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How to Maximize Your Income and Reduce Your Expenditures

If the past few years have taught us anything, it’s that we need to be taking out less debt and building up more savings. And certainly, it’s where the public seem to be heading – levels of mortgage overpayment and personal savings have rocketed in the past year amongst those who have the luxury of being able to put income aside.

For many of us though, finding money to save is a real struggle. After the bills and living costs are taken out of a monthly salary payment, there’s not always a lot left to play with. So what do you do?

The answer lies in getting tough with yourself, carrying out a review of your current spending patterns and working out a sensible budget. Essentially you need to both maximise income and reduce expenditure – both sides of the coin. There are plenty of ways to do this when you start thinking, so be creative and start thinking outside the box.

Here are a few top tips to get you started:

Ask for a pay rise – it seems like an obvious option, but so many of us never do it. Take a look at the market and see what similar companies are offering for your job role or profession. This will give you an idea of whether you’re currently being paid enough for your skills level and experience.

Ask your manager in a calm and prepared manager and come with facts and examples to back up your request. If the request is turned down, try again in a few months time, with more evidence. Also, ask HR for advice about your job salary banding and progression, so you show that you’re serious.

Get a new job – the obvious option when your pay rise request is denied. You may find that you can earn more elsewhere in the same profession, or flex your skills into a new career entirely. See a professional careers advisor for guidance.

Get a second income – more people than ever are opting for this route, by becoming self-employed on a part time basis. There are numerous industries that rely on an army of part-time staff, often self-employed. Examples are party-planners, sales people, freelance designers, coders, copywriters and researchers, market researchers, bar and restaurant staff and plenty more.

Take in a lodger – if you have a spare room, then the government allows you to take in a lodger without paying tax on rental income (up to £4250 pa.) This can be an effective way to make the use of your home to bring in income. Do your research first though on how to select the right lodger and make the relationship work.

Look for opportunities to earn – examples include signing up for overtime during busy periods at work or selling unwanted items on eBay. You could also sign up with the local council to count votes during election period, or help steward at large events. There are various agencies offering links to such opportunities if you search online.

On the other side of the coin lies spending reduction. This is a bitter pill for some to swallow, but there really is no point in earning more if you’re not going to make good use of it!

Food shopping – when it comes to food shopping, start using grocery coupons/vouchers and sign up for reward schemes. Downgrade your brands when you’re out shopping, so that you save money on you shop each time. Look at bulk buying offers, local grocers, markets and other opportunities to slash monthly grocery bills.

Travel – identify ways to save on travel, firstly by walking when a journey is a mile and under. If you’re doing this regularly you’ll save on petrol and you can cancel your gym subscription! With train tickets, book well in advance to take advantage of special deals and with holidays, look for cheap holiday offers and promotions via online search sites – these check the whole of the market to find the best prices and options for your requirements. Holiday extras such as car hire and airport parking can also usually be arranged via these online travel sites so be sure to compare prices to save yourself some money.

Clothes shopping – instead of shopping expensively on the high street, channel your passion for fashion into eBay. Many of your regular brands will be on there already and you can sell last season’s purchases to make way for the current season of items. Get savvy with bids and set yourself limits – you’ll find some great bargains if you’re clever about it!

Entertainment – when it comes to entertainment, sign up to group buying schemes for special offers and look more broadly in your area for things to do that don’t cost a lot of money. Things like local leisure centres, museums, parks, libraries, city parades and exhibitions are often free or subsidised by the council and you can enjoy time with the family without spending a lot of money on more commercial entertainments.

Hobbies – rather than taking up yet another expensive sport that you’ll buy all the equipment for and then never see through, find low cost hobbies to enjoy and cultivate. Walking or running, painting, music appreciation, gardening, racket sports, debating groups, local social clubs – all of these can be enjoyed without necessarily parting with too much cash. And it will broaden your horizons too – thinking more broadly about what counts, such as spending time with loved ones, rather than throwing money at free time like there’s no tomorrow!

This post brought to you by MoneySupermarket.

Get Age on your Side

Misc

One of the best ways in the early years of your career to provide for your long term future is to have a 401K for your retirement where your employer will match your own contributions up to a certain figure. Your contribution is pre-tax incidentally. Albert Einstein once said that compound interest was the ‘eighth wonder of the world’ and it is compound interest that will help even small amounts to grow into a substantial figure on retirement if savings begin in your 20s.

