Don’t wait until the month before a special occasion to begin to save. Instead, start planning now. “Look at last year’s expenses, divide that number by 10 and pay yourself 10 percent each month,” says Gail Cunningham, spokesperson for the National Foundation for Credit Counseling. For instance, if you know you tend to spend $1000 on Christmas gifts, save $100 a month into a dedicated account. Looking back now at last year's expenses will also help you anticipate periodic bills, like insurance premiums and heating oil, that can catch you off guard.
Take coupon clipping to the next level by pairing coupons with discount gift cards. Websites like plasticjungle.com work with retailers to buy and sell unwanted gift cards. “Then if you look for sale items and get free shipping as well, it's a savvy way to shop and save money,” says Andrea Woroch, consumer savings expert for surfmyads.com.
“Having a certain amount automatically deducted from your paycheck and put into savings is a smart way to save money,” Woroch says. The Internet makes it easier than ever to coordinate your bank, credit cards and budget. Also, most banks have online bill paying centers, so paying your monthly bills is as easy as clicking a few buttons and entering your account information.
It may seem a little old school, but haggling can get you the best prices for everyday essentials. “A lot of people are negotiating these days,” Woroch says. “Companies are competing harder than ever for your dollars, and they’re going to be open to offering bundled packages and possibly lower prices.”
You’re never going to figure out why you’re short on cash at the end of the month unless you write down every single thing you purchase. Cunningham recommends keeping an old check register handy throughout the day. “It’s definitely not fun, but the only way to keep track of where your money is going is to write down your purchases as you make them,” she says. “If you leave it until you get home at the end of the day, you won't remember all the trips to the deli or the drug store."
The first exercise in writing down what you spend should have lasted a month. Now you need to continue the process for a second month. Whether you keep track of everything on websites like mint.com and bundle.com, or write it all down in a ledger, the longer you keep up the tracking, the more you'll learn from it. “Keep tweaking until the process works for you, and then it will become habit,” Cunningham says. “You may not realize it, but you’ve created your monthly budget.”
An annual insurance checkup is a smart move that can keep you from paying more than you need to. “Sit down with your agent and make her talk in real language,” Cunningham says. “Insurance people have a completely different vernacular.” Ask about loyalty discounts and bundling options.
Consider adjusting your W4 to take out less money each month. “Millions of people jump up and click their heels when they’re given a refund in April,” Cunningham says. “They’re terrifically excited when Uncle Sam hands them their money back.” Instead of receiving a lump sump, which most blow through quickly, opt for the extra money every month to make your budgeting more realistic.
Your next paycheck is going to be bigger—and you don’t have to do a thing. This year, the government implemented a social security tax holiday, decreasing the amount taken out of your check by 2 percentage points. “The average person will see an increase of $72 a month,” Cunningham says. “Don’t wake up this time next year and wonder where that money went.”
One surprisingly effective tool is the grocery list. "Making one takes 10 minutes, but statistics show those who shop with a list—and stick to it—save 30 percent more,” says Ellie Kay, author of The Sixty Minute Money Workout (2010, Waterbrook/Random House). While you’re at the store, be sure to check expiration dates on perishable goods; you'll save money on spoilage.
“Interest rates have been at an all time low in 2010, so in 2011 they really have nowhere to go but up,” Kay says. Interest rates generally follow the direction of inflation and emerging markets are putting more strain on food and industrial prices. “As people absorb the shock of increased prices for everyday goods, this will then be followed by another round of price increases,” says Anita Eisthen, a chartered financial analyst. “Having something in the bank is a better safety net than having nothing.”
It’s great to have money set aside in case of disaster, but how much is enough? Kay advises the following: Those who are married and have a dual income need six to eight months of living expenses in an emergency account. If you’re single or married with one income, it’s advisable to have 12 to 15 months stocked away. Those who are self-employed need the largest cushion: about 18 months of living expenses.