MORE IDEAS ON SAVING MONEY
10 ways not to get
nickeled and dimed
PART II

By MARY ANNE COLE

Unlike the U.S. budget the late Sen. Everett Dirksen was said to be talking about here, our own budgets can benefit from watching the pennies and letting the billions take care of themselves.

Here we take up where we left off in the last issue of SAN ANTONIO WOMAN, with the second five of 10 ways you can save a little that can add up to a lot

. Our first five ways were:
• Get overdraft protection on your checking account.
• Avoid late fees by setting up automatic payments.
• Avoid ATM fees.
• Don’t pay annual fees on credit cards.
• Don’t pay transfer fees on credit cards.
With these five alone, we added up about $500 in annual savings.

The next five continue our list of specific, measurable ways to make good on that New Year’s resolution to get financially healthy.

6. STAY AWAY FROM CHECKING ACCOUNTS THAT REQUIRE HIGH MINIMUM
BALANCES OR MONTHLY SERVICE CHARGES.
High minimum balances are just a way that the bank can use your money for free. A $500 minimum balance, for example, would earn you a little more than $15 in a year in even the most conservative interest- earning account. Countless banks will give you a checking account with no minimum balance or a really low one, like $25. And monthly fees on checking accounts? Fuhgeddaboudit. Averaging around $10, this is money you might as well throw in the trash, as it’s easy to find a bank that will give you a checking account with no monthly fees and no minimum balance.

SAMPLE SAVINGS PER YEAR: $120

7. DON’T PAY YOUR FEDERAL INCOME TAXES WITH A CREDIT CARD.
It sounds great: Pay the $2,000 (or whatever) you owe the IRS with a credit card and get all those “free” points while putting off the pain for
another month. But putting your taxes (or tuition) on your credit card is the same as doing a balance transfer because you’re charged 3 percent for the privilege. You weren’t looking forward to paying those taxes anyway, and now you’ve tacked 3 percent more onto the price tag. That’s a $60 convenience fee on a $2,000 tax payment. Bite the bullet, write the check, and save the $60.

SAMPLE SAVINGS PER YEAR: $60

8. DON’T LEAVE YOUR SAVINGS IN A LOW-INTEREST SAVINGS ACCOUNT.
Everyone should have an emergency fund — usually estimated at three to six months’ income — in an account they can access easily and whose value doesn’t fluctuate too much. Some banks these days are paying less than 1 percent on savings accounts, but there’s no reason to accept less than 3 percent. If you’re keen on an insured account, you’ll need a regular savings account, which can pay 3 percent or more. Many people keep their savings in money market accounts, which earn higher interest than many savings accounts while not fluctuating very much in value.

SAMPLE SAVINGS PER YEAR ON $12,000 IN A 3-PERCENT ACCOUNT VS. A
1-PERCENT ACCOUNT: $240

9. DON’T MAIL CHECKS TO PAY BILLS.
If you paid attention to tip #2, you know that setting up all the automatic payments you can manage will help you avoid late fees. But if you’re one of those people who likes to keep close control over what goes out and when, electronic bill-paying services can save you time and money in writing checks. Many banks will let you make 15-20 electronic payments per month without a fee, and many creditors, particularly credit cards, will allow you to make online transfers from your checking or savings account to pay their bills. Not only will you save money on the rising cost of the checks themselves — which is now as much as $20 per box of 200, or 10 cents each — but you’ll save that 41-cent stamp.

SAMPLE ANNUAL SAVINGS ON 10 BILLS PAID BY CHECK PER MONTH: $61.20

10.VOW TO GET OUT OF DEBT BY LOWERING INTEREST RATES AND MAXIMIZING PAYMENTS TO HIGHER-INTEREST LOANS.
This one could be an article by itself, but we’ll summarize here, because it’s an important way to reduce stress and make real financial progress.

If you have several outstanding loans — credit card balances you don’t pay in full each month, a car payment, a student loan, furniture loans and so on — you probably either pay the minimum each month or pay a little more here and a little less there without any particular reason for doing so. But there’s a way to get control of your debt payments that will allow you feel in control and to pay them off more quickly.

First, find out the interest rate you’re paying on each one. Then call the creditor with the highest interest rate and ask if the rate can be lowered. What do you have to lose? All they can say is no, and they’ll often say yes, especially if you hint that you may otherwise have to transfer the balance.

If they do say no, you can look for a no-fee balance-transfer option to a lower rate, but avoid those “teaser” rates if they’ll go up after a few months to a rate higher than you were paying in the first place. You can also try calling a credit card where you’ve had an account for
some time and ask if they’ll accept a balance transfer without a transfer fee. Again, what do you have to lose?

Once you think you’ve lowered your interest rates as far as possible, decide the maximum total amount you can afford to pay each month for all your debts put together. Then list all your debts, with the one with the highest interest rate first as “Debt A,” the one with the second-highest interest rate as “Debt B,” etc., along with the minimum payments for each debt. Assuming the maximum you can pay is higher than the total of the minimum payments, put ALL the excess into Debt A, the highest-interest debt, while continuing to pay the minimum on the other loans. Don’t fall into the trap of paying only the minimum when you could afford to pay more.

When Debt A is paid off, DON’T breathe a sigh of relief and decide that what you were paying on Debt A is now extra spending money! Take the amount you were paying on Debt A and add it to what you’re paying on Debt B, leaving the other debts at minimum payments. When Debt B is paid off, move the entire amount you were paying on Debt B and add it to what you’re paying on Debt C until all your loans are paid off. This is the most efficient way to reduce the amount of interest you’re paying on your debts and eventually to become debt-free.

SAMPLE ANNUAL SAVINGS ON LOWERING A $2,000 LOAN’S INTEREST RATE BY 2 PERCENT AND REALIGNING DEBT REPAYMENT: $100+

So there you have our top 10 easy ways to save money in 2008. Added to the sample savings of $500 from the first five tips, the $580 saved with the second five tips makes your total annual savings more than $1,000, a great way to make 2008 a healthy year financially!