Deru

We are in a deep recession.  So deep, many consider it a depression.  Whichever word you use to describe the current state of economic affairs in America right now, the fact remains that your dollar isn’t going nearly far enough.  The trite saying “too much month left at the end of the money” is highly appropriate for a very large percentage of Americans. 

Millions of people are out of work.  Mortgage defaults are still on the rise.  Housing prices are still dropping.  The cost of groceries is increasing.  Energy costs are on the rise again and expected to double or even triple by the end of the year. 

I could go on a crusade blaming every politician and their relatives, but all that will serve is to create more anger, frustration and resentment.  We have enough of that going around already.  Instead, I want to help you find a way to get through this troubling time.  So here are some tips I have gathered from around the internet and from personal contacts who make being thrifty an art form. 

Groceries are one of the largest portions of any household’s monthly budget.  They account for anywhere from 25% to 40% of most people’s budget.  If you have teens, it increases dramatically.  In my household, it accounts for 33% of our budget.  And that is AFTER we have cut back on all non essential items.  Gone are the days of purchasing bakery fresh bagels, chips and dip, candy and other such items. 

I am not going to tell you to clip coupons. Coupons are mostly a waste of time.  What I will tell you is to buy generic or store brand items.  A can of peas does not taste any better simply because its label reads Del Monte.  Store brand items are usually considerably less expensive.  Besides, the chances are quite likely that the store brand items are made by the same company that makes your favorite brand.  In other words, it is possible that Del Monte also cans the store brand peas found in your favorite retailer. It is a common practice. 

Do you really think Wal-Mart has factories all across America making their Great Value brand of products.  No.  They contract with the companies who already make the product and have them put the Great Value label on the item.  Then they sell the product for considerably less. 

I remember as a child that it was a given fact that generic foods were of considerably less quality than name brand.  That simply isn’t true any longer. 

One final note on this topic.  Many people believe that they can clip coupons and get name brand products for the same price as generic.  So I experimented.  My wife and I made a list of the 50 items we used most at home.  We then purchased a Sunday paper and collected all the junk mail we received over the previous week to find coupons for these items.  We were able to find coupons for 27 of those items.  Then we went shopping.  Of the 27 items on the list, only three were less expensive than their generic counterpart after using the coupon.  This does not take into consideration such gimmicks as double or triple coupon days that some stores offer.  We don’t have any stores in our state which offers such programs.  This makes generic foods the better value for us. 

The President is considering a 25% national sales tax.  This means that if you spend $500 per month on groceries now, you will spend $625 after the tax.  By purchasing generic brands, you will save at least as much as you are taxed making your net increase zero. 

Another way to cut costs is to turn up your thermostat this summer.  While I know that this is not a popular action, it is a money saver.  Instead of keeping your house at a comfortable 72 degrees, try keeping it at 75 degrees.  With energy costs projected to double or triple this year, that extra three degrees can literally save you hundreds each month.  Of course, if the President has a sudden change of heart and doesn’t impose extra taxes on energy, this will only save you a lot of money over the course of the summer.  Either way, it is a winning situation.  Yes, it is more comfortable at 72 degrees than at 75, but let’s face it, for the savings, that three degrees is worth it. 

Use cash to purchase gasoline.  Many stations will offer a cheaper price for gasoline if you pay in cash.  Others, like ARCO, will not offer a lower price for cash but will charge you a fee for using your credit or debit card.  While this only amounts to 50 cents or less, remember, it all adds up over time. 

If you use a credit card for your purchases, pay it off in FULL each month to avoid interest, late fees or other penalties.  Remember, the credit card companies have recently taken a big hit from the government so they are going to use every sneaky tactic possible to make up the loss in revenue they are expecting.  It is wise of you to remember, the credit card companies are not your friend.  They are in the business of making money.  As they have already proven themselves untrustworthy you can expect they will find ways around the new laws in order to make you pay them more money.

