A Guide to Saving Money in 2009
In the last several months, we have witnessed a financial crisis reminiscent of the Great Depression.
To date, 1.2 million people have lost their jobs, 17 banks have closed their doors, General Motors, Direct TV, and Circuit City are on the brink of bankruptcy, and the credit crunch is still keeping banks from lending money.
You might ask, what about the 700 billion dollar bailout? While it did ease the credit crunch somewhat, we are now learning that the money has been used to pay dividends to shareholders as well as bonuses to employees.
In addition, the Federal Reserve eliminated a little known tax code that allows banks to buy other failed institutions without having to pay tax.
“The change to Section 382 of the tax code – a provision that limited a kind of tax shelter arising in corporate mergers — came after a two-decade effort by conservative economists and Republican administration officials to eliminate or overhaul the law, which is so little-known that even influential tax experts sometimes draw a blank at its mention. Lawmakers are now looking at whether the new notice was introduced to benefit specific banks, as well as whether it inappropriately accelerated bank takeovers.”
As reported by the Washington Post on November 20, 2008, “The sweeping change to two decades of tax policy escaped the notice of lawmakers for several days, as they remained consumed with the controversial bailout bill. When they found out, some legislators were furious. Some congressional staff members have privately concluded that the notice was illegal. But they have worried that saying so publicly could unravel several recent bank mergers made possible by the change and send the economy into an even deeper tailspin.”
In other words, the step taken by the Federal Reserve is illegal and even though Congress knows about it, no immediate steps are being taken for fear that it will send the stock market into a nose dive. It still remains to be seen what will be done in this regard and will no doubt add fuel to the recession fire.
When President-Elect Obama met with President Bush on November 10, 2008, he asked for a second Stimulus Package; enact legislation that would help those whose homes are in foreclosure; and to immediately assist the automobile industry. Whether or not a lame-duck Congress will act and the President will sign such legislation is yet to be determined.
The aforementioned information is meant to keep you informed as to what is being done and (in the case of the Federal Reserve) what is not. As the global economy is bracing itself for what is yet to come, we will all have to tighten our belts and make sacrifices in order to ride out this storm.
The bottom line is that 2009 is going to be a rough year for everyone.
Saving Money in 2009
Being frugal has become the norm lately, rather than the exception. With so much uncertainty about the economy, now is a good time to sit down with your spouse, partner, and family members to lay out a plan for the next two years. Determine where you can save money, starting with your budget.
Tweaking the Budget: While you may have an existing budget that is working very nicely for you, it may be a good time to revisit it and decide where you can make further cuts. List the bills starting with the grocery bills, mortgage/rent, car loans, credit cards, student loans, telephone, utilities, cable, entertainment, and incidentals.
Now decide where you can make cuts. Can you lower the monthly allowance for food? Can you reduce interest rates on credit cards, eliminate certain telephone charges, and reduce the number of premier channels on cable?
Let’s review these items to determine if cutting down is feasible and/or applicable.
Groceries: With the price of groceries still high, here are some suggestions on how to save money on food:
* Purchase paper products in bulk, specifically generic or the lowest price paper products available.
* Buy store brand items; they are just as good as name brands.
* Prepare meals for a week or two and freeze them.
* If applicable, grow your own vegetables.
* Use online coupons as well as cutting coupons out of the Sunday papers.
* Look for weekly or in-store sales and buy in bulk.
* Take lunch to work.
* Refrain from dining out
Here are a few sites where you can print grocery coupons and/or receive online discounts:
http://www.couponwinner.com/CategoryCoupons.aspx?CID=273
http://www.wow-coupons.com/index.php
http://www.couponfetch.com/37
http://www.couponalbum.com/category/food.htm
Note: It was reported that New York’s Mayor Bloomberg is considering charging six cents for each plastic bag that is packed with groceries. To all New Yorkers: If this legislation is passed, it will be necessary for you to bring your own bags to the supermarket.
Mortgage: If you are finding it difficult to meet the mortgage payments, call your lender and ask if you can meet to discuss the options. Remember, the last thing a lender wants to do is foreclose on your home. By contacting them, you are indicating that you are not only responsible, but willing to work with them to meet the payments.
For more information on failure to pay mortgages, go to: http://portal.hud.gov/portal/page?_pageid=73,1827458&_dad=portal&_schema=PORTAL
Rent: Are you falling behind in your rent? The last thing you want to do is use a credit card advance to pay the landlord. Instead, talk to your family members or seek advice from a financial counselor who can guide you in the right direction.
The Rental Housing Information site offers some answers: http://www.rha-ps.com/Content/NavigationMenu/TenantInformation/IfYouCantPayRent/default.htm
Car Loans: This is a difficult call. With the auto dealers in trouble, they may not be willing to offer options in this regard. Again, if you need assistance, talk with family members and/or financial counselors to try and find a way to meet your payments.
