IDK Wednesday: Saving on Shopping

In addition to Monday’s post about how to save money on shopping by using deals, loyalty cards, etc., here are a few more tips:

1. Only go with cash. Leave your cards at home. You’re basically guaranteed you won’t go over your spending limit.

2. Ask yourself three times, “Do I really need this” before you buy it.

3. Go with a list. Only get what’s on your list.

Questions?

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Coupon Queen

You know those loyalty cards you get offered… everywhere?

PetCo, Ulta, Borders, FroYo places… little punch cards where every time you get something, you get a punch and when you get the final punch, you get something free. Or if you’re a member, you get 10% off.

Or you know those silly paper coupons? Buy one get one free deals? $3 off whatever.

Or the brochure or weekly ads you get that say “10% off 6 bottles of wine!”

Or the emails you get saying 25% off purchases over $50!

It’s so easy to get these things. To sign on or up for them. It doesn’t hurt anyone, right? In fact, knowing when sales are happening can be helpful, right?

That is true. But let’s see if we can take this habit of signing up for membership cards, loyalty cards and email newsletters and use it to our advantage and make sure that marketing isn’t getting the best of us– and our wallets.

Loyalty cards. I went in to get an icy treat earlier this summer and was offered a loyalty card upon purchase. Before answering, I thought to myself: how often to I come to this place to get froyo? The answer was: this is the first time, and I’m not too impressed, so I don’t plan on coming back. So I said no. And I haven’t regretted it. On the other hand, one of the places I work at offers a loyalty card so that when you purchase 5 meal-deals, you get your sixth for free– this is a great value, especially for customers that come in twice a week. I think a wise rule-of-thumb is: How often do I come here? If the answer is weekly, or at least a couple times a month, a no-cost loyalty card won’t hurt. The only inconvenience is making sure you have it on you when you go shopping.

Membership cards. I secretly love these things. Especially the little keychain cards. These have the same rule of thumb as loyalty cards– “how often do I come here?” I have a card for PetCo and it saved me $15 last time I went and stocked up on kitty accessories. Again, having them on you is a priority for their usefulness, but oftentimes your phone number can be used to gain the benefits of your membership card if you left it at home. I suggest saying yes to free membership cards of places you visit often and places you know you want to shop at. For example, I said yes to the membership card at a local jewelry and accessory store not because I go there weekly, or even monthly, but I know that when I do want new pretty shiny things, I’ll be going there– so why not reap some auto-benefits that cost me nothing?

I think free loyalty/membership things are good to have in moderation. You don’t need to say yes to everything– but saying yes to places you’d shop even if there wasn’t a benefits program will only save you money.

Looking out for deals is smart. Seeking out excuses to buy more is not smart. When you go grocery shopping, there are always deals– you just may be oblivious to them. Next time you walk in, pause and look for the weeklies or coupons. Here’s the catch: don’t buy things you don’t actually need just because they’re on sale or there’s a special deal on them. At my local grocery store, there’s a coupon for “Buy a 12-pack of Diet Coke, get 1 NYC Nail Polish for Free!” I don’t drink Diet Coke, and the nail polish is only $.99 anyways. Just get the polish; the coupon is a trick to get you to spend more. Now, if you drink Diet Coke, and it was on your list anyways, why not swing by and get the nail polish? Look for deals and specials on things you were already planning on getting. Another way to benefit from coupons and weekly ads is taking advantage of deals on things that are dream or wish items. Special, exotic chocolate bars on sale for 1/2 price sound like a nice treat to me, even if you weren’t planning on getting chocolate.