It is worth illustrating this with real figures. A figure of $4,000 a year saved between the ages of 25 and 35 with no further contributions after that will produce a larger final figure at 65 than someone starting at 35 and contributing $4,000 per annum for 30 years. The latter has invested three times as much as well. The factors that decide this are time and compound interest. The whole total of former is working for him or her for 30 years. A fair amount of the second example is only ‘working’ positively for a limited time. Start early!

An Illustration

It is worth looking at examples to see what size of fund is realistic. 8% is not an unreasonable sum to put away on a salary of $40,000 a year, a salary that grows at 2% per annum for 20 years. If the employer pays 3% in addition and growth is a modest 7%, the fund at the end of 20 years would be around $210,000. If you can put 10% in instead, or if you extend the saving period to 30 years the fund rockets to over $500,000! It’s time and compound interest again because in the example over 20 years you will have only put in just under $80,000 yourself to have a fund two and a half times bigger.

A Couple of Observations

Can there be a bigger argument for saving from an early age than that? Surely not! The question is how to manage your money well enough so that you can start to save in the early years of your career. You may well have a student loan to begin to pay off. Probably two of the most important things to do with realisticloans.com, or not to do depending how you look at it are:

Credit Cards. Avoid building up debts by buying things you cannot afford. The interest charged on outstanding balances is penal. If you have a balance, perhaps as a legacy of subsidizing your student life, take out a personal loan to clear it. It is much cheaper in terms of interest rate and repayable in monthly instalments over a fixed term
Resist the temptation of trying to impress with material things. Impress people by who you are and not a new car or the latest fashions.

Expenditure

There is no doubt that you may well have monthly expenditure you did not face before, especially if you have relocated to start work. Such expenditure is unavoidable but you should spend some time on researching whether you are getting the best deals. That applies to a number of significant things such as utilities, insurance and telephone. There are comparison websites that do a good deal of research for you and at least will provide you with a short list to look at further.

The aim is to create a regular surplus that can be transferred out of your checking account when your monthly pay comes in to work positively for you and your future. You will need to apply self-discipline to your finances but you can see from the example of ‘time and compound interest’ what they benefits are for being in control. It really is not much to sacrifice.

There will be times in the years to come when you have big financial decisions to make. Real estate comes to mind immediately and a long term mortgage can reasonably be regarded as positive debt because it should produce good growth over the term you have committed yourself to. With real estate often comes marriage and a family; and all the expense that involves. Yet that responsibility is yet another reason to start young in saving for the future, and your possible dependents.

Cheap Drugs – How I Saved $25 in 3 Minutes

Finance

: Image by cackhanded via Flickr

Today, I stopped by the grocery store to pick up a couple of prescriptions. I always get the generics, because they are less than half the price of the name-brands, while still being chemically identical. That’s not what I’m talking about, although it did save me about $75 today.

When the pharmacist rang up my medications, the total came up to $35. That just wasn’t right.

Many chain pharmacies have gone to a cheap pricing model for generic drugs. That usually means $4-6 per monthly prescription. Cub Foods doesn’t have that.

So I asked for the price match.

Cub Foods matches prices on generics with whatever large pharmacy is nearby. In this case, they matched Target’s prices, bringing the price from $35 to $10. Instant $25 savings. I just had to wait for them to look up my prescriptions in their match-book.

Pharmacies with cheap generics:

K-Mart offers a 3 month supply for $15.

Target and Wal-Mart both have a 30-day supply for $4.

Publix offers a 14-day prescription for some antibiotics for free. That’s insane! It’s also a heckuva way to get people in the door. “Why don’t you shop for half an hour while I fill your scrip?”

If your pharmacy is anywhere near any of these stores, call and ask if they’ll match the price for generic drugs.

A few tips:

Before you go get your cheap drugs, call ahead and make sure what you need is on the cheap list. Don’t assume.

You won’t be able to use your insurance to buy the cheap generics. The overhead in insurance processing would mean that the pharmacies would be operating at a loss for each prescription. You can’t make that up in volume. Between our copays and deductibles, it’s far cheaper to just pay the generic price without involving the insurance company.

Don’t be afraid of generics. It’s not like Nike. Generics are chemically identical to the name brands. There are two differences: the price and the letter stamped on the side of the pill.

The stores offering cheap drugs are generally bigger stores hoping to use the drugs as a loss leader. Places like Walgreens or CVS make up to 70% of their profits from the pharmacy. They can’t stay open treating that as a loss leader.

