All good financial management starts with starts with setting goals.
I have the education and experience to get control of my family’s finances. What I haven’t bothered to do in several years, is sit down and set goals to save/earn money. What areas could I do better? Where am I overpaying? What opportunities am I missing? These are questions I haven’t asked myself in years. Now that I have, you’d be surprise at how much money I can save and earn just by making simple adjustments.
1. Get an Interest Bearing Checking Account – Estimated Earnings – $11/month
Back in the 90’s, when I opened my first checking account, banks would use free checking as a way to get new customers in the door. Seeing a financial bargain, I signed up for this new and exotic enticement of free checking. Then I moved on with my life and never thought about checking accounts again.
Free checking was once a big deal. There used to be annual fees and minimum balance requirements. But, times have changed. Free checking once brought new bank members a decade ago; now the big crowd pleaser is interest bearing checking.
Earlier this month, I highlighted interest bearing checking accounts earning 4.09% APY. That’s about 4 times my savings account interest rate. All I need to earn interest is a balance in my account a days in the month. A look at my current average daily checking balance, indicated that the figure would be in the thousands. Meaning I could earn hundreds just be switching checking accounts. Perhaps more if I optimize my interest earnings, which I don’t.
2. Save the Money I Owe – Estimated Earnings – $15/month
Ever wanted to earn interest, but have no money to save? Businesses have this problem. They get around it, by saving the money they owe. This is no Enron accounting and it is completely legitimate.
If you have any bill due greater than your pay period, for example due more than 30 days You can escrow those expenses in a bank account that earns interest. This way, you earn interest on the money to pay bills.
A couple of bills that come to mind? Property taxes, water bill, home insurance, car insurance and even income taxes.
3. Cut the Grocery Bill – Estimated Savings – $150/month
On average, Americans spend 13% of all of their expenditures on groceries. My family spends at least 16%, if not more. Cutting the bill down a mere 3% will save my family $150/month.
Out of all of my goals, I expect that this one will save me the most money and to be the most challenging. However, it is not an unreasonable goal. There are not many ways to cut down your gasoline purchases outside of driving less, but there are numerous ways to reduce your grocery bill without drastically changing your purchasing habits.
You can utilize coupons, save money on produce with a garden or purchasing from farm stands and manage what your family eats through meal management (Post soon to follow). It will take a lot of time and energy, but I believe saving $1,800 per year is a result within my families reach.
4. Cut the Entertainment Budget – Estimated Savings – $100/month
My family has a great time going out and enjoying the zoo, the museum and local restaurants. My wife and I love it most because we are both employed and engaging in these activities as a family increases the amount of time we have to spend with our children.
Every hour at the museum is a mess that doesn’t need to be cleaned up at home. Ever meal we eat out is time that we aren’t cooking or doing dishes. However, they are also large expenses, particularly the eating out part.
I’m not looking to minimize this area, just cut back by substituting picnics and smarter restaurant choices, more frequent trips to the park and walks.
5. Save on Car and Homeowner’s Insurance Bill – Estimated Savings – $16/month
I’ve never really shopped around for car and homeowner’s insurance. Back when I was a teenager, I simply signed up with the place my parents used for their car insurance. Later, I added a homeowner’s policy.
I know I’m overpaying not just because I haven’t shopped. My home has a higher coverage limit that is required by my bank, but I went with a higher coverage, because I was too lazy to look elsewhere (FYI…my current coverage is about 6 times the value of my home). I also, could cancel my collision coverage on the car that is ten years old. Again, I just haven’t felt like picking up the phone.
I’ve overpaid on my insurance for long enough.
6. Get the Health Insurance Plan Without the Co-Pays – Estimated Savings – $80/month
I’ve paid a high price for predictability.
I talked about my family health care plan yesterday. Co-Pays make you feel like using health care will never cost a lot of money. But, you spend a lot of money for the feeling. I can afford the $120 instead of the $25 co-pay and doing so will save us 50% on our premiums.
7. Pay Bills On Time – Estimated Savings – $12/month
This is one area I dread to scare with the world. I’m not chronically late in any of my bills, especially not the credit card bill (I learned that lesson years ago and I’m never late). However, with about a dozen bills to pay every month, it’s not uncommon for me to miss one. The charges aren’t large and I rarely notice the money going out, but it does add up.
In fact, I estimated that it adds up to over $100 annually. It’s a ridiculous cost. After all, I’m a responsible adult. It’s time I acted like one.
8. Cut the Cable Bill – Estimated Savings – $12/month
No, cutting cable won’t save me much. We have the very cheap, basic cable that costs $12/month and only has channels 2-19. However, since my family switched to Netflix (which is $8), I never watch cable anymore. The only reason I’m still paying the bill is because I’m afraid that one day, I don’t know when, I’ll want to watch something.
It never happens.
9. Get a Credit Card with Rewards – Estimated Savings – $20/month
After reading everything above, you may be concerned that I’m not responsible enough to actually earn money on a credit card. However, the one expense that I handle extremely well is the credit card bill.
When I was a freshman in college, I ran up about $12,000 in credit card debt. I dropped down to part-time for school and worked full time. In one year, everything was paid off and I’d learned a valuable lesson about credit.
I don’t buy things I can’t afford, I monitor my purchasing and most importantly, never pay late. I also don’t earn anything on my card. This is because I’m one of those people who received a college card and never switched.
However, these days you can earn about 1-2% back on purchases and I purchase everything on credit. After having paid extra to learn a credit lesson, it’s time the credit paid me back.
10. Take Advantage of My Employee Benefits – Estimated Earnings – $41/month
I don’t want to go into too much detail with this one since it involves my employer and few get a similar benefit from their employer. Thus, writing about it benefits very few people.
However, what is teachable from this is that few people at my job take full advantage of this benefit. It requires forgoing a good chunk of their income for six months and that’s not a sacrifice that they are willing to make. This isn’t to say that they couldn’t afford to do so, they just refuse to save now for more later.
If you have the resources and not just excuses, you should take every employee benefit that you can from your job.
How much is that?
By my calculation, this is about $457/month savings for a total of about $5,500 per year. The best part is, most of it will be tax free since I’m cutting on expenses, not earning more money. I also have only scratched the surface as far as what can be cut/earned/saved. For example, my wife and I could save about $35/month once we can change our phone plans, I haven’t even thought about addressing the gasoline purchases and this blog could earn us a great deal of money (we’ve already received our first google check for advertising).
But, my list is long enough already. Succeeding in your goals requires being specific and reasonable. I could earn/save more, but that is for next year when I will have a better chance at focusing in on reaching the goal. If you try and grab for too much, you’ll grab nothing.
However, there is one more thing that I can do for my children this year.
11. File their taxes this year for them – $100’s per year
My daughter and son have received government savings bonds as gifts. My daughter has several now. By filing their taxes, I can save them from paying any interest for several years.
The way government savings bonds work is that they are completely tax free except for government taxes. They come with the option of deferring any interest until the bond is cashed. It’s easy to take the deferment, because you don’t need to worry about any taxes until the bond is cashed.
However, the best option for your children is to file their taxes for them (you only have to do this once), because you do not need to defer interest earnings. Instead, you can paid gains in interest annually. Because, children usually don’t work and earn other income, the interest earned each year is not likely to exceed their $3,700 personal deduction.
In filing taxes for them, I can save them taxes on their interest until they find their first job. This is likely to total in the hundred of dollars over time.