Emails. These are the most dangerous offenders of retail marketing there is. Browsing your favorite store–clothing, accessory, whatever– you’ll be prompted to sign up for emails telling you about special deals. Beware. Doing this will make you want to buy the things. Retail will always have sales. They have a calendar stocked full of them. These emails will tempt you will special, limited-time offers, but more often than not, they’ll be having another similar sale, soon. Now, if you’re in the market for new shoes and it’s in your budget, and you get an email from your favorite shoe store saying it’s buy one, get one half off, before you go crazy and come home with four pairs of new shoes, think to yourself– do I need two pairs right now or do I just want them? There’s nothing wrong with taking advantage of a deal that was made specifically for you to buy more merchandise, but being informed makes you more responsible. Just remember–you can always unsubscribe to the store’s email, and when you need to buy something, visit the website and see if there are any deals going on.

If you feel like it’s silly not to take advantage of every deal there is, you might be Honey Boo Boo Child’s mom.

IDK Wednesday: Savings Accounts

At least he found some change.

Got questions about savings accounts? Let hear ’em!

For a Rainy Day

So, you know that saying? “I’m saving it for a rainy day.”

That’s great and all, but are you saving for that surprise car part breaking down? For that unexpected visit to the veterinarian? For getting laid off? For getting sick?

No?

Listen, I know–firsthand–how hard it is to save when you’re making very little and paying very much. I know that oftentimes, there’s so little left to put away that you figure, “Why bother?” And that sometimes, the little you manage to save disappears at the first sign of trouble. And I know right now it seems like, “What do I have to save for? I don’t need money put away for anything. I’m fine. I’ll save later.”

That is dangerous. You NEED to have money put away that you never touch except for emergencies. Let’s delve into learning about savings accounts. Remember ignorance? Get ready to say bye-by to it when it comes to savings.

Here’s the thing– you need an emergency savings account. No if, ands, or buts. One that earns you interest. If you’ve already got some money socked away (awesome!) in your checking account (not awesome!) then you can shop around and get a savings account with a higher interest rate to reward a high minimum deposit. Having money in your checking account that you “use as savings” is silly. Savings accounts have higher interest rates than interest checking accounts and don’t come with checks or a card (usually) which makes spending the money harder. It’s important to separate your money, so that it can do its intended job for you. Transfer the socked-up money to savings and pat yourself on the back. And keep socking away.

If, on the other hand, you have absolutely nothing saved, you still need to open a checking account. Why, you ask? Have you ever seen that chick-flick called Under the Tuscan Sun? It’s okay if you admit it, you’re alone reading a blog. Well, in the movie, a sexy silver fox tells our depressed divorcee heroine an anecdote about Italians building a train track in the Alps to prepare for a train to cross there, even though there was no train built yet that could actually make the journey. They were preparing for the future, with hopeful determination, so to speak.

An improbable place for a train, but nonetheless–they did it. You can do the same with your money.

That’s what we’re doing with opening a savings account without having any money to deposit into it. Preparing for the future. Because having an empty piggy bank calls for change rattling around in it.

On Bankrate.com, the best savings accounts that don’t require a high minimum deposit are Barclay’s and Ally. Find a savings account with a high interest rate (so your money can have moneybabies) and open an account today if you don’t already have one. Put in at least $1. Call it hopeful determination.

Now, here are some good rules to apply to savings accounts:

1. Make money appear there magically. How you ask? Automatic savings. Whenever you get your paycheck deposited, you can arrange for your checking account to automatically deduct whatever amount you decide you need to save a month and apply it to your savings account. So you never actually see that money. You never get a chance to spend it. But it’s there, gently reassuring you with its presence and availability and portfolio-building whilst you sleep. Like a plush blanket.

2. DON’T TOUCH IT. Who took the cookies from the cookie jar? YOU. ONLY YOU. ALWAYS YOU. I know how tempting it is to transfer money from your savings to your checking whenever you’re running low between paydays–it’s yours, after all. You earned it. You need it. Need it for what, may I ask? Oh, a dress? So this isn’t an emergency? You just want something because you saw it? You better check yourself before you wreck yourself. Financially. If you keep taking cookies from the cookie jar, pretty soon, you won’t have any cookies to satisfy your chocolate craving. Or the mechanic’s bill. If you want, you can connect your savings to your checking so that if you overdraft, your savings will automatically cover it, avoiding any fees. But remember– you’ll be robbing yourself if you do it often. Vicious cycle? Yes, indeed. Make a list of things you would use your precious emergency savings for. Here’s my list: accidents of the body, vehicle, house or pet; living expenses if I have absolutely no other income; flights for emergencies, such as funerals or family illness; copays for ER/Urgent Care/Wellness doctors visits; unexpected/unbudgeted bills. Notice that there’s nothing fun on that list.

