10 Smarter Ways to Save without Breaking a Sweat
Can you save money during a pandemic? Can you save money when you’re not sure if you’re going to be furloughed or even have a job? Can you save money during a recession? Not only is the answer “yes” to all these questions, but it’s actually more important to save money when times are bad. And interestingly enough, it doesn’t have to be a chore.
Who we are
First, let me introduce who I am and where I’m from. My name is XX. I’m the XX at Consolidated Credit, one of the nation’s largest and oldest credit counseling agencies. Over the past 27 years, Consolidated Credit has helped more than 6 million Americans get out of debt. Our certified credit counselors take a 100-question test every two years, so they can stay current on the best methods for getting out of debt and onto the path of financial freedom. So everything we discuss today isn’t theoretical. It’s real and it works.
Before we start talking about saving, let’s talk first about overspending. See that number on your screen? That’s what 14.3 trillion dollars looks like. It’s the total amount of money every American owes for everything, from mortgages to credit cards to student loans to auto loans to personal loans and more. It’s a huge number, but interestingly, it’s actually been shrinking during the pandemic.
The total debt all of us owe fell by 34 billion dollars earlier this year. That sounds like a lot of money, but compared to 143 trillion, it represents only a drop of only .02 percent. Still it was the largest decrease since early in 2013. What caused that drop? Experts say two things. First, we’re all nervous about the future right now, so we’ve reduced our frivolous spending just in case the worst happens. Second, lenders are equally nervous, so they’ve tightened their standards. For example, it’s not as easy to get a new credit card these days.
The worst is yet to come…
Some economists predict things will become worse before they get better.
Save money without even knowing you’re saving money!
I know how hard it is to save money even in the best of times. So saving now seems like it’ll be difficult. And there are many techniques that require some sacrifice. But first let’s start with some small ways that really add up, and they don’t hurt at all.
Automatically pay your bills
Let’s start with an easy one. Almost every bank and credit card – and even many municipal utilities – offer automatic bill pay. You set the day when you want a bill to be paid, and that amount is automatically deducted from your bank account right then, and not a day sooner. What’s the advantage, besides the worry of paying bills? You’ll never pay a late fee again. That’s a big deal when you consider 1 in 4 Americans regularly owes late fees because they forget one of the many bills they’re juggling. That’s money they’re giving away instead of saving.
Direct deposit? Try INDIRECT deposit
You can also automate your savings just like you automate your bill-paying. More than 9 in 10 Americans are paid through direct deposit, and almost all of them have access to a neat feature: You can direct some of that money AWAY from your checking account. You can send it to a savings account you don’t normally see.
This works very well when you get a raise, because you can divert that extra money into a savings account, and you won’t be tempted to spend it because you constantly see it in your checking account. Of course, these days, more Americans are getting furloughed or laid off than getting raises, but this tactic still works, even if you set aside just a few dollars per paycheck. Soon you’ll have built up an emergency fund that will give you peace of mind as these uncertain times continue.
To set up multiple direct deposit streams, simply talk to your Human Resources or payroll department. They can walk you through this easy process.
Online tools can help you save money painlessly
During this pandemic, we’ve all spent way too much time staring at computer screens. But in this case, using a computer isn’t a waste of time but a great way to save. We’re going to start at the beginning, with a topic no one enjoys talking about: budgeting.
How to budget without getting bored
You can’t really save money if you don’t know where it’s going. But let’s be brutally honest: budgeting isn’t fun. So how can you draw up a household budget AND keep it without cramping your lifestyle?
While you can certainly go old-school and create a budget by putting pen to paper, it’s so much easier if you use secure online tools that require just a few keystrokes. There are websites, apps, and programs that handle the drudgery of budgeting for you. Many are free, and the ones that charge are only a few bucks. Here’s how they work.
A cutting edge way to cut expenses
One of the most popular is called Mint, although many banks and credit unions offer similar programs on their websites for their customers. Basically, you just type in your income and expenses, and these programs do the math for you. You can even project your savings if you eat one less takeout dinner, or if you refinance your mortgage. The software does the heavy lifting for you.