How do you save money on prescriptions?

Selling Your Car

Finance

: English: Jalopy car in Joshua Tree National Park in Hidden Valley Campground (Photo credit: Wikipedia)

When it’s time to replace your car, most people focus on the new car, instead of the old, but that is ignoring real money. Your old car–unless it has disintegrated–still has value. Sometimes, it’s just time to ask yourself, “When should I sell my car?”

When you’re looking to sell your car (like with We Will Buy Your Car), you generally have several options:

Tow & crush. If your car has been wrecked, doesn’t run, or is just old and beat up, you may be stuck with calling a junkyard and accepting $50 for them to pick up your car and crush it for scrap.
Trade it in. This is probably the least hassle, but–other than #1–doesn’t pay well. Dealerships are willing to pay something under what they will get at a wholesale auction, which is quite a bit less than the blue book value.
Sell it yourself. Now you’re thinking, “He’s going to buy my car! Oh, bother.” It can be a pain, but it’s also the best way to get a decent price for your wheels.

When you sell your car, there are a few things to keep in mind, much like when you sell something on Craigslist.

Don’t be alone. There are bad people in the world, but they don’t like witnesses. Bad things are much less likely to happen if you have company.
Know your price. Specifically, know three price: your dream price, the price that would make you happy, and the absolute lowest price you are willing to accept. Make sure you figure these numbers out ahead of time. Know what you are comfortable with before it comes time to close the deal.
Check IDs. The buyer is going to want to test-drive your car. That’s fine, but you want to make sure you know who is driving off in your car. “Officer, Sumdood took my car. He was wearing jeans.” That won’t get your car back.
Clean it up. Get the car detailed before you show it to a potential buyer. A sparkling-clean car will almost always bring in a few hundred extra dollars. It’s well worth the expense.

Following this plan should make the sale go as smoothly as possible and bring you the most possible money.

Readers, what have you done to dispose of an old car?

This is a sponsored post written to provide some insight into the world of used car retail.

Today, I am continuing the series, Money Problems: 30 Days to Perfect Finances. The series will consist of 30 things you can do in one setting to perfect your finances. It’s not a system to magically make your debt disappear. Instead, it is a path to understanding where you are, where you want to be, and–most importantly–how to bridge the gap.

I’m not running the series in 30 consecutive days. That’s not my schedule. Also, I think that talking about the same thing for 30 days straight will bore both of us. Instead, it will run roughly once a week. To make sure you don’t miss a post, please take a moment to subscribe, either by email or rss.

On this, Day 7, we’re going to talk about paying off debt.

Until you pay off your debts, you are living with an anchor around your neck, keeping you from doing the things you love. Take a look at the amount you are paying to your debt-holders each month. How could you better use that money, now? A vacation, private school for your kids, a reliable car?

If you’ve got a ton of debt, the real cost is in missed opportunities. For example, with my son’s vision therapy being poorly covered by our insurance plan, we are planning a much smaller vacation this summer–a “staycation”–instead of a trip to the Black Hills. If we didn’t have a debt payment to worry about, we’d have a much larger savings and would have been able to absorb the cost without canceling other plans. The way it is, our poor planning and reliance on debt over the last 10 years have cost us the opportunity to go somewhere new.

The only way to regain the ability to take advantage of future opportunities is to get out of debt, which tends to be an intimidating thought. When we started on our journey out of debt, we were buried 6 figures deep, with a credit card balance that matched our mortgage. It looked like an impossible obstacle, but we’ve been making it happen. The secret is to make a plan and stick with it. Pick some kind of plan, and follow it until you are done. Don’t give up and don’t get discouraged.

What kind of plan should you pick? That’s a personal choice. What motivates you? Do you want to see quick progress or do you like seeing the effects of efficient, long-term planning? These are the most common options:

Debt Snowball

Popularized by Dave Ramsey, this is the plan with the greatest emotional effect. It’s bad math, but that doesn’t matter, if the people using it are motivated to keep at it long enough to get out of debt.

To prepare your debt snowball, take all of your debts–no matter how small–and arrange them in order of balance. Ignore the interest rate. You’re going to pay the minimum payment on each of your debts, except for the smallest balance. That one will get every spare cent you can throw at it. When the smallest debt is paid off, that payment and every spare cent you were throwing at it(your “snowball”) will go to the next smallest debt. As the smallest debts are paid off, your snowball will grow and each subