Top 15 Recession Resources at Your Fingertips
Welcome to the comprehensive and continually growing recession resource courtesy of DiscussEconomics. You are going to find practical tips on how to reduce your spending, save money, and ways to come out of our recession in a better position than you went in. At the bottom we’ve highlighted total average savings to give you an ideas of how much money you can save by applying the following simple steps.
Visit our resources and discover how you can take control of your finances!
1. Save hundreds on your INSURANCE PREMIUMS. Did you know that if you’ve started to drive your car less because of the higher gas prices (which aren’t so high at the time of this writing) you could be in-line for a rebate in your premiums. Moving from a regular to casual driver can save you cash.
There’s more, what about home insurance premiums? Chances are your deductible sits around $500 bucks. When something breaks and it’s less than that number you won’t bother calling the insurance company to claim. However, when items are marginally higher, say 600-1000 you tend to avoid the insurance company. Usually you only approach the insurance for the loss of something huge, valuables, hot-water tank, or other big ticket items.
While you’re at it, try shopping around for another insurance policy. Competition may have lowered your premiums with another firm for the same coverage.
Why not increase your deductible to $1000 or even $1500. The savings could be more than $50/month and on average $20. Average expected savings: $200-400/year
2. Turn off your lights and computers! Unnecessary power consumption can fatten your electricity bill. Most people can save at least 10% per month by simply turning off lights when leaving rooms and not leaving appliances/electronics on when unused.
If you’re really committed to power consumption then shut off things like modems when not in use, turn off computers completely when unused, and so forth. 75 percent of the electricity used to power home electronics is consumed while the products are off, according to the U.S. Department of Energy!
You can track how much you’ll save by replacing your bulbs or turning off your lights by visiting this link.
3. GO GREEN! Energy saving appliances and lights. Remember that 60 watt bulb that produces 95% heat and 5% light? Well change that bulb to an energy efficient 7W model and save money.
You can also consider energy efficient electronics. The price tag on some items are quite high, however, the saving touted outweigh original cost. Take for example the spin dryer that retails for under 600USD (less than a new dryer) and touts a savings of $300/year on average. Albeit, your loads will be smaller, if this little spinner can last for ten years that’s $3000 in electricity savings and a reduction of your carbon footprint!
Save money and be eco-friendly! Check out Energy Efficient for interesting items available to the US. In Canada, you are eligible for certain rebates for hitting a certain level of energy efficiency in the home. Check out the government‘s web site for province specific offerings.
4. EAT WELL, EAT IN Eating in rather that going out for meals will save you 50-75% per meal. For a family of four that’s a savings of 50-75 dollars per meal. Let’s say you eat out like this even once a month, you are bound to save 600-900/year.
Let’s assume fast food eating rather than dining. That would run about $40 for a foursome to a savings of 15-25 dollars per meal. If you eat once a month you can save 180-300/ year; eat out twice a month at fast foot joints you are slated to save 360-600/year.
Remember I am calculating opportunity cost, which means this is your savings between eating in and eating out, you still have to buy food to eat at home so you don’t save the entire cost of not eating out.
Total average savings? 1 per month: dining out 50/month or 600/year; fastfood 15/month or 360/year.
5. DINE OUT COUPONS. If you must dine out then save money using 2 for 1 coupons. Your city has tons of them in this book: Entertainment.com. Your savings are almost 50% per outing. Go out once a week for a party of two? That’s usually 30-60/outing x 4 = 120-240 month.
Cut that by about 40% by using coupons and you save $48-$96/month or $576-$1150/year.
6. Staying on the topic of food you can save 15-25% on your FOOD BILL per trip if you follow some basic rules. For instance, if you are less picky with what meats and brands to buy, you can buy what’s on sale rather than preference. Buying what’s on sale or no-name brands will save you 20% easily. By the way, the coupon will give you additional savings so don’t hesitate to get out the clippers.
Make sure you go shopping with a list so you don’t pick up unnecessary items as your eyes get big. Not shopping on an empty stomach may save you some cash too. So for a family of four your bill may be around $600/month.
Total average savings for no-name and sale items? About 25% or $150/month or $1,800/year.
7. Adjust your CREDIT CARD and spending habits. Credit card use took an unexpected downturn, it has been declining since about November 2008. What’s happening? People are no longer putting larger purchases on their credit cards. Why is this a good thing?
The vast majority of Americans have no idea how to properly use credit cards. They assume it’s free money, what they don’t know is the detrimental effects of maintaining a balance. Here is a basic rule for handling credit cards: do not put anything on a credit card you don’t already have the money for.
If you need money to buy things go to the bank and get a loan that’s half the interest rate. People won’t do this because A) the bank will ask questions why you really need to splurge on furniture or electronics, and b) people are usually too embarrassed to face scrutiny.
Tips for Handling Credit Cards
- Dos and Don’ts of Using Credit Wisely
- View your account activity online and monitor your credit card balance and pay your bill online.
