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If asked for ways to save money on purchases, several ideas would come to mind: clip coupons, buy on sale, use promotional codes, etc... you know, the usual stuff. Nothing glamorous, but they work.
However, if I were asked for the absolute best, the number one approach to saving money when buying stuff, I would say: planning/timing. And before you quit reading because you're disappointed it's not some magical, secret silver bullet, let me explain.
If you're not in a hurry for something, you can wait till it goes on sale, correct? If there's no rush, than waiting to use a coupon makes sense, right? The problem is, often times we don't plan this out. We buy when we "need" something and so we're forced to pay full-price because we have an impending "deadline." We've all been there. Poor planning leads us to wait till the last minute, and the last minute rarely leads to savings. (Plus, at the last minute, there is often a poor selection). Here's a personal example.
My wife and I recently did a surprise room makeover for our two girls who will be sharing a bedroom to free up a room for our baby due in August. We'd been stockpiling decor options for several weeks, but with the makeover just a week away, we were without good curtain options.
The only thing we could find were curtains from Pottery Barn Kids (which don't come cheap I might add). Because of the time it takes to ship them (another added cost), we didn't have time to try to find a means of discount (promotional codes, gift cards, coupons, wait for a sale, etc).
Had we done a better job of planning out this makeover, we could have found some cheaper ones we like from somewhere else, or perhaps tracked down some kind of discount. But because of the timing, we paid full price + shipping. (That was painful to type.)
Timing is one of the primary principles behind extreme couponers. Yes, they add coupons on top of sales, but they don't wait until the need an item to buy it — they buy it when it's the most beneficial financially and then they stockpile the items for when they need them.
Think about it. Plane tickets usually get more expensive when you wait until you need them. The same with hotels (sure, there are last-minute deals, but the selection and quality may not be up to your standards). If you're buying a car because yours is on the brink of death and you need something stat, you won't have the time to research for the best car for your situation.
And when is it most expensive to buy clothes? When they're in season. You could have saved a bundle on a winter jacket in February if you were planning for next winter, but those savings are likely gone now.
This is why timing is everything. It affords you the opportunity to make a purchase without deadline pressures, gives you more selection to choose from, allows you to research discounted options, and — let's face it — makes the process more enjoyable overall. (And, chances are, if you're doing a good job of timing your purchases correctly, you're probably also doing a good job budgeting for said purchase because you're a good planner.)
Take my word for it: you never want to pay full price for curtains from Pottery Barn Kids. Plan better and carefully consider the timing of your purchases. I bet you'll save money almost every time.
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Building a savings reserve is one of the best things you can do for your long-term financial health. And the beginning of a new year is a great time to get started — or to start saving more than you have been.
The easiest way to save steadily is to have some of your income set aside automatically before you have the opportunity to spend it!
Here are two paths to automated savings, plus ideas about how much to save, as discussed in chapter 5 of The Sound Mind Investing Handbook (5th ed.):
Sign up to have part of your paycheck (you decide how much) automatically deposited into a savings account at a credit union or local bank. It's easy, convenient, and offers useful discipline. Plus, your savings are insured and available for withdrawal without penalty whenever you wish.
For a slightly higher rate of return, set up an automatic monthly transfer from your checking account to a money-market account at an online bank.
How much should you save? If you're still in your 20s, set a target of saving 5%–10% of your income. Initially, this will go toward building your contingency fund. Once that's in place, your savings can be used for a down payment on a house and other large purchases.
In your 30s and 40s, move up to a savings rate of 10%–15% of your income. Usually at this age, the primary use of savings will be to invest for retirement.
Many people think they could never save 10% of their income! But what would happen if a cutback at work resulted in fewer hours and a 10% reduction in your income? Wouldn't you make the necessary adjustments in your spending so you could still cover the basics?
Juicing your savings in 2011 has been made easier by the tax-compromise bill signed into law a few weeks ago. All else being equal, a temporary cut in the Social Security tax will mean a 2% increase in your pay. To be sure, 2% isn't a lot, but it'll aid you in reaching the 10% goal.
And by running a few calculations, you may be able to hike your take-home pay even more, giving your savings even more of a boost.
So if you need to save more, there's no better time than right now.
I'm torn. I can't decide if my love for our dog outweighs my distaste for feeling duped into buying yet another kind of insurance: pet insurance. Yes, it's real with actual revenue numbers to back it up. Opinions vary regarding its merits: this piece acknowledges the value, while this piece does not. Then there's this information about calculating the worth of your pet.
If you ask me, it's impossible to put a price on a face like Gertie's. But I think I'm in the "factor it into your budget" camp. In other words, instead of paying premiums to a pet insurance company, open a pet savings account and "pay yourself" instead. If we put money aside now, not only will it be there if we need it but we'll get the benefit of compounding interest.
But that's only half the story, the money-saving, budget-conscience half.
Isn't there a stewardship issue here? Don't think so? Maybe this piece will change your mind. It willl certainly incense the hard core pets-aren't-people-they're-possessions crowd. Even a big-time pet lover like myself was taken back. Listen to this:
APPMA reports that 42% of dogs now sleep in the same bed as their owners. I'm not judging anyone... yet.