Right now is a good time to refinance your mortgage if you can do so.  If you have a 760 FICO score or better, you can expect to pay interest rates around 4.5% to 5.5%.  The lower your score from that point, the higher your interest rates.  Of course, for those who obtained adjustable rate mortgages, right now is NOT the time to refinance.  We are currently in an ARM and our interest rates are dropping every six months.  On a loan that we were paying $865/month on last year at this time we are now paying only $513/month.  We will not be shopping for a new mortgage any time soon as a result.  In a couple of years from now, when our ARM begins adjusting upward again, we will start looking around.  But until then, we are enjoying the lower rates.

Open a fee free checking account that doesn’t require a minimum balance.  With the recent shake up in the banking industry, these are becoming increasingly rare.  Before long, you can expect these to disappear completely.  Many banks, such as Washington Mutual, have free checking.  When Chase bought them after they collapsed, they “grandfathered” in all of WaMu’s customers thus waiving the fee requirements other Chase customers may have to pay.  If your bank has been purchased by another, make sure you are not going to be required to pay a monthly fee.  Bank of America is notorious for nickel-diming its customers.  If you can move your account from them to another, you should do so. 

My father-in-law is a BOA customer.  He reports to me that he pays out as much as $50 each month in fees.  I cannot, for the life of me, figure out why anybody would want to belong to a bank with a reputation for poor customer service and pay them $50 per month for the privilege of being treated that way.  If you feel the need to be made to feel like you are unworthy of someone’s time and effort, please send me your $50 each month and I will be happy to give you an inferiority complex for your troubles. 

Manage your credit carefully.  A good credit rating will save you a ton of money on interest for your mortgage, auto loan and credit cards.  While you will still pay higher interest rates for personal or unsecured loans, they will still not be as high as for those with a credit rating below 760. 

That is something to remember.  A credit score of 760 is the new 700.  Two years ago, if you had a credit score of 700 or better, you were able to finance just about anything at a very low interest rate.  Now, a 700 will still allow you to finance just about anything, but you will pay higher interest rates.  If your score is below 680, I wish you luck in finding any kind of financing at less than 20%. 

One overlooked means of saving money is your water.  Many believe that their water and sewage bill is based upon the amount of water they consume each month.  In most municipalities, this is not the case.  What is usually the case is your monthly sewage bill is the average of your water consumption during two months of the year.  Which two months is determined by each city.  In our area, it is January and February.  Since we know this, during those two months we conserve water to the extreme.  As a result, our sewage bill each month is always low regardless of our water consumption. 

We conserve water normally anyway.  Not because of the money issue, but because we understand that fresh water is very rare.  We don’t water our lawn during the summer months, for example.  This serves two purposes.  First, we consume less water.  Second, since the grass doesn’t grow, I mow it less, cutting my consumption of gasoline and reducing air pollution.  Not to mention, I don’t have to mow the lawn!  For me, that is a win, win, win situation.  Sure, my lawn is brown for two months of the year, but so what?  It turns green again in September.  During the winter months, it doesn’t matter.  During the spring months, it turns green again.  My neighbors may not like it, but I don’t really care.  My neighbors aren’t paying my bills.  If they are willing to pay my mortgage and my utilities, I will be happy to waste water on my lawn in July and August. 

Since we are on the subject of conservation, you can use this to save money also.  Most urban dwellers have a garbage service which comes to their house once per week to collect your refuse.  What many people don’t know is that if your garbage can lid does not close completely, the company will charge you more for that week’s pick-up.  By recycling, you can help to ensure that your can’s lid remains closed on trash day.  Additionally, you help the environment. 

In our city, it costs us about $30 per month for trash pick-up.  I have taken a two prong approach to reducing this cost.  First, I recycle aluminum, tin and steel cans, glass, plastic and cardboard. Since the recycling center is less than a mile away, this is convenient for me.  Second, I don’t use our local trash pick-up service.  I have a six foot by eight foot trailer that I use to take my trash directly to the dump every two to three months.  If I go every two months, and I spend the average amount each time (about $30) plus the three dollars of gas it takes to get there, I end up spending slightly more than HALF what I would by using the city’s service.  Substantial savings.  Since all the trash ends up at the same dump anyway, why should I pay someone double what it costs me to do myself. 

