month)
I’m hesitant to do the math but saving money is about facing the facts. You can’t save unless you know the full impact of your spending.
My cutbacks added up to $1,318.10 a year. My splurges add up to $1,961 a year. Hmmm…not good. I could cut myself some slack; this accounting method leaves out many ways that I save money, but I think it is time to make some changes. I may be able to negotiate a lower Internet bill with Time Warner, I’ll get fewer massages, and start buying regular milk half the time.
An ABC station in the Bay Area did a segment recently on seven freebies that can save thousands of dollars a year, including free directory assistance, free legal advice, free music, free birthday treats, free music and free PC protection. Check it out here.
Thanks, Andy!
