20 Ways to Save on a Shoestring, Part 5

Here's post #5 on an article I found at Money Central titled "20 Ways to Save on a Shoestring":

There are a thousand ways to live on less. But you don’t want to make your life a misery. Here are some of the most painless ways you can economize without losing out on quality of life:

Get your mortgage costs down. First, look at whether the rate is too high. If it is, look at refinancing -- if you’ll save money. Next, let’s look at the private mortgage insurance (PMI) you’ve been paying because you didn’t have enough money to make a 20% downpayment. You’re protecting the lender, not you. If the equity in your home is greater than 22%, demand that your lender cancel it. It’s the law. Lastly, pay ahead on your mortgage. If you can swing an extra $100 per month, you will save thousands in interest costs over the long haul.

Toss the catalogs. The most insidious form of spending temptation known to man or woman. Chuck them straight in the trash. Yes, including Victoria’s Secret. Sorry, guys.

Don’t pay unnecessary fees. Like the $1.50 you pay just because the ATM is right there, right now as opposed to walking two blocks to your bank, where you don’t get charged every time you use your cash card. Or the late fees for returning videos. I know a woman who paid $60 in late fees to a video store last year. (It wasn’t me.) (OK, it was.) Or those fat charges banks hit you with when you write a check that, well, bounces.

Clean it yourself. I’ve discovered a nifty trick: When a clothing label says, "Dry Clean Only," I wash it. Or I dab out that little coffee stain with an old-fashioned cleaning device known as a sponge.

Never pay a pro. If you can fix the neighbor’s car, and she can paint the bathroom: do it.

Here's my take on these:

• Mortgage. We don't have one. We made a conscious decision to get out of debt several years ago. We did it by paying ahead on our mortgage -- like the tip suggests. It's saved us tens of thousands of dollars.
• Catalogs. We hardly look at them.
• Fees. We avoid fees like the plague. And even when someone tries to sneak one in on us, my wife's a master at getting them removed. ;-)
• Clean it yourself. I've posted on this. Good tip. And here's another clothes-related saving tip.
• Pro. I have traded services a few times, but most of our purchases are with people who know what they are doing. I believe in value -- getting the most for what you pay -- not just saving money (getting it done cheaply). If you do your homework, you can find professionals that do a great job but don't charge an arm and a leg. That's the best value to me.

Click here to read part 6 of this series.

Comments

[Joe Ganley]

I have to disagree with paying down your mortgage. Most people are paying 6% or less; after the tax break on the interest, that's effectively 4.5% or less. Even if you want your money to be totally safe (I would), you can make the same return in CDs, and the money is far more liquid -- if you get in a financial bind, you don't have to sell your house to get it back. Furthermore, typical mortgages are loaded so that at the beginning you pay mostly interest and at the end mostly principal, so as your mortgage ages, you put more and more of the interest behind you, and there's a rapidly diminishing return in paying extra principal.

[FMF]

Joe --

This makes sense on PAPER but my experience with people is that there's an (almost) insurmountable gap between "what's best technically" and "what's best practically".

In my early days, I used to advocate what you're saying above only to see people keep paying the regular payments on their mortgage and the extra money would somehow disappear -- spent in some "miscellaneous" hole. Then I switched to an easier to understand (and implement) strategy of telling people to add a bit extra to their mortgage payments and it was like a light came on -- they started to see results. Hence, I go with what people will do and what will get them results.

In addition, there is a "value" (even if it's only emotional -- but I would say it's more) to being totally free from debt. You owe no one anything and then you can build up a tremendous net worth in a short period of time. This is how I've done it, and it's worked out pretty well for me.

FMF

[Joe Ganley]

I see your point - for some people, I suppose it's a FEATURE that you can't (easily) get back the extra money you put down on your mortgage.

[FMF]

Joe --

Yes, you're correct.

Some of the worst advice I ever gave anyone was to my parents. They were thinking of buying a cash-value life insurance policy as a combination of insurance protection and an investment.

I explained how expensive this was and that they should "buy term and invest the difference". They understood what I was saying, so they rejected the cash-value insurance idea. However, they never followed up and "invested the difference".

In the two decades since, they have accumulated little savings, and have instead spent their funds on great long-term investments like cigarettes, entertainment equipment, and vacations. I can't help but think how better off they would be today if I had just told them to go the way that was not technically the best option, but was the best way practically. Financially, they'd be much better off.

The same sort of situation applies here -- though with a mortgage rather than insurance.

FMF