TOP SAVINGS TIPS FOR 2009
It's rough out there.
It's rough out there. If the economy is putting a crimp in your wallet, we can help. At Kiplinger's Personal Finance, we found ways to trim spending on everything from insurance and health costs to high-tech must-haves like computers and TVs.
We searched for big gains and sliced $18,250 in savings for a full year. It's all detailed in the March 2009 issue of Kiplinger's Personal Finance magazine. Here are some of the Top Savings Tips from the cover story, to help you get started on saving money in every area of your life. Click on the slide show to your right, and see how much you can put back into your pocket!
Compiled by Amy Pollak
Banking & Loans: Wipe Out Interest
The average household has $7,430 in credit-card debt. But let’s assume you have just half that. Take advantage of a 12-month 0% balance-transfer offer from Bank of America or Discover.
ANNUAL SAVINGS: $422 (on a rate of 13.6%)
Banking & Loans: Use Cash-Back Cards
Tired of accruing airline miles that you can never redeem? Switch to a cash-back credit card and earn enough in a year to pay for a coast-to-coast ticket. If you spend $850 a month for 12 months using Blue Cash from American Express, you could see a $250 credit on your bill at the end of the period. Even charging $550 a month on basics such as groceries, gas and drugstore purchases can put money in your pocket.
ANNUAL SAVINGS: $25
Banking & Loans: Refinance Your Mortgage
Take advantage of the lowest rates in years. Monthly mortgage payments take up the lion's share of most household budgets, so refinancing can produce substantial savings. With the interest rate on a 30-year fixed-rate loan at less than 5.5%, now is a good time to refinance. Slashing your rate from 6.75% to 5.25% on a 30-year loan will save you 17% on your monthly payment.
On a $200,000 mortgage, that translates into a savings of almost $193 per month. For your own situation, use the "How much will my payment be?" calculator at Kiplinger.com. Of course, for a refi to pay off, you must stay in the house long enough to recoup any closing costs, which typically amount to 2% to 4% of the loan.
ANNUAL SAVINGS: $2,313 (refinancing a $200,000 mortgage)
Health & Insurance: Reshop Life Insurance
The rates are lower, even though you're older. Premiums have plummeted over the past decade, and you may be able to save hundreds of dollars by reshopping your policy, even though you're older now.
Term-insurance prices varied widely in 1998, and many major insurers were charging a 40-year-old man at least $750 per year for a $500,000, 20-year term policy.
Today, a healthy 50-year-old man can buy a $500,000 ten-year term policy (which expires in the same year) for just $445-a savings of more than $300 per year. Compare prices among dozens of insurers at Accuquote.com.
ANNUAL SAVINGS:$300 (on a ten-year term policy for a 50-year-old)
Health & Insurance: Boost the Deductibles
Increasing the deductibles on your comprehensive and collision auto coverage from $500 to $1,000, or even $2,500, can reduce your premiums by 12% to 18%. For example, boosting the deductibles from $500 to $1,000 would mean a savings of $648 per year, on average, for a northern California family with two teenage drivers, according to the database at InsWeb, an insurance Web site. Raising the deductibles from $250 to $2,500 lowers the average premium by $1,503.
ANNUAL SAVINGS: $648 (with a $1,000 deductible and two teenagers)
Investing Costs: Slash Fees
The average diversified U.S. stock mutual fund charges 1.3% a year in expenses. If your fund isn’t beating its benchmark (or you don’t have the time to monitor actively managed funds), you’re better off buying a low-cost index fund or ETF that hews to the benchmark.
For instance, Fidelity Spartan 500 Index fund (symbol FSMKX), which tracks Standard & Poor’s 500-stock index, has an annual expense ratio of just 0.10%. And indexing isn’t a compromise strategy. Managers of many top pension funds and endowments swear by it.
ANNUAL SAVINGS: $1,200 (based on cutting expenses from 1.3% to 0.10% on a $100,000 portfolio)
Investing Costs: Go With A Discount Broker
Full-service firms charge $30 or more for an online stock trade. But online brokers’ fees average just $10, reports Aite Group, a financial research firm. We like E*Trade and TD Ameritrade for $10 trades. And be honest: Is your broker’s research worth the extra 20 bucks?
Or, trade for free. ZeccoTrading gives you ten free stock trades per month if you maintain a minimum balance of $25,000. WellsTrade allows 100 free trades a year if you keep a total of $25,000 or more in Wells Fargo in almost all types of accounts.
ANNUAL SAVINGS: $240 (using a discount broker for one trade per month)
Food Costs: Belly Up To The Bar
You just need to give up the table. You can eat well at a fraction of the price if you stick to the bar menu—and we’re not just talking wings. These restaurants are among many that offer fancy food on the cheap while eating at the bar. We computed the difference in price between ordering two entrees from the regular menu and three items (one for each diner, plus one to share) from the bar menu.