Half of all dog owners say they consider their pet's comfort when buying a car. I barely consider my kids' comfort.
With annual growth nearing 50%, the pooper scooper industry is now experiencing a lot of consolidation...There's a "pooper scooper industry"?
I'm not going to say that some of these crazy things people do for their pets are morally or even financially wrong because I don't know their heart or their giving. But it's hard not to have questions when you learn that Fido could be put on a cocktail of Slentrol and Reconcile; one for the unwanted pounds he put on while being depressed and the other for the depression from all the canine separation anxiety. My question in particular: Why medicate when he could just have liposuction and go everywhere with you in your canine-cozy Caddy? ;-)
Is it just me or is there a financial stewardship issue banging around in here somewhere? I think so, or at least there certainly can be without proper balance. You see, I want my giving to reflect how much I love the God and love other people. So it's more about my love for Him and less about my lack of love for Gertie.
Besides, when pet cloning comes down in price, Gertie will know how much we love her for the rest of her lives.
(This piece originally appeared in a July 2007 blog post (membership required) of The Sound Mind Investing Weblog.)
The New York Times' Bucks blog offers good follow-up info on a topic we discussed in the June issue of SMI (subscribers' link): using multiple savings accounts as an aid to reach specific savings goals.
From Bucks' writer Jennifer Saranow Schultz:
A growing number of banks are offering features intended to help you allocate various savings accounts to specific goals.
As of [July 1], FNBO Direct customers no longer have to fill out complete applications to open new savings accounts. Instead, FNBO Direct fills out most of the applications for them. The new feature is aimed at making it easier for customers to open multiple savings accounts, each of which customers can name for a specific savings goal and all of which customers can track online with the same user name and password....
Since last year, Ally Bank has also had a similar offering, including the ability for customers to quickly set up multiple savings accounts, "nickname" them and see them all in one place online.
A spokeswoman for ING Direct, which has long offered such features, said 10 percent of the bank's customers had multiple savings accounts, with the top five nicknames (or savings goals) being "savings," "vacation," "emergency fund/rainy day," "house" and "taxes."...
Many credit unions also offer similar features as do other banks, including Capital One and Bank of America.
As we noted in our June article:
Having a series of dedicated savings accounts creates a structure that will help you follow through on your savings goals, especially when combined with automatic transfers from your checking account.
Goals can be a powerful driver of behavior, and being able to see — at a glance — how much is in each of your accumulation accounts (as well as in your emergency fund) lets you know exactly where you stand in relation to your various savings goals. As you see your balances rise, you'll be encouraged to keep moving forward.
For Ally customers, step-by-step instructions for setting up multiple accounts are here. Details for ING customers are here.
Below, Bob Lotich of ChristianPF.com explains how he uses ING's multiple-savings-accounts feature, which he calls a "virtual envelope budgeting system."
"Christmas Club accounts are now largely a thing of the past (undercut by the rise of easy credit)..." — so I wrote in the current issue of the Sound Mind Investing newsletter in an article on multiple savings accounts (subscribers' link).
That's true — Christmas Clubs have faded into the past for the most part.
But a reversal may be in the offing. Sears/Kmart promoted a Christmas Club program last year. Now, the New York Times reports another major retailer is rolling out such a club for this year:
Toys "R" Us is counting on an Eisenhower-era tactic to get consumers to spend this Christmas. The toy retailer will begin offering a "Christmas Savers Club" [this week] that allows shoppers to put money away with the company for holiday gifts.
Participants will receive a card similar to a gift card, and can contribute funds to it through cash or credit card payments. As an incentive Toys "R" Us will add 3 percent interest on the balance.
The program is a throwback to what banks and credit unions offered in the 1950s and 1960s before credit cards allowed people to spend money they did not have.
Our Level 2 article focused on Christmas Clubs run by banks, but many retailers had them too back in the day — to build customer loyalty, of course. That's exactly what Toys "R" Us is going for.
Shoppers can sign up for the program in Toys "R" Us stores, either at the cash register or the customer service stand. The company will add the interest on the balance as of Oct. 16, and the funds will be available Oct. 31 for purchases at Toys "R" Us and Babies "R" Us stores and Web sites.
Earning 3% is nothing to sneeze at these days, but unless you are absolutely, positively planning to buy something from Toys "R" Us — and you know exactly how much you're going to spend — it's probably better to set aside your Christmas savings in an earmarked bank account.
Earlier this week, I talked about the benefits of having multiple earmarked accounts with host Bob Crittenden on Faith Radio's Faith Meeting House program. Listen below (13 min.) — or download an mp3 (right click/save as).
The fundamentals of good financial management aren't difficult, but they do require 1) planning and 2) discipline to stick with your plan.
In a short interview Monday on Alabama's Faith Radio, SMI assistant editor Joseph Slife (right) talked with host Bob Crittenden about the importance of having a savings plan. In a follow-up to air soon, he'll discuss a simple way to make sure your savings plan works.
Use the audio player below to listen — only 7 minutes!
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