The economic times we’re in are some of the toughest in memory for most people, so it’s more important than ever to pinch pennies and save wherever we can. But where do you begin, especially if you don’t feel like you have any extra pennies to pinch?
Be budget-wise
The best way to start, whether you’re cutting corners or developing a savings plan, is to establish a household budget. This should include all major expenses, including rent or mortgage, car payments, credit card payments, groceries, insurance payments, phone expenses, utilities, cable, Internet and eating out.
People have to track spending to know what they have for income and expenses, and to make sure they’re not spending more than they make, says Karen Dickrell, professor and Family Living Educator with the University of Wisconsin-Cooperative Extension in Outagamie County.
“That sounds pretty basic, but many times people don’t know they should have a budget,” says Dickrell, adding that the exercise may show you’re spending a considerable amount of cash without even realizing it. “Then they should look at ways to cut some of their expenses and make a spending plan so they can pay their bills when they’re due, instead of what some people do and that’s working with their creditors to merely reduce or defer their payments.”
Examine expenses
Reducing or deferring payments is better than nothing if there are no other alternatives, but it’s much better to cut expenses to leave more money for paying bills.
When cutting expenses, go over the budget carefully and be honest with yourself. Can you do away with some of those non-essentials, such as health club or golf club memberships, manicures and massages, hairstyling or kids’ athletics? You might save if you change the way you and your family recreate. It may be tough at first, but the rewards will be worth it.
Deal with credit cards
Next come credit cards. Our society has become reliant upon credit, and in some cases it can’t be avoided. But when you see how much you’re paying each month in finance charges, and think about what you could be doing with that money, it can encourage you to get credit card debt paid off as quickly as possible.
Start with cards with a very low balance or a higher interest rate and pay them off first. You may want to cut back to one credit card with a decent credit limit so you can charge what you need in an emergency, and maybe even get something back in return, notes Jean Burlager, a regional manager for Citizens Bank.
“There are many credit cards that are available now industry-wide that have, for example, rewards or bonus programs attached to them where you can actually get cash back, or you might be able to save on hotels, travel, or make charitable donations, or anything like that,” she says. “Those types of cards are wonderful … because they give you an added benefit.”