- Start out with just one credit card, why do you need more other than to get yourself into money trouble. Have one credit card you use regularly, perhaps one for business, and one as a backup you use. Most people only need and can only handle one credit card, any more is being greedy and can lead to financial destruction.Another link to help: How Many Credit Cards is Too Many
- Every SINGLE application to for a new credit card, even if you cancel right away, has a negative impact on your credit rating. Yes you can build credit with credit cards, but that’s only if you use them correctly. Most people harm their ratings by continually adding cards. Browse the Opt-out of Credit Card Offers
- Living on the edge? You should have a nest egg of cash, take the pain of not eating out for a couple of months to accumulate some funds. Many financial advisers suggest 6 months of expenses in savings. If you do take on a balance then pay if off in full as soon as possible. Save yourself more heartache by not putting anything else on that credit card.
- Here are some more tips on paying off your credit card debt. Five Principles of Making Credit Card Payments. The interest rates in credit cards are meant to be crippling for those who have bad spending habits. Usually around 20% is the average interest rate, therefore making minimum payments is not a service to you, but a way for companies to make money off of your slow payment.
- When paying off an existing balance try to pay the highest interest rate first. You may also be able to pick up momentum by paying off the small balances if there is a sizable gap. However, if you have the problem of small and large balances then you made the mistake of getting too many credit cards.
- Go for a balance transfer to a lower interest rate. Many times a credit card will offer an interim low interest rate for X amount of months. You transfer for over, and instead of 20% a month, you’ll pay perhaps 4% for six months. You’ll get 6 months of 16% less interest out of the deal. There is, however, a negative to this process. If you don’t already have a credit card offering this promo (that doesn’t have a balance) then you’ll have to apply for another card which will adversely affect your credit rating. Furthermore, if you’ve transferred there may be a ‘catch’ on new purchases using that card, so it may be best to cut it up.
Expected Savings: Depends on how much you can control your bad spending habits.
8. CONSOLIDATE DEBT. Rather than point you to one of the countless web sites out there that try to sucker you into a debt consolidation deal here is some practical advice. The point of debt consolidation is to combine all debts under one roof and hopefully reducing your interest rate for some. You’ll pay the same interest rate, for everything, rather than 10 different interest rates for 10 different debts.
This is a good thing since you can now put more money towards the principal (initial borrowed amount) per month. However, the extra cash you save isn’t supposed to be your new disposable income windfall. Debt consolidation is a two step process.
Step 1. Consolidate your debt.
Step 2. Use the money you save each month and invest it properly.
You’ve taken the interest money you would have been paying, and are now making interest on it. Initially you don’t make much interest, but as time goes on you end up making some good cash. Depending on the size of your debt you can expect to pay off all your debts months to potentially years earlier.
Expected Savings: Depends on your debt size.
9. DOWNGRADE UNUSED TECHNOLOGY and FEATURES. Chances are you don’t need super high-speed internet, or in the very least you won’t notice a change if you downgrade. How about your TV? Do you really need all those channels? The phone features really necessary? Cell phone features you don’t use? Cut back on things you don’t even consume consumers!
Many hi-speed internet providers have varying high-speed speeds. I know it doesn’t make sense, but unless your downloading video all the time, checking the email and surfing can be done on basic hi-speed. Save the ten bucks a month.
Cable packages/satellite can run from 25-75/month. Downgrade and eliminate channels you don’t watch, save at least 20/month.
Move your phone to VoIP. Skype will give you free outgoing calls all over North America for $35 bucks. The only catch is you need to have hi-speed internet and a microphone (still cheaper than any long distance plan). You can also take out the unnecessary calling features like call waiting.
Cell phones also have tons of features you may not need. Perhaps you don’t even need both a landline and a cell phone. Think about taking out a feature package and save $10 / month.
Total electronic savings: $10-15 internet + $10-20 TV + $3-8 phone + $5-10 cell phone = $28-$53/month or $336-$636/ year.
10. Adjust your DRIVING HABITS. Did you know that having properly inflated tires can save 5% on your gasoline consumption? That by not flooring the gas peddle at starts you can save 10% off your fuel consumption? That’s 15% savings per tank of gas, not too shabby if you’re driving a gas guzzler. For more tips on how NOT to save money on gas read our other post on the topic.
Total savings per tank: 5-15% or $5-$15/month on spending of $100 of gas ($60-$180/year).
11. CONTRIBUTE RRSP‘s. Not only is this the right time to buy if you’re not within 5 years of retiring, but you can also reduce the amount of taxes you pay by contributing to your deduction limit. Here are some basic introductory tips from the government of Canada’s web site on RRSPs.
(Remember you are taxed on the RRSP and gains when you withdraw from your accounts. There is a provision in Canada to withdraw early without penalty if you’re buying a house.)
So if you have the room to invest then do so, if you have even more income and want to further reduce the amount of taxable income then consider contributing to your spouse’s RRSP account. Remember this is for long term investments, you shouldn’t be thinking about withdrawing this money in the near future especially if you’re young.
