Practicing Daily Financial Responsibility and Ways to Save Money

1. Don't nickel and dime yourself.

   Day-to-day costs add up, so it's a good idea to keep track of these small recurring expenses. Morning coffee out, cigarettes, lunches out, haircuts - either too frequent or the do-it-yourself kind that only bring you into the barber or salon for a fix - and the like don't seem like great expenses or put you in need of debt help or a debt management program, but they add up. One of the first things a credit counseling service tell you is to take a minute to look at your spending and see how much you're being nickeled and dimed.

2. Don't pay for what you don't use.

   There are items you pay for but don't use, such as phone add-ons like three-way calling. Our credit counseling service suggests that cutting these items out of your budget is one of the fastest ways to save money. You spend "only" $4 a month for such an add-on, but that's $48 a year or $576 over ten years - and that's real money. What about that gym membership that keeps getting automatically renewed (either charged to a credit card or debited from your checking account)? Or those karate or piano lessons you paid up front for your kids? If the child loses interest and stops going to classes, you've still paid for it.

3. Budget and save.

   Saving your money yields great rewards. The way you can save money is by budgeting. Part of your budgeting plan should include getting debt help and setting aside money to pay down credit card debt. Think about it this way: if you have $2,000 in credit card debt, with an interest rate of 18%, and you pay only the minimum amount every month, it will take you about thirty years to pay it off. Not only that, but when you finally reach your last payment, you will have paid almost $7,000, more than three times the original debt! That money could have gone into savings. Here's another way to think about it: for every $20 you charge on an account with an 18% interest rate, you increase your total debt by over $200 a year!

   Good budgeting involves spending less than you earn. Ideally, the remainder goes into an interest-bearing savings account. This way, you've got money set aside for variables, such as an unusually high utility bill. Or, if you earn variable income, you are prepared for a lean month. In addition, if you have multiple credit card accounts, you can take the additional money and put it toward the card with a higher interest rate, this is what we recommend to consumers enrolled in our debt management program.

   Take some time to fill out the budget guides available on this website from Family Credit Management Service to see how much you're earning and how much you're spending. The differences might surprise you, but you'll get an overview of how to distinguish your wants from your needs!

4. Conserve.

   Plan your automobile trips to save on gas, drive the speed limit, and keep your tires properly inflated. At home, change your light bulbs to fluorescent or the longer lasting energy saving bulbs. Though the latter is a slightly higher cost up front, the long-term savings - both on new bulbs and electricity - are real. Keep the heat low and the air conditioner set on “high,” and pay attention to the energy guide when shopping for new appliances. These are just several ways to save money and be a little friendlier to our environment.

5. Be a responsible consumer.

   There are a number of "don'ts" here. Don't buy junk! Don't buy the latest electronic equipment the moment they come on the market! Don't keep up with your neighbors! Don't rent furniture for your home! Don't spend when you're unhappy! Don't spend for the sake of spending!

   One man's junk is another man's treasure. Here's how you can tell if you're buying junk: you don't use the item you purchase more than once. I frequently have clients come in to my credit counseling service with a stack of credit card bills. Needless to say, the balances are large. As we go through each bill, I ask the client to talk about the purchases, such as what they were thinking when they bought the item, how many times they've used the item, and so on. More often than not, the client can't remember the last time they used the item in question or why they thought at the time that it was an important purchase. That item, then, I would call "junk."

   The retailers have it all planned out so that you'll purchase junk. They know how to get us to buy things we don't need: clothes never worn; CDs played once and then set aside; knick-knacks and "collectibles" like figurines, plates, dolls; books, t-shirts; holiday decorations. The list is long, but you get the idea! Buying these “extras” is what often puts people in need of a debt management program.

   An increasingly strong influence over our purchasing decisions is technology. Every day, it seems, a more sophisticated, faster, smaller or bigger, and sleeker, electronic gadget arrives in the stores. Keeping up with technological advancements is nearly impossible - and in most cases, it's unreasonable. From televisions and DVD players, to computers, stereos and portable music players, you don't have to buy the moment the item arrives at the stores. You didn't have it before, so you can wait until the price comes down. Or, if you've already got a similar item that works, keep it!

   It's not just the retailers, it's also our desire to keep up with the neighbors that keep us buying. I have a family member with a beautiful, three-year old house. They decided to replace the kitchen cabinets and floor because one of their neighbors now has white cabinet facing. If this kind of thinking persists, they will never be happy. Someone will always have more than they do, and they'll go broke and need debt help just trying to keep up.

   Some people think that they can furnish their home cheaply by renting. Don't do it! Renting furniture or appliances is actually a very costly way to acquire poor quality pieces - and you don't even get to keep them in the end. Instead of renting, seek out durable, modestly priced furniture. If money is tight, get only what you need: bed, nightstand, dining table, chairs, and sofa. Your dining table can double as a desk in a pinch, and as you carefully pick out quality pieces, you can build on your home furnishing base.