3. There’s some discrepancy amongst experts about the magic number you need to have in your savings account, so I’m gonna go with a compromise between some of my favorites and say 3 for us youngins. You need at least three months of your cost of living in your emergency savings account. All of your bills, food, miscellaneous costs–you need to be able to pay for three months worth of living  just using your savings. Know why? That three months gives you enormous independence. You could get fired or laid off or quit your job and you could survive without worrying for three months while you get a new job. Secure in your job? You’ll be able to pay for emergencies. You’ll be able to cover unexpected extra costs without having a panic attack. (If you’ve got a little more money to work with, I suggest bumping up to 6 months.) Now, this of course means you need to know what your monthly cost of living is… but that’s a couple posts from now. Now, I’m not gonna lie. It’s gonna take a while to accumulate that much and that is completely okay! All you need to do is start saving; once you do– you’re actively taking steps to be financially stable.

4. Once you’ve reached the initial 3 months of cost of living goal, you can and should keep saving for your emergency savings (you can decrease how much you put in monthly, if that helps or you can bump up to 6 or even…. 9!), but you can also start thinking about short term and long term savings plans. If you want to put money aside to buy something expensive in the near future, that’s called a short term savings goal– it’s much different than your long term and emergency savings. Short term savings goals are to buy a new laptop, to get you out of credit card debt, to buy a new wardrobe, to take a vacation; things you want to do in a year–keeping this relatively small amount of money in your checking account isn’t going to hurt. The important thing is to keep it separate from your emergency savings. Long term saving goals are for a future house, wedding, child, etc–things more than a year away–perhaps save up a certain large amount, say $5,000 or so and then think about depositing it into a certificate of deposit… but that comes with a few obstacles. You might want to make separate accounts for short term savings goals and long term saving goals. I know it’s rough, but you NEED to separate spending and saving in your mind. Saving money to plan to spend it is NOT what saving for emergencies is for. This short or long term savings–and the interest that it makes– you can use to buy stock, a new iPad, pay for a trip to Paris, pay off student loans early, use as a down payment for a house, or pay for a wedding, but you always need to have your emergency savings that can cover your living expense for at least three months hanging out, only getting fatter. And every year you need to reevaluate your savings to make sure it’s keeping up with inflation, your salary and your costs.

Suze Orman calls savings accounts “the cornerstone of financial security.” And for good reason– it gives you a liquid asset that helps fund your other assets and experiences while keeping you safe from the unknown. What’s not to love about savings? Now, how do we get to that awesome point of financial security?

We have to face denial. Usually people say they don’t have enough left over to save. But saving should be the first thing that’s done with your money. Even before paying rent. There’s a premise in the financial world that is so simple that it’s mind-blowing when you put it into action: when you have less, you spend less. When you have more, you spend more. If you never see the money you move to your savings account, it’s like it’s not there to spend. You’ll have to budget wisely, stick to the budget, and make a small sacrifice or two, depending on how much you’re saving.

When we get to the first post about budgeting (which I think will be the one after next Monday’s) we’re going to talk a bit about budgeting. And denial. But I want to leave you with this thought: could you spend $1 a day for a month? Say, for a candy bar or a cheap cup of coffee? A momentary indulgence. Now imagine– instead of spending it, save it. In a year, that’s $365.  It may not sound like a lot, but which would you rather have? Nothing, but lots of coffee or candy (that enters and exits your body in a day)… or $365 to use if you suddenly need it?