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.
Updated February 6, 2012 and originally published October 17, 2005.