   The last two elements of being a responsible consumer involve your emotions. Remember that we're working toward becoming rational consumers. This means becoming aware of the emotional impulses that drive certain purchases. There are people who shop to feel better, just as there are people who eat or drink when depressed. As anyone who has an addiction knows, the 'high' doesn't last long, and before you know it, you're back at the store with another item in your hands. Begin to monitor your mood for all your purchases, and start noting what, and how often, you buy when you're feeling down. Also note the times you go shopping for no apparent reason. Shopping isn't just 'something to do.' There should be a purpose for it (and parting company with your hard-earned money isn't one!) If you find yourself compelled to shop without a reason, you might be addicted to it. One of the easiest ways to save money is not to spend it. At Family Credit Management Service we recommend you make a rule for yourself: If you want to purchase something not on your list, wait five days. If you remember and still want it, then buy it. If an addiction to shopping has put you in debt, you may want to seek the advice of a credit counselor and investigate the option of a debt management program.

   Americans often joke that we're addicted to our cars. If car purchases are any indication, that joke may be closer to the truth than we think. Some people purchase a new car every year or two. Others lease cars, and get a new one every time a new model comes out. This brings us to the sixth tip.

6. Consider whether buying or leasing a car is your best option.

   The moment a new car is driven off the lot, the value decreases considerably. At the same time, however, your car loan reflects the total cost of the car prior to its leaving the lot. One main objective, then, when purchasing a car, is to get out of your loan as fast as possible and avoid another one in the future. It's doable. For example, once your car is paid off, take that same amount and put it into an interest bearing savings account that is exclusively for your next automobile purchase. This way, if you keep your car for several years, you can pay cash for your next car up front.

   Are you "upside down" on your loan? If so, that means you owe more than you've paid off, and you'd lose money if you tried to sell the vehicle. I can’t tell you how many people come to us for debt help because they are in this exact situation. Don't let this happen to you!

   In addition, research all your options. Not only do you want to get the best quality car for the money, you also want to consider how long you'll keep the car. If the car's got to last, then you'd better like it! You'll be less likely to feel the urge to get a new car if the car you've got is one you really enjoy. Consider if buying used as opposed to new is more or less costly. There are some terrific warrantees on used cars, but how much do you know about the car's history or the seller's integrity? Do your homework! Check the CARFAX Report (www.carfax.com) and have a mechanic look your potential new car over. How much you drive and how fuel-efficient your car needs to be should also factor into what type of car you'll get, as will the costs of insurance and registration, not to mention taxes at the time of purchase. You'll typically incur higher insurance and registration fees when the car is more expensive or when you live in a zip code the insurance companies considers a risk for auto theft.

7. Be responsible about making home improvements.

   Whatever you put into your home, be it renovations, repairs, or additions, should increase the value of the property. You want to make sure you'll get your money back. Depending on your home's condition, some projects will return more than your investment. On the other hand, some improvements could make your house harder to sell, or they don't provide a good return on your investment. In other words, you could price your house out of the market. Before undertaking a major improvement, review the neighborhood to make sure you're not overpricing it. Always get at least three bids, try to get referrals for contractors, and be sure to check those contractors out. The Business Bureau is a good resource for checking the business backgrounds of such professionals. Doing a little bit of research before beginning a project can save you a lot of money and headaches and avoid excessive credit card use and a debt management program.

8. Understand the nature of your activities.

   Don't mistake entertainment for a moneymaking opportunity. If you gamble, don't expect to make any money. Gambling is entertainment, not a part time job. The only one who makes money off this activity is the casino or state. Casinos wouldn't be in business if they lost more than they won. Moreover, it is an understatement to say that the odds of winning the lottery are heavily against you. Most of us know this, but somehow, with every purchase, think there's a realistic chance of winning. I know an older woman, living on Social Security and with little savings, who goes to casinos regularly. The fact is, she can't afford it, and is ignoring the opportunity costs involved in gambling. Instead, she perceives her activity as a part time job - but it's one that doesn't pay. If she keeps it up, she will need debt help. Don't be like this woman!

9. Stay on top of your life.

   It seems like a little thing, but it affects your life: open your mail and read it daily. If you let it pile up, you'll likely miss the bill that needs to be paid before the month is out. Balance your checkbook weekly. Keeping tabs on your checking and credit card accounts lets you know how much money you have, how much money you owe, and how much interest and fees accrue. Reading your mail is important also because companies can make mistakes, and these mistakes could translate to costs you would otherwise overlook.

   In addition, use your gift certificates. This, too, seems like a little thing, but in many states, if you don't use a gift certificate, the issuing business may start deducting from the balance.

10. Protect yourself.

    Identity theft is one of the fastest growing crimes today, made easier to pull off as more and more of our private information is shared increasingly with marketers and companies interested in soliciting your business. You've got to be vigilant in protecting yourself from such theft. You get lots of junk mail; solicitations from credit card companies are among the worst offenders. When it comes in the mail, shred it. Someone could come along and open an account in your name just by changing the address on the offer. Monitor your accounts and mail (remember, stay on top of your life!), and be aware of phishing, a ploy used by identity thieves. If you receive an email that purports to be from your bank or credit card asking you to update your information by following the link listed in the message, don't! Instead, forward the email to your Internet service provider (ISP) and make your bank or credit card company aware of the email.

    This list is by no means exhaustive, but it should give you a start on becoming more deliberative about your purchases and looking for ways to save money in your daily life.. This deliberation will reflect your views on what you want vs. what you need and help you avoid the need of a credit counseling service or debt management program.