If you’re closer to retiring then safer options that don’t have the same short-term risk are an option. Within 2-3 years of retirement look at GIC’s (guaranteed investments). As you get closer, reduce risk. If you’re young and want to do RRSP’s (long term) then DO NOT invest in GIC’s. That’s just a chance for your bank to earn crazy money off your investments in interest while you get 3%.
For guaranteed and tax free accounts there’s always the latest instrument for Canadians — the TFSA.
12. Use your TFSA room. Canadians have a new investment tool called the TFSA or tax free savings account. It doesn’t actually have to be a savings account with a bank, but all gains are still tax free regardless of where and what up to a maximum of $5000/year. That means how much you put in is rolled over for a fresh $5K cap room each year. That doesn’t mean you can invest $10K in year two if you didn’t put anything in year 1.
It also means tax free withdrawals. If you want to buy a house and you have 8 years of maximum TFSA contributions (so 40K), then you can withdraw the entire amount and in year 9 you will still have room for 40K plus 5K to re-contribute into the tax free account. Depending on where you’re at in life and what financial responsibilities you’ll have in the near future will dictate whether you go the route of the TFSA or RRSP.
13. STOP ADDICTIONS. Easier said than done sure, but how about one that you can manage? Rather than purchasing coffee from your favorite store, brew at home and carry a travel mug. Sound pathetic? Think about the savings. Coffee ranges from 1-5/cup. You drink at least one a day fives times a week (we’re being modest). To brew at home costs filters and coffee beans. The expected savings is .5-4.5/day.
While you’re at it, cancel memberships and unused rentals. You don’t go to the gym so why bother paying for it?
Expected savings: .5-4.5/day x 20 days (month) = $10-$90/month or $120-1008/year.
14. Save $2,056 in one weekend with common household upgrades and adjustments like selling unused items, energy efficient appliances and bulbs, and my person favorite: drinking tap water instead of bottled (assuming you have safe water).
Heat may be another thing, whether it’s gas, electric, or fire, suitable insulation will ensure you aren’t bleeding off heat in the winter. Find the nooks and crannies that let cold air in and fill them. For large houses, consider shutting off vents in room you’re never in (like the basement).
15. IT’S TIME TO SAVE AND INVEST. Although you have a better future if you’re further away from retirement, the old adage still holds true, by low and sell high. Right now, prices have never been lower. You can buy equities (stocks) of profitable firms for bottom basement prices. Don’t put all your eggs in one basket though, you still need money to be accessible in the short term. You also don’t get the option of professional management if you’re doing this yourself.
Might we recommend equity mutual funds? This would be a great time to buy and you have a month left (in Canada) to contribute to your RRSPs (end of February to reduce taxable income of 2008). You can have a number of different instruments in your RRSP, but equities should be in your portfolio especially if you’re under 40. Many have lost of 50% of their current equity (house and stocks). However, if you have the income to buy more, then you could come out of this recession smelling like roses.
Recession Savings Recap
So how much can you save in our growing recession resource collection? Here’s a summary:
1. Save hundreds on your INSURANCE PREMIUMS: Average expected savings: $200-400/year
2. Turn off your lights and computers!
3. GO GREEN! Energy saving appliances and lights. Savings depends on your appliances.
4. EAT WELL, EAT IN: Total average savings? 1 per month: dining out $50/month or $600/year; fastfood $15/month or $360/year.
5. DINE OUT COUPONS: Cut that by about 40% by using coupons and you save $48-$96/month or $576-$1150/year.
6. You can save 15-25% on your FOOD BILL per trip: Total average savings for no-name and sale items? About 25% or $150/month or $1,800/year.
7. Adjust your CREDIT CARD and spending habits: Expected Savings: Depends on how much you can control your bad spending habits.
8. CONSOLIDATE DEBT: Expected Savings: Depends on your debt size.
9. DOWNGRADE UNUSED TECHNOLOGY and FEATURES: Total savings: $10-15 internet + $10-20 TV + $3-$8 phone + $5-$10 cell phone = TOTAL $28-$53/month or $336-$636/ year.
10. Adjust your DRIVING HABITS: Total savings per tank: 5-15% or $5-$15/month on spending of $100 of gas ($60-$180/year).
11. CONTRIBUTE RRSP‘s: future wealth:
12. Use your TFSA room: Future Tax savings.
13. STOP ADDICTIONS: Expected savings: .5-4.5/day x 20 days (month) = $10-$90/month or $120-$1008/year.
14. Save $2,056 in one weekend with common household upgrades and adjustments
TOTAL SAVINGS ABOUT: MONTH=$451-$625.83 or YEAR=$5,578-$7,510
We didn’t even calculate some of the biggest savings such as managing your debts properly. Since every person has different needs it’s hard to determine an example. However, that will be one of your biggest money savers as you dwindle down your debt load.
Enjoy our list and share it with your friends! Post your ideas below in the comment section as well and happy savings!