Here’s the second article in which I’m visiting MP Dunleavey’s article about techniques for saving when a low income is working against you. Part One is here.
- Create bank errors in your favor. MP suggests adding a little extra expense or a little less income when entering transactions into Microsoft Money or Quicken. I think this is a bad idea; your home register should always be perfectly in tune with the one from the bank. If you keep track of your spending in a “cash account” in the software, which I strongly suggest, then it is safe to overestimate your expenses. For example, I might pay $5.15 for lunch in my company’s cafeteria, but I will usually enter that as $6.00. Since my cash account isn’t checked against a bank statement, I’m free to overstate my expenses.
- Make a fair trade. Rather than paying someone for their service, offer another service in exchange. Perhaps I should offer to design a web site for my apartment complex; free rent would be a Good Thing.
- Switch from paper to plastic. Paying by credit card instead of cash, if the full balance is paid off each month, might be a good way to visualize your expenses through the statement and curb spending. I am not convinced, though. In general, people paying with a card spend more in the same situations as those paying with cash. Perhaps it is a psychological issue; credit cards don’t “feel” like money.
- Divide and conquer. If you have have a yearly payment, like car insurance, spread the expense out over twelve months using a savings account. Rather than taking one $2,400 expense, take $200 out each month and hide away in savings. After twelve months, take out the $2,400 and write the check.
- Buy non-perishables in bulk; bulk prices are much lower. Sometimes. Pay attention to what you’re buying and don’t assume that just because you’re buying in bulk, it’s chepaer. Keep in mind the yearly “membership fee” for those bulk stores, as well.
- Share the savings. If you want to buy in bulk but have no reason to store so much, include your friends on the shopping trip and split the price between the group.
Expect this series to be concluded in the next day or so. There are 19 tips in total, and we have touched on 12. Feel free to leave more suggestions for saving money on a low income.
Subscribe
Something that works really well for me is having hobbies that cost little or no money. I go running, I blog, I read, and I dink around with the family finances. They’re all low-cost activities that I enjoy a lot.
I can only speak for myself, but I think my spending is usually worse with cash than with credit. Once I have cash in my wallet, I seem to burn through it quickly (usually on food and coffee and little things I don’t need). When I use my cards, I don’t bother buying little things, or I think twice about bothering to buy something, and make my monthly bill bigger than it has to be. Plus, I know I will have to see the purchase again on my online banking, and not just forget about it.
Doing these round-ups is basically cooking your own books, even if it is in your own favor. I like keeping honest books and find this to be bad advice.
If you’re doing round-up on tax deductions, double shame on you; you already can choose to round up when filling out the tax form.
Foob
Use neither cash nor credit…debit is the answer! I buy whatever possible, even a soda, with my debit card so I can keep track of what I buy.
Debit cards are not a good idea. The laws governing debit cards are not the same as credit cards and if stolen and money is spent it is almost impossible to get it back. With a credit card you can simply cancel the charges and there is no loss to you.
Catch a Gideon