Under no circumstances should you withdraw any money from your 401K or take out credit card advances.
Credit Card Debt: Although the Federal Reserve cut interest rates again last month, it may not be totally reflected in the amount of money you pay on credit card interest. In fact, some credit card companies are now indicating that late payments will incur even higher fees than before.
If you have credit card debt, here are some suggestions:
* Pay down the debt by snow-balling the payments. Make a list of the highest interest rate cards first. Instead of making a minimum payment, increase the payment as much as you can. When that credit card is paid off, use the same amount you used to pay off that card and apply it to the next card using the same method, and so on.
* Call the credit card companies and ask if they can lower the interest rates.
* Ask the credit card companies if they can change the payment due date to coincide with the date you receive a paycheck.
* Check your credit report annually.
* Cut up all cards except one, and only use it in cases of emergency.
* Do not consolidate credit card bills by taking out cash advances on others.
* If you can’t afford to buy an item with cash, don’t buy it.
* If the debt you have incurred leaves you stressed and unable to pay – talk to a financial counselor. Bankruptcy should be the very last resort.
* Be sure to pay bills on time, otherwise late fees will be added to your monthly payment.
Student Loans: If you are having a problem paying student loans, talk to the lenders. In most cases, they can offer alternative methods for payment. Some of these alternatives include:
* postponing payments through deferment or forbearance programs
* ask about affordable payment plans or loan consolidation
For more information on student loans, check out: http://studentaid.ed.gov/PORTALSWebApp/students/english/repaying.jsp
Telephone: With most people using cell phones more than landlines, it may be worth considering disconnecting your home phone. In addition, if you have a computer you can take advantage of making calls online using Vonage or Skype. Check out both links below and determine which one is best for you.
http://www.vonage.com/lp/US/searchgoogle/?gclid=CNX-yenT7ZYCFQKaFQod6mG1qw
http://www.skype.com/
Although major telephone companies are offering bundle packages for internet, cable, and phone; it may be a good idea to determine it this type of consolidation is cost effective. This will require calling each company and comparing costs as well as the type of packages offered.
If you need to keep your home phone, then it would be a good idea to call the telephone company and try to reduce the amount paid monthly. This entails a line by line examination of the charges. Do you really need call waiting and caller ID? Is your number unlisted?
One woman called the phone company and reduced her monthly bill by $25.00 by getting rid of the aforementioned extras as well as having her number listed instead.
Utilities: Here are some tips you can utilize to save money on utility bills, as offered by the FTC:
* Keep air vents, baseboard heaters, and radiators unrestricted by furniture, carpet or curtains. It makes the air flow more easily. If baseboard heaters have movable vents, keep them open during the winter and closed during the summer.
* Schedule annual tune-ups for your heat pump, furnace or boiler. Maintenance checks can help keep this equipment running smoothly and efficiently.
* Locate your refrigerator away from heat sources like the stove, dishwasher and heat vents. Vacuum the coils every three months; dirt buildup makes the machine work harder to keep the contents cool. Check the door gaskets for air leaks. If ice buildup in the freezer is more than 1/4 inch thick, defrost.
* Preheat the oven only when the recipe specifically calls for it and turn off the oven shortly before the recipe suggests. The heat in the oven can finish the job.
* Cook in pots that fit the size of your stove top burners to cut energy waste. Using lids on your pans means you can lower the temperatures and reduce the energy used.
* Scrape but don’t pre-rinse your dishes by hand if you have a dishwasher that automatically pre-rinses or has a rinse/hold cycle. Save time and water.
* Remember to clean clothes dryer filters after each use.
* Lower the temperature setting on your water heater. Many thermostats are preset at the factory at 140 degrees. Lowering it to 120 degrees will save you 15 percent of your water heating energy.
Cable: As mentioned in the Forward of this report, Direct TV is in financial trouble. If you have cable and are paying dearly for the premium channels, now may be a good time to contact the cable company and reduce these in number.
In addition, if you are a Time Warner Cable customer, you can contact them and take advantage of their Price Lock Guarantee. This will save you 10% off your total bill per month.
Since the telephone companies are offering bundled packages as well, this may be a good time to compare their prices to that of your cable company. Perhaps you can realize savings here as well.
Entertainment: Perhaps you may have had to forego a vacation this year. However, everyone needs a break now and then. Instead of booking a 7-night package abroad, why not take a weekend jaunt to a Bed and Breakfast in your area. Check with your travel agent for the latest deals and prices.