CHEESECAKE FACTORY ENTREE: Salmon salad ($32)BAR: Chicken pot stickers ($9)SAVINGS FOR TWO: $23
MCCORMICK & SCHMICK’S ENTREE: Rainbow trout ($35.60)BAR: Fish and scallop ceviche ($12)SAVINGS FOR TWO: $23.60
MORTON’S THE STEAKHOUSE ENTREE: New York strip steak ($86)BAR: Petite filet mignon sandwiches ($30)SAVINGS FOR TWO: $56.
TOTAL ANNUAL SAVINGS: $410 (for a couple who dine out once a month)
Food Costs: Switch Supermarkets
Stock up on grocery staples at a discount. Six-word strategy for saving on food: Get in car. Drive to Costco. We compared prices on 37 staples at Costco, Safeway and Whole Foods, calculated the prices for equivalent sizes, multiplied the total for each list by 12 (representing monthly shopping expeditions) and added Costco’s $50 annual membership to the cost.
Result: Costco can supply a family of four with many of the basics for an annual tab of $1,708, followed by Safeway, at $2,417, and Whole Foods, at a pricey $3,498. If there is no Costco in your area try BJ's and Sam's Warehouse for great discounts.
ANNUAL SAVINGS:$1,790 (Costco versus Whole Foods)
Utility Costs: Bundle Up For Savings
Competition is a wonderful thing. And phone, wireless, cable and satellite-TV companies are competing like mad to get your business by bundling services at discount prices. Right now, the standard-issue package is $99 for TV, telephone and broadband Internet service.
All those services can easily total more than $150 a month if billed separately, so a monthly savings of $20 is a minimum if you go the bundling route. One caveat: That $99 deal usually lasts for only one year. Solution: If your contract price rises, you can either switch providers for a lower rate or threaten to switch providers to bargain your rate back down.
ANNUAL SAVINGS: $240
Utility Costs: Trim Utility Bills
Reduce energy and water usage and in turn save a grand. Install a smart thermostat. Why heat or cool your home when you don't need to? With a programmable thermostat, you can put your temperature preferences on autopilot. Cost: $70.
ANNUAL SAVINGS: $180
Leisure Costs: Swap Sitting Services
Round up another family or two with cabin fever and take turns baby-sitting the kids. If you go out for four hours every month and would have paid a baby sitter $10 per hour, you can save $40 per month. All you need to do is watch the other family's brood occasionally-which gives your kids a few extra playmates.ANNUAL SAVINGS: $480 (one night out a month)
Leisure Costs: Last Minute Travel
Whet your wanderlust and save big by booking an impromptu, package-deal vacation at LastMinute.com. Reserved a week before departure, a trip for two from New York City to Amsterdam in early January cost about $2,000, including a round-trip flight and five-night stay in a four-star hotel. If you had planned the same trip several months in advance and booked it all separately, you'd have spent $2,500.
ANNUAL SAVINGS: $500 (one package trip to a vacation destination)
Transportation Costs: Buy a Fuel-Efficient Car
If you're in the market for a new car this year, you're in the driver's seat when it comes to haggling over price. (See The 2009 Cars: Deals Are Insane). The Toyota Corolla or Honda Fit will deliver 30 mpg, compared with 20 mpg for the Ford Taurus V6 or Chevrolet Impala V6. ANNUAL SAVINGS: $550
Downsizing from a gas guzzler also does the trick. Not all trade-downs are equal, though. For example, beware of swapping a relatively new large crossover for a smaller one with better gas mileage.
The money you lose by trading in a newer vehicle (cars typically lose 40% to 50% of their value in the first three years of ownership) may be more than the money you save on gas. A smart new-car downsize: Swap a '07 Chevrolet Tahoe AWD for a '09 Volkswagen Jetta SportWagen. You'll save on both gas and monthly payments without losing all your cargo space. SAVINGS: $1,031
TOTAL ANNUAL SAVINGS: $1,581 (if both changes are made by a two-car family)
Transportation Costs: Save On Gas
The little stuff adds up. The exhilarating drop in gas prices was welcome relief after last summer's run-up. But even at current prices, you can save big by altering your driving behavior.
Keep your cool. Easing up on aggressive driving can cut your fuel consumption by 35%. Speeding is the biggest culprit, but drag-race-inspired peal-outs and jerky lane changes also shave miles per gallon. SAVINGS: $400
Get rid of the junk in your trunk. An extra 100 pounds in your vehicle costs you. SAVINGS: $30 Maintain your vehicle by keeping your engine properly tuned and tires inflated, replacing air filters regularly and using the right grade of motor oil. SAVINGS: $348
TOTAL ANNUAL SAVINGS: $778 (based on studies using the best-selling Toyota Camry V6)
Shop and Save: Laptops
Recession-battered retailers slashing prices to attract customers. The average laptop costs $795, according to the Consumer Electronics Association. But at Best Buy in February, the top-selling Acer 15.6-inch Aspire laptop was on sale for $450. It has all the memory and features most users will ever need.SAVINGS: $395
Shop and Save: Televisions
Big box retailers are offering some of the best deals around to help trim the cost of just about everything in your family budget. The average price for a high-definition TV is $874, and you can easily spend more than $1,500. At Costco in early January, a 42-inch Panasonic Plasma HDTV went for $730.