If that’s a little too techy for you, there’s a middle step. Websites like Tiller let you download customized spreadsheets that stay on your computer, and you easily personalize. Each program has its pros and cons, but they all work. So it’s really up to what makes you feel the most comfortable.
High-tech ways to save for everything
Thankfully, computer technology can be used for more than just budgeting. You can save when you buy things. Before we share those tips, just a word of warning: Use these shopping tools to buy only what you need, not to splurge. It makes no sense saving a few bucks on every purchase just to turn around and buy something frivolous.
Don’t just shop online. Compare…
Everyone knows you can score great deals online rather than in the store. But NOT everyone knows about these comparison-shopping tech tools. These websites and apps — and many others just like them — let you make a list of your desired items, then tell you when the best deal is being offered. Most of the ones you see here are pegged to Amazon, but BayWatch monitors deals on eBay, while the Mac Index does the same for the sale of Apple products.
You can find these price-monitoring programs everywhere, and you don’t need to be tech savvy to take advantage of them. Try one or more and see if you save big.
How to save without changing your current lifestyle
Now let’s talk about saving while changing the WAY you do things, not what you actually do. For us here at Consolidated Credit, that means credit cards. Why? Because more than 75 percent of all Americans adults own at least one credit card, and the average American owns three. So if you can easily save on your credit cards, then you can make a real dent in your debt. And that means savings. Here’s how…
All told, those of us with credit cards are carrying balances of over one trillion dollars. And we’re paying for that privilege. While credit card interest rates fluctuate wildly depending on the card and your circumstances, right now it’s hovering around 20 percent. That mens you pay $1 in interest for every $5 you charge. If you could cut or even eliminate those interest payments, you’d have a lot more money in your pocket, and you wouldn’t have to change a thing about how you live.
Balance transfer cards
So let’s start with one of the easy ways to do that. It’s a certain kind of credit card. It’s called a balance transfer card. These cards offer you a low interest rate, and in many cases, no interest rate at all. With one of these cards, more of your money goes to paying down your balances instead of lining the pockets of your credit card issuer. With credit card interest rates hovering around 20 percent right now, that’s a big savings for doing nothing different during your day. Sound too good to be true? There are some drawbacks you need to watch out for.
Specifically, there are three things to watch out for. First, most balance transfer cards charge a fee to move your balances from your other, higher-interest cards. This can total up to 5 percent of every dollar you transfer. While some charge less and a few don’t charge anything, you need to keep your eyes peeled for this annoying fee.
Second, all balance transfer cards have an expiration date, usually at the end of 18 months but sometimes for only six months. If you use that time to pay off your balance, you come out way ahead. If you don’t, the interest rate jumps — sometimes to a higher rate than you had on your original cards!
Finally, if your credit score is under 670, you’ll generally struggle to get approved. That might be even more true these days, as lenders tighten up.
Debt consolidation loan
Next up on the scale of difficulty is a debt consolidation loan. This is simply a personal loan you secure and then use to pay off all your credit card bills with steep interest rates. The concept is the same as a balance transfer card: You’re paying off the high interest rates with a lower one. In this case, you might be able to get a personal loan of between 36 and 60 months from your bank or credit union at 6 percent, then use the money to pay off your credit cards that are charging you 20 percent. Then you simply make one monthly payment on the personal loan. Usually, you get out of debt faster AND make a smaller monthly payment, which is the definition of a win-win. You save money by literally doing nothing different, except who you write a smaller check to.
If you get a debt consolidation loan, you’re looking at 3-5 years to pay it all off. In the meantime, you need to be careful not to run up more debt. That timeline is pretty close to a debt management program, which we’ll talk about in a few minutes, but in that case, you work with a credit counseling agency that can help keep you on the straight and narrow. With a debt consolidation loan, you’re on your own — if you can even get a loan. If you have too much debt, it’s a classic Catch 22. You need the loan to pay off debts, but you have so much debt, no bank or credit union will give you the loan.