You can also save money by eliminating the theatre and movies and renting DVDs instead. Netflix and Blockbuster both offer affordable prices for DVD rentals.
https://www.netflix.com/Register?mqso=80015652
http://www.blockbuster.com/
Or, as an alternative, watch movies on your computer. The fees are ridiculously low (in some cases $1.98).
You can also take out DVDs from the library. So too, instead of purchasing books online, your library will probably have the latest titles available at no cost to you.
Incidentals: Here are tips on how you can save money by eliminating everyday incidentals:
* If you smoke, try to quit. That’s a savings of approximately $10.00 a pack in some areas.
* Instead of buying breakfast on the way to work or that delicious cup of coffee at a well-known coffee shop, bring your own coffee in a thermos. Why not bake some cookies to bring along as well.
* Check out consignment and thrift shops to purchase clothes.
* Always make a shopping list before you go to the supermarket. This will prevent you from buying items you do not need or can afford. Also, never grocery shop when you are hungry!
* A well-maintained car will keep costs down.
* Check out well-known pharmacies to determine if you can purchase prescriptions at low costs.
* Most banks charge ridiculous fees, including ATM fees. Think about switching to another bank.
* Avoid buying snacks from vending machines.
* You may want to cancel your gym membership and workout at home.
* Cancel magazine subscriptions and newspaper deliveries, if applicable.
* Sell any unused or new items on eBay.
* Have a garage sale.
* Watch out for email scams that either ask for money or claim you won a handsome sum.
* When writing a check, make sure you have sufficient funds. The cost of bounced checks is on the rise.
* You may decide to increase the deductibles on your home and auto insurance policies. This can yield savings in the long run.
Energy Conservation: You can save quite a bit of money if you heed the following suggestions:
* Turn off the lights when you leave a room. Keep the shades up and the blinds open so that natural light and the sun will brighten the rooms and keep them warm.
* If you use air conditioning, turn it up to 75 degrees. For those using thermostats, turn it down to 68 degrees. Wear sweaters and utilize more blankets during the evening hours.
* Unplug all appliances when not in use.
* Use appliances with the Energy Star label.
* Replace existing light bulbs with energy efficient ones.
* Winterize your home.
* Use the microwave whenever possible.
* Only use dishwasher for full loads.
* Use washing machine for full loads and wash clothes in cold water.
* When preparing your list of errands, try to make one trip to accomplish all. This will save on gas.
Looking Forward:
If you have a 401K plan with your employer, keep contributing to it. While you may have lost money, once the market rallies the stocks, bonds, and mutual funds in your portfolio will increase. Remember, buy low; sell high!
Consider asking your boss for additional overtime. Or, if that is not feasible, you may wish to consider applying for a second job.
Try to put away enough money to last at least 18 months. If the current economic crisis continues, you may need to rely on that money to pay some of your bills.
While there are some experts who say this is a good time to invest in the stock market, it is not a good idea. There is no indication that the market has hit bottom, and you can’t afford to lose any more money than you already have.
Finally, don’t panic. We are all in the same boat and we will have to tread water together in order to make it to the island. Resist the urge to take all your money out of the bank out of fear. Keep in mind that the FDIC insures deposits up to $250,000.
As stated at the outset, we will all have to make sacrifices; some more than others. However, as long as you stay informed as to what is transpiring day to day, you will be able to make intelligent decisions and judgments that may have little impact on your daily life.
Resource Links:
401K – http://www.401k.org/
FDIC Insurance: http://www.fdic.gov/deposit/deposits/index.html
When a Bank Fails: http://www.fdic.gov/consumers/banking/facts/index.html
Stimulus Check Information: http://www.irs.gov/
Information on filing for the 2008 Stimulus Check: http://www.irs.gov/newsroom/article/0,,id=177937,00.html
Suspicious e-Mails and Identity Theft: http://www.irs.gov/newsroom/article/0,,id=155682,00.html
Bounced Check Fees: http://www.bankrate.com/brm/news/chk/chkstudy/20081027-bounced-check-fees-a1.asp
ATM Fees: http://www.bankrate.com/brm/news/chk/chkstudy/20081027-ATM-fees-a1.asp?caret=3
Credit Card Interest Rates: http://www.creditcards.com/
CD Rates Comparison: http://cdrates.bankaholic.com/
Note: Some of the banks listed may have closed.
Verizon Bundle: https://www22.verizon.com/Residential/ServiceLocation/ServiceLocation.htm?
AT&T Bundle: http://www.attsavings.com/bundles.html
Discount Coupons: http://www.currentcodes.com/
Deal Hunting: http://www.dealhunting.com/ – additional promotional discounts
Coupon Winner: http://www.couponwinner.com/
Any Coupons: http://www.anycoupons.com/
