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| Pastor Vincent Achesa |
Money Saving Tips
How to Save Money while Living Well
These are hard times, economically. Unemployment is rampant,
stock-based retirement funds have lost value, and in some areas a home may be
almost unsellable. How to cope? One way to live well in these challenging
times is to focus on the aspects of a good life that are beyond economics. I
have written many articles about living joyfully through gratitude,
forgiveness, positive thinking, and prayer. Another way to cope is to make the
money you do have go farther.
Here are some tips for saving money and living well on
less...
1. Budget. Few people like the idea of budgeting. It sounds
like a lot of work, and it can be a reminder of the gap between our income and
our need, or at least our desire, to spend. Nonetheless, budgeting is an
important weapon in the battle to live better on less money.
You are likely to be most successful, and happiest with the
process, if you make a game of budgeting. Think of budgeting as a process of
balancing numbers, something like a game of Sudoku, as well as a process of
balancing life priorities.
The more flexibility you bring to the budgeting process, the
greater the likelihood that you will be satisfied with the result. If you begin
by listing your "fixed" expenses and then find that they exceed your
income - even before you add-in anything for "discretionary" spending
- you will consider the budgeting exercise, and yourself, to be a failure.
However, if you begin by throwing out all your preconceived assumptions, you
can build a workable - even comfortable - budget from the ground up.
This kind
of budget that is developed without regard for past spending patterns is called
a "zero-based budget."
What about expenses for which you have already made a
commitment, such as mortgage payment or rent (if you have a lease), car loan
payment, credit card payments? There are actually solutions to all of these,
which I address below, but for now, create two budgets - a transitional budget
which allocates income to the full amount of these pre-committed expenses, and
another zero-based budget which divides your income in a more thoughtful way.
If your transitional budget exceeds your income, you do have a problem, but you
also have a lot of leverage to renegotiate with your creditors.
In your zero-based budget, allocate your income across all
your needs and desires. It is important, no matter how little you have, to
include something for fun activities - even if it is just bus fare to the zoo
on "Free Tuesday." Begin by setting up categories of spending.
Allocate a percentage of your income to each category. For example, allocate
30% to housing. It is less scary to write down 30% than to see a number of
dollars that isn't supported by your current income. After you translate the
percentages to dollars, you can tweak the numbers a little, but remember that
for every dollar you add to one category you have to subtract a dollar from
another category. The objective is achieving balance, regardless of your
comfort with the absolute numbers. The next step is finding ways to live
comfortably within the allocation in each budget category.
2. Reduce interest costs. Interest charges may be eating up
a significant part of your income, but you can minimize the bite. First look at
ways to reduce your debt, or at least keep your debt load from increasing. Then
examine each debt to see if you can reduce the interest cost by refinancing, or
even renegotiating.
Mortgage rates may now be lower than when you took out your
mortgage. Check mortgage rates and compare. After you understand how your
current mortgage rate compares with current rates, approach your current lender
and ask them to lower your rate to match the current market rate. If they do
lower your rate, you may save on fees you would otherwise pay to refinance with
another lender, reduce the hassle, and show greater continuity in your credit
history.
While most interest rates are generally low now, credit card
interest rates can be astronomical. You are throwing away lots of money if you
pay 20% interest to a credit card company when you have better alternatives.
Try to avoid increasing your credit card debt and work at paying off the debt
you have now. Consider other kinds of loans to pay off your credit card debt -
perhaps a home equity line of credit - perhaps refinancing your mortgage for a
larger amount as well as a lower rate.
Another approach to reducing credit card interest costs is
to find a credit card that offers a "0% balance transfer" option. If
you have reasonably good credit, you may find a card that lets you borrow
perhaps $20,000 at 0% interest for up to a year. The one-time "transfer
fee" of about 3% is your only cost. That's a really good deal - a total
cost of 3% to borrow money for a year. The catch? After the 0% teaser interest
rate runs out, the interest skyrockets to over 20%, so plan ahead to refinance
your borrowing in some way, perhaps yet another free balance transfer credit
card.
3. Reduce energy use at home. Keep the thermostat up in
summer, down in winter. Open the windows rather than using the A/C on
moderately hot days. Keep the blinds drawn on hot days to keep out the heat of
the sun. Wear shorts in the house in summer and sweats in winter to keep
comfortable after you have readjusted your thermostat settings. Turn off the TV
and lights when you are not using them. This reduces A/C usage as well.
4. Drive less. Save on gasoline and maintenance as well as
saving your time, your stress and the environment by planning your driving
carefully. Combine trips. Share the ride with neighbors and friends.
5. Consider cooperative shopping. Membership stores like
Costco and Sam's Club offer good deals on bulk items, but you can lose the
savings in driving to a distant store and buying more than you need. Try
pooling your shopping list with friends or neighbors so only one of you spends
the time and gas on a shopping trip and you can divide the case lots. Or have
one person drive to the country to make a group buy direct from a farm.
6. Barter and cooperate. How can you and your friends and
neighbors help each other? Maybe you need an edger for your lawn. Your neighbor
has an edger but needs to borrow a trimmer. It's a good deal for both of you.
Or maybe you are good with a computer but hate lawn work while your friend is
happy to work outdoors but can't stand doing his tax return. Trade tax prep for
yard work.
7. Buy second hand - clothes to cars. Lose your ego. Give up
the idea that you have to keep up with your neighbors. It's okay to drive a
second hand car or shop at a thrift store, even if you have never done it
before - even if it "just isn't done" in your neighborhood. You will
find really nice people shopping at Goodwill, quite likely including that
neighbor or friend you thought might look down on you for shopping there.
8. Comparison shop. When was the last time you compared the
rate you pay for car insurance with the rates offered by other auto insurance
companies? Or maybe you can get a better rate from your current insurance
company just by asking. Also, comparison shop on all major purchases - whenever
you are shopping for a car, a television, new appliances, new carpet, home
repairs, whatever.
9. Ask for a discount or a special deal. You won't know if
you don't ask. Homes may sell for only two thirds of the asking price. I got a
big discount on propane delivery just for asking, and without changing
companies. Make a practice of asking for discounts and specials - you aren't
going to offend anyone.
10. Shop on-line. Often the best prices are available to
on-line shoppers. You are even likely to get a better price by shopping for a
car online. Better yet, you also save on gas, wear and tear, your time and your
stress level when you shop online. Comparison shop. Check the vendor's
reputation and the guarantees they offer. Do they pay postage both ways on
returns? How long do you have to return an item? Is there a "restocking
fee" on returns?
Achesa
is a Pastor at Word Ministry in Nairobi.
achesavincent@yahoo.com
cellphone 0720-387460
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