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How To Save More Of Your Income

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AARP Offers Many Good Suggestions For Saving Money
AARP Offers Many Good Suggestions For Saving Money

The annual AARP list of 99 ways to save money is out and it offers these nine suggestions to reduce your expenditures on financial matters:

Auto Insurance

Shop around for auto insurance. Insurers use a tactic called “price optimization.” That means they raise premiums based not on risk factors, but on how much of an increase they think you will accept. When it comes time to renew your insurance, bargain with your insurer for a better rate.

Pay Raises

Before you are called into human resources to discuss your next raise, ask for a salary range that informs you of the low-to-high range the company pays for a particular job. Knowing where you are in the range can become the basis for negotiation. Perhaps understanding the range will be impetus for more training so you can move up.

Credit Scores

Don’t pay for a credit score. It can be obtained free from Creditkarma.com or Credit.com or from Sharpen Your Financial Focus through its website, Sharpen Today.org.

Delay Social Security

Plan ahead on your Social Security. If you have reason to think you will live beyond age 80, wait until you are 70 to begin collecting so you will get the maximum benefit. If you are a couple and feel it likely you will live past 80, let the partner who had greatest earnings delay collection.

Home Renovations

If you are considering house renovations, these changes are considered the most likely to enhance the value of your property: Replace the front or garage door, add a deck, turn an attic space into a bed/bath or update the kitchen. That‘s from Remodeling Magazine’s 2014 cost/value report.

Divide Payments On Credit Cards

When you have heavy credit card expenditures, consider paying the bill in two increments instead of one monthly payment. Paying on time is the most important factor in calculating your credit score. Next is the percentage of credit you have available. People with the highest scores keep utilization under 10 percent. Paying your bill in two payments in a month keeps a lid on this number.

Tax Diversification

Consider tax diversification in your 401k. Like Roth IRAs, many Roth 401k’s allow you to put in money on which you already have paid tax. Then you may withdraw it at retirement tax-free. If there is a possibility your tax bracket will go up in the future, these tax-free dollars stashed in a 401k now be even more valuable.

Look at your banking institution. Some smaller banks and credit unions offer more than the going interest rate (about 2 percent) on checking accounts, even with balances of $10,000 or more. You’ll have to make direct deposits, in all likelihood to reap this benefit.

Talk to the vet who cares for your pets and see if he offers drug discounts or will provide samples of medications free. Ask if you can fill the vet’s prescriptions at a pharmacy for humans. Walmart and some other pharmacy outlets provide a $4 prescription price for many medications, which could save you money.

Child Care Is A Huge Expense

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You child care costs can equal a year's college tuition. Have you added this expense to your budget?
You child care costs can equal a year’s college tuition. Have you added this expense to your budget?

Many women who opt to work to supplement the family budget quickly find that child care can make a huge dent in their contribution. The annual cost of infant care can equal a year’s tuition at a community college in 31 states, according to an article in Working Mother.

The options are many and you need to choose the type of care that you want for your child, and also fits into the budget comfortably.

Here are some alternatives, including the likely cost:

NANNY: Nannies are professionals. Some will live in your home and, besides caring for your child, will do housekeeping and meal preparation. They may assist with the child’s homework, take him or her to school and other events, such as play dates. The annual cost? About $36,275 yearly average. The wages may be tax deductible and eligible for flexible spending reimbursement. Working women whose jobs require unpredictable hours or frequent travel may find this the best option, even though the cost is commensurately high. Having just one caretaker may pose problems if the nanny becomes ill or otherwise unavailable and you have to find a replacement in a hurry.

CENTER-BASED DAY CARE: Much like a school, large day care centers often accept children in different age groups and provide multiple caregivers. They may offer amenities such as kindergarten preparation and instructive field trips. The average annual cost for full-time infant care is $3,863 to $16,430. Prices generally decrease as the child becomes older and does not need the same level of care. The cost may be tax deductible and eligible for FSA reimbursement. This mode of child care is most ideal for moms who have routine hours and who want their child to mingle with peers. The centers are not usually flexible for those who work early or late and may impose an extra charge – sometimes as much as $15 for every minute you are late. Problems may arise when the child is sick or cannot attend day care for any reason.

IN-HOME CARE: Providers in this category usually have small groups of children in their own home. The home atmosphere is attractive to many working mothers, and the annual cost is lower – $3,930 to $11,046 for full-time infant care. While the least expensive of the options, and offering the chance for a child to interact with a small group, the downside is how to provide when the caretaker is unavailable for any reason. (Most states have regulations and licensing standards for those who provide in-home care. Check.)