Additionally, consider your power usage.  Of course, you should use energy efficient bulbs for your lighting.  That is a no-brainer.  You should turn up your thermostat, as discussed earlier in this article.  Those are two good ways to reduce your energy consumption.  But have you considered your energy vampires?  It is estimated that 40% of your energy bill is due to energy vampires.  What are vampires?  Any appliance or gadget that uses electricity even when it is powered down.  Things like your microwave oven, VCR, computers, DVD players and televisions are vampires.  They require power to maintain a ready status, run clocks, etc. even when the power has been turned off.  The voltage levels are relatively low, but continuous.  Over the course of a month, this vampirism accounts for about 40% of your electric bill. 

The best way to solve this problem is to use multi-outlet surge protectors.  Most come with a power switch.  They can be found at dollar stores, department stores, electronic stores, etc.  By plugging your appliances into these devices, you can use the power switch on the surge protector to cut off power to your gadgets completely.  This will prevent vampirism.  This means that you may have to wait an extra 30 to 60 seconds to use your DVD player though.  If you have satellite TV, you will have to reacquire the signal each time you turn the box on, usually taking about a minute.  These minor inconveniences are definitely worth the savings on your power bill.

Computers present a problem when using this method.  Many people use their computer and internet for phone service.  This means that they must keep their computer turned on 24 hours a day in order for their phone to work.  Our household is one of those cases.  More on that later.  So what we have done is put our computers on one surge protector and our monitors on another.  This way we can keep the computers on for our phone service and turn off the monitors and printers at night when we are not using them. 

This next idea I have heard one left wing liberal politician heavily criticized for, but it is one with which I have to agree.  Paint your roof white.  Yes, white.  The reality is simple physics.  Most roofs are constructed with black or dark grey shingles.  As we all know, black absorbs more light and heat energy than any other color.  White reflects more than any color.  Therefore, if you want your house to remain cool during the summer months, a white roof will reduce your cooling costs.  It will not significantly increase your heating costs during the winter months.  I don’t see why everyone wouldn’t do so. 

When I was a child I had the opportunity to live on the island of Bermuda.  Every house constructed on that island has a white roof.  There are two reasons for this.  One is to reduce energy consumption.  The second, and the more important of the two, is that they use rainwater collected from their roofs for drinking, bathing, etc. since there is no natural fresh water source on the islands.

Now, about that phone service.  We use the magicJack internet phone device.  This costs us $20 per year.  The device costs about $50.  For that $50 you get the device and the first year’s service.  After that first year, you are billed only $20 each year.  It uses your existing high speed internet connection (dsl, cable, satellite) and a USB connection on your computer.  It is extremely simple to use.  When I received my first one, I merely plugged it into my computer and everything else was done for me.  Within five minutes it had downloaded the program and I was registered with a new phone number. 

Here is the thing I think is really cool about this device.  If I take my laptop to New York with me and have the magicJack device plugged in, you can call me.  If I am in San Francisco, you can call me.  If you are calling from my home town, it is STILL a local call whether I am in San Francisco or Miami.  If you have a magicJack device, the call is always free.  I take the device with me when I travel so I can make and receive telephone calls and faxes from anywhere I have a high speed internet connection.  This device will not work with a dial up connection. 

So, instead of spending $65 per month on phone service, I now spend $20 per YEAR!  Now if you don’t consider that substantial savings, you need to contact your local psychiatrist.  I now have a device for each of the computers in our home and one for the laptop.  Yes, that is $100 per year, but I am still spending less for ALL FIVE phone numbers than I was paying for ONE through Qwest.

These suggestions are just a few of the things anyone can do to help save substantial amounts of money during these extremely tough times.  By using these methods myself, I have trimmed our monthly budget by over $400.  I haven’t painted my roof white yet, but plan to do so when I repaint my house this summer. 

Our income is quite modest, not quite $1800 per month.  These cost cutting measures have allowed us to survive and remain comfortable.  Yes, we have had to cut back on some things.  I can no longer buy my daily frappaccino and we haven’t eaten out in over six months.  But the important thing is that we are surviving.  We are managing to provide what we need for our children without causing them too much discomfort.  While our teen cannot wear brand names like Nike, the shoes we purchase at Wal-Mart serve him quite well. 

I cannot guarantee that you will have the same success as we have enjoyed to this point, but I can say with confidence that you will enjoy significant savings by trying these ideas.