OK, I admit my bias here. I work at one of the nation’s largest and oldest credit counseling agencies, so I naturally think they’re awesome. The best of these nonprofit agencies will offer you a free debt analysis from a certified credit counselor. With one phone call, a counselor will review every dollar you spend and every dollar you earn. They’ll point you to plain-English educational resources that can help you save big bucks. Even better, they can give you a menu of debt-busting options.
But before we do that let’s review the only drawback I know of for nonprofit credit counseling agencies. And that is: Like everything in the world, from doctors to diners, there are good ones and not-so-good ones. How do you find the best? There are three easy ways to figure that out in just a few minutes of Internet searching.
First, go to the website for the Better Business Bureau and search the name of the credit counseling agency. If it doesn’t have an A-plus rating, forget about it. Second, read the agency’s “about” page and see how long it’s been around. The longer the better, because that means they know their stuff backward and forward. Third, check out review sites that have excellent customer reviews for the agency, like Trustpilot.com and consumeraffairs.com.
Debt management program
One of the most powerful debt-busting solutions is only available through a credit counseling agency. It’s called a Debt Management Program, or a DMP for short. It might be able to cut your monthly payments by up to 30 or even 50 percent. A DMP also freezes late fees. Even better, you only make one payment a month for all the credit cards that are in the program. Unfortunately, credit card companies won’t let you sign up for a DMP yourself.
To qualify for a DMP, you have to work through a credit counseling agency, because the credit card companies trust those nonprofits to follow all the rules they establish. After all, the credit card companies are willing to forgo some of what you owe them to get back the rest. They don’t surrender profits that easily. Luckily, when you work with a reputable credit counseling agency, they take care of the paperwork for you. So in a way, this con becomes a pro.
Two easy moves…
Negotiate everything from cable to credit cards to phones
Let’s end with two niche tactics that require some of your time, but just once. First, did you know you can negotiate lower bills? It’s true. For example if you’ve had a credit card for many years and you’ve been a good customer, you can often call the number on the back of the card and get some tasty concessions just for the asking. For example, you might be able to shave down your interest rate if you mention another card has offered you less. And you can also move your due date, so it corresponds better with your paychecks, so you never get caught short and need to float that balance a little longer.
401(k)s, HSAs, and other workplace savings
Finally, let’s end with the last place you might look for easy savings: you work. Earlier, we mentioned direct deposit, but that’s simply diverting your own money to where you won’t easily see it. Now we’re talking about your workplace giving you valuable services that can save you big.
One of the most popular is a 401(k), which helps you save for retirement. What’s so special about a 401(k)? Many employers match a portion of your contribution to this retirement account. According to government research, the average is 4.3 percent. That means for every dollar you sock away for later, you get 43 cents. Doesn’t sound like much, but when you consider a savings account is paying less than 1 percent in interest, that’s suddenly a lot. Also, the IRS gives you some money, too: By not taxing what you contribute.
Another big workplace benefit is called a Health Savings Account, or HSA. It does the same thing by letting you set aside money for healthcare and having it be invisible to the IRS.
We could spend an entire webinar talking about these lucrative benefits, but we suggest you chat up you HR department. Believe it or not, they WANT you to take their money. Why? Because companies that offer these benefits know their employees will appreciate them. They’re more likely to stick around and work hard. So let your bosses help you save!
Same thing goes for your cable bill. You can often get extra premium channels if your provider is running a special you didn’t know about. You can even negotiate for a lower bill, often saving $5 or more per month. The same tactic works for those complex mobile phone contracts. These little savings really add up, especially when you don’t have to do anything.
So that’s how you can save without breaking a sweat. If you have any questions, Consolidated Credit is here every day to answer them. And of course, we can share some powerful, advanced savings tactics that DO require a proactive attitude. The bottom line is: There are many ways to improve your bottom line! Thank you for your time today, we hope it proved profitable.