AU PAIR: Primarily young people 18 to 25 from other countries, who provide up to 45 hours a week of child care in your home. Light housekeeping and meal preparation are often part of the arrangement. Parents pay a stipend, provide a private room and meals. The average annual cost is $18,722, regardless of the number of children. The advantage for your children is exposure to another country’s culture and language and in-home care. The fee includes $500 a year toward the au pair’s enrollment in a local post-secondary education program. A two-week paid vacation is required. Wages may be tax deductible and FSA eligible. Agencies such as Au Pair in America arrange services. On the downside, au pairs are in the country on one-year visas, with possibility for one-year extensions, so continuity is not guaranteed.

Budgeting Made Easy

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Turn The Impossible Into Reality
Turn The Impossible Into Reality
There are those who know how to budget. The rest of us tend to depend on them to fill in the details where finances are concerned. But with a little bit of learning you could take your place in the ranks of those who are serious budgeters.

If it’s something you have been vowing for a long time to launch into in a serious way, now is the time. Tomorrow is never a good day to begin budgeting.

Start off with one simple rule: Spend less than you make. Then begin to investigate the shortcuts that have proven to be effective in making a budget work for your financial well-being.

The people who developed The Fool’s Lazy Budget have learned where to cut corners and simplify the steps. They offer these tips:

Analyze Your Current Spending Habits

Begin with an analysis of your current spending habits. Honestly examine your outgo on every single day for three months. If you don’t lay this foundation up front your budgeting efforts are likely to fail. There are tools to help you track spending, including a 218-category spreadsheet. Put in the data then study it carefully. But that may be the hard way. A simplified one-step approach starts with a debit card review. Look at the raw data your bank provides and create your own general spending categories. Pay particular attention to the categories in which the figures make you weep. Some banks provide a year-end spending summary, with weak spots graphed in different colors on bar charts. Pay particular attention to your spending if you use cash and project the results over four weeks. Whatever your method, identify the categories where overspending is obvious.

Peek Into the Future

Take a mental trip to “the mall of your future,” as advised by Dayana Yochim of the Fool’s Lazy Budget staff. This virtual shopping spree, sans side trips to the food court, will give you a concrete view of what you want to spend. List your needs for the next three to six months. Start with the things that are not optional, of course, such as housing, food, utilities, etc. Then realistically list such things as new car tires, family vacation costs, etc. If you have plans to pay off a credit card, max out your IRA or add to your emergency fund, list these items. Than add expected expenses for long-term items you anticipate over the next year or thin the next five years. Use the lists to plot spending to match identified needs.

You now have a written plan that, if followed faithfully, will save you from impluse spending that is a budget-buster. Share the plans with family members. If practical, provide a wallet-sized outline for each person involved in family spending. Don’t ignore the potential spending that adds to the quality of life for your family. Add some agreed-upon items that will make life better over the short term and the long term. It’s sort of the old all-work-and-no-play-makes-Jack-a-dull-boy theory. Spending is more satisfying if there is room for some outlay for what you really WANT.

Set Goals

When you have your goals firmly in mind, pencil in what you estimate the costs of achieving these goals will be, on a monthly basis. For instance, if those new tires for the car are non-negotiable, start setting aside a portion of the cost over several months so the final outlay is not so overwhelming.

Save Regularly

Start saving something each pay period. Hide some money from yourself by diverting a portion of each paycheck to an account separate from your checking account. Don’t let it be available for impulse buying or those sudden moments when you see something you “just can’t do without.” Think carefully about what you think is essential. Often it isn’t. Arrange with y our bank to transfer the excess in your checking account to savings on a regular basis.

Quit Overspending

Stop overspending. You know where your own temptations lie. Set some limits and stick with them. Start an envelope system where you put an amount sufficient to cover a necessary expenditure for a month into an envelope. Typically, the four most essential expenditures for a family are housing (34 percent); transportation (18 percent); food (13 percent); and entertainment (4 percent). If it is at all possible to cut any of these categories, do so and you’ll have money to shift to other categories. Have an envelope for each category and slip in the money to cover that expense. When it’s gone, that’s it. Economize where it’s feasible.

A budget is a personal thing and you will make your own adjustments. That’s fine as long as the basics stay in place. Don’t spend more than you make. Give yourselves a savings cushion. Look ahead to avoid, as much as possible in this uncertain world, the unexpected expenses that knock you for a financial loop. You’ll save yourself a lot of stress if you keep a handle on your money. That’s called budgeting.

