With our tough economy leading people to eat out less often, switch from SUVs to gas sippers, and generally spend less, an MSN columnist recently wondered what would happen if we all suddenly got and stayed money-smart? That is, what if we paid our credit cards in full each month (46 percent of households carry a balance), drove cars at least until we paid them off (24 percent of new car buyers still owe on their trade-in), and maintained an emergency fund (28 percent of households live paycheck to paycheck)? In an economy that's heavily dependent on consumer spending, the answer, unfortunately, is a recession--at least for the short-term.
As for the long-term, the article painted a compelling vision of what's possible should enough people make the changes mentioned above: more affordable homes, a lower retirement age, and an improved ability for people to weather the financial storms that blow through most of our lives at one time or another.
Matt's View
Think of any money-saving moves you've made in response to the economy. Are you driving less? Shopping at different types of grocery or clothing stores? Dining in more often? Which changes do you believe will be permanent? And which ones are you hoping will be so very temporary? Please send me a note
and let me know.
High gasoline and food prices have people tightening their belts in one place where frugality is not likely to pay off: their healthcare. MarketWatch reported on a survey by the National Association of Insurance Commissioners, in which about one in five (22 percent) Americans said they have reduced their visits to the doctor in order to save money. About one in ten (11 percent) said they have cut back on the number of prescription drugs they take or are taking a lower dosage than prescribed in order to stretch their supplies.
Matt's View
This survey brought to mind the old auto repair shop commercial, which warned anyone tempted to scrimp on their car maintenance, "You can pay me now or you can pay me later." When it comes to our health, the pay later option is not a good plan. And that's not the easier-said-than-done advice of a guy who's never felt any medical bill pain.
Our family is getting hammered on the healthcare front this year. Our two-year-old has been hospitalized twice, I've had two "procedures" (medical-speak for "prying many thousands of dollars from a patient's wallet while under anesthesia"), and we're about to have another baby. This year, our out of pocket expenses will exceed the maximum amount we're allowed to put into our Health Savings Account - by a long shot. Still, we're keeping up with regular check ups. It's not easy, by any stretch, but it's easier with an emergency fund and a budget. A budget gives us the knowledge we need to adjust our spending in other categories to cover our higher than expected medical expenses.
Regular readers know that I'm a big fan of a budget. If you've never put one together, check out my Budget Quick-Start Guide
.
If you use your debit card to make a purchase but don't have enough money in your account, chances are good that your bank will allow the transaction to go through, helping you avoid the embarrassment of a checkout line rejection. However, as pointed out in a recent CNNMoney.com article, there's a cost to the bank's kindness - an overdraft fee, often as high as $35. Banks generated over $17 billion in overdraft fees in 2006.
Matt's View
The best way to avoid overdraft fees, of course, is to know your bank account balance. A second-best option, if you maintain a savings account at the bank where you have a checking account, is to sign up for a type of overdraft protection whereby funds in your savings account are automatically transferred to your checking account if needed. There will still be a fee, but it will be much less than the other type of overdraft fee. If you sometimes have a low balance in your checking account and you have a savings account at the same bank, see if this type of overdraft protection is available. Usually there's no fee to sign up.
Does it seem as though the packages lining grocery store aisles are getting smaller? They are. It's a strategy some packaged goods manufacturers are using to pass along their higher costs. Instead of raising the price on a normal sized container, they are shrinking the container but charging what they used to charge for the larger container. According to a New York Times story, some of the most common shrinking package categories include canned tuna, paper towels, chewing gum, butter-type spreads, candy bars, coffee, and ice cream.
Matt's View
Now more than ever, a price book is an essential tool for smart grocery shoppers. A price book is simply a small notebook (or an electronic organizer) where you list the types of products you buy most frequently, the best prices you've found on a per-ounce or per-count basis, the brands that tend to offer the best deals, and the stores. Evaluating prices on a per-ounce or per-count basis makes it easier to figure out which product is a good value no matter what the size of the package.
