Budgeting and Saving

High-rate CDs, low-cost funds, turning spare change into big savings

Drive a Bargain

Michal Sharabi, like many super savers, got the message early from her parents not to carry a balance on her credit card. But it was her job as a licensed clinical social worker that drove home just how big a difference saving money can make. "I see the financial struggle and hardship that some of my patients face while trying to cope under difficult circumstances," says Sharabi, 30. "That has motivated me to be financially stable."

Sharabi had been commuting more than 100 miles every day from her home in Encino, Cal., to her job with Kaiser Permanente in Lancaster -- and spending a fortune on gasoline. So she asked her boss if she could work the same number of hours in a four-day week. Her boss agreed, and now she's saving about $75 a month on gas alone.

Last year, she signed up for a credit card that gives her a 5% rebate on gas purchases, and so far she's gotten back more than $150. She puts all of that money in a savings account with ING Direct that pays 4.5% interest.

All told, Sharabi figures that while other drivers complain about the price of gas, she has realized more than $1,000 in gas-related savings over the past year. "I'm not only saving money, I'm actually making money," she says.

Emergency Cash

I used to keep $25,000 to $50,000 of emergency cash and fun money in a money-market account that paid about 1% interest. When my bank offered a 90-day certificate of deposit paying 3.97%, I invested my cash in three CDs of equal amounts, spaced 30 days apart, so a CD would mature each month. If I needed the money, I could forfeit the interest on one CD, but the others would automatically renew. After one year at 3.97% versus 1%, I will have netted an extra $1,485. I plan to use the extra cash to fund Roth IRAs for my two teens. -- Karen Gaudet, Wheeling, W.Va.

Small Change

At the end of every week, I take all the money in my purse (change and bills) and put it in my savings account. On Monday, I start the week fresh. I save an average of $2,000 to $2,500 a year, sometimes more when I do the same with my husband's change. It pays for family emergencies and vacations. -- Vanessa Ragsdale, Jensen Beach, Fla.

Big Bills

I get paid biweekly, so I estimate the total annual cost of big bills due throughout the year -- such as car insurance and maintenance -- divide it by 26 and then budget that amount every payday. The money is automatically transferred to a high-yield online savings account. Not only do these funds earn interest (currently 4.5%), but I also have the cash on hand when the bills come due. When my car loan was retired, I continued to budget the payment amount. I now have more than $8,500 in a savings account earmarked for buying a new car. -- Harvey Cohen, Arbutus, Md.

KIP TIP: For a list of the highest-yielding bank certificates of deposit and money-market funds, see the Credit and Money section of Kiplinger.com.

Low-Cost Funds

I diversify my investments, and save money on fees, by using five of Vanguard's extremely low-cost index funds. -- David Sawyer, Minneapolis

KIP TIP: If you invest in stocks, our choice for the best online broker is OptionsXpress. At $14.95 per trade, its commissions are competitive, and it won't nickel-and-dime you on fees.

Credit Freeze

When I was in college, I went a little wild with student credit cards. I learned the hard way that I needed some control, so I froze the cards in a large pan of water. If I wanted or needed something badly enough to wait for the cards to thaw out, then it was probably worth purchasing. If not, I saved the dough. My mom still laughs about this, but I saved thousands in forgone impulse purchases. -- Kelly Colucci, Cumming, Ga.

Military Bonus

If military personnel are stationed in certain combat zones, they may deposit up to $10,000 in a special savings account that pays 10% interest while they are deployed and for up to three months afterward. I did this several times during my 20 years in the Air Force, and the $40,000 that I accumulated helped me buy a car, fund a retirement plan and finance several home-improvement projects. It is now helping me afford to go back to school. -- Anne Forry, Felton, Del.

KIP TIP: Military personnel can also make a pretax contribution of up to $15,500 per year to their Thrift Savings Plan to fund their retirement. If you're stationed in a combat zone, you can contribute up to 100% of your tax-exempt pay, for a total contribution of up to $45,000 in 2007.

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