Funding Your Spending Goals

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Most everyone has in their budget some special projects, purchases or plans that require advance savings to accomplish. If you have created such a wish list, it’s time to seriously begin the planning part.

Set Written Goals For Your Desired Purchases
Set Written Goals For Your Desired Purchases

Start by identifying as accurately as possible what this “dream” item is going to cost. When the figure is set, break the total into as many “payments” as necessary to reach that goal. That’s how much you need to set aside each pay period to fund this goal. Take the “wish list” into consideration if you should happen into any windfalls, bonuses, raises, inheritances or other augmentation of your income. The sooner you achieve one goal, the sooner you can start on another.

Make your goals concrete by putting them down in writing. Purchase or create a chart that lets you see at a glance where you stand vis-à-vis the goal.

It’s likely you will have several savings goals concurrently: a dream vacation, saving for a down payment on a house, building a retirement fund, etc. If you find you are pinching to fund all of them, you have some options: Reduce the list or scale back on some of the goals (a shorter vacation, perhaps?) You can extend the time for some of the larger goals, reducing the periodic savings payment. Or you can reassess your overall budget and see if there is some category that can be reasonably reduced and the money shifted to the savings category. For instance, you may be willing to sacrifice some of your regularly budget entertainment or transportation funds to speed up the long-term goals.

Other tips that will support those goals include setting up automatic deductions when possible, for instance for your 401k, a savings bond program, a brokerage account, etc. Track expenses monthly. If there is a category in which you are overspending, apply self-discipline. Streamlining could save you something to put toward your wish list. When you go out, leave your credit cards and checkbook home. Use cash. Having to hand over something concrete may inspire you to be a bit more stingy when you are out and about.

Above all, keep your attention focused on what it is you want in the future and don’t let the wants of the present rob you of those satisfying financial objectives.

Cut Your Expenses And Increase Your Income

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Savings Can Grow When You Decrease Expenses and Increase Your Income
Savings Can Grow When You Decrease Expenses and Increase Your Income
The annual AARP list of 99 ways to save money is out and it offers these nine suggestions to reduce your expenditures on financial matters:

Auto Insurance

Shop around for auto insurance. Insurers use a tactic called “price optimization.” That means they raise premiums based not on risk factors, but on how much of an increase they think you will accept. When it comes time to renew your insurance, bargain with your insurer for a better rate.

Pay Raises

Before you are called into human resources to discuss your next raise, ask for a salary range that informs you of the low-to-high range the company pays for a particular job. Knowing where you are in the range can become the basis for negotiation. Perhaps understanding the range will be impetus for more training so you can move up.

Free Credit Reports

Don’t pay for a credit score. It can be obtained free from Creditkarma.com or Credit.com or from Sharpen Your Financial Focus through its website, Sharpen Today.org.

Social Security

Plan ahead on your Social Security. If you have reason to think you will live beyond age 80, wait until you are 70 to begin collecting so you will get the maximum benefit. If you are a couple and feel it likely you will live past 80, let the partner who had greatest earnings delay collection.

Home Improvement

If you are considering house renovations, these changes are considered the most likely to enhance the value of your property: Replace the front or garage door, add a deck, turn an attic space into a bed/bath or update the kitchen. That‘s from Remodeling Magazine’s 2014 cost/value report.

Credit Card Payments

When you have heavy credit card expenditures, consider paying the bill in two increments instead of one monthly payment. Paying on time is the most important factor in calculating your credit score. Next is the percentage of credit you have available. People with the highest scores keep utilization under 10 percent. Paying your bill in two payments in a month keeps a lid on this number.

401Ks

Consider tax diversification in your 401k. Like Roth IRAs, many Roth 401k’s allow you to put in money on which you already have paid tax. Then you may withdraw it at retirement tax-free. If there is a possibility your tax bracket will go up in the future, these tax-free dollars stashed in a 401k now be even more valuable.

Interest Rates On Bank Accounts

Look at your banking institution. Some smaller banks and credit unions offer more than the going interest rate (about 2 percent) on checking accounts, even with balances of $10,000 or more. You’ll have to make direct deposits, in all likelihood to reap this benefit.

Pet Prescriptions

Talk to the vet who cares for your pets and see if he offers drug discounts or will provide samples of medications free. Ask if you can fill the vet’s prescriptions at a pharmacy for humans. Walmart and some other pharmacy outlets provide a $4 prescription price for many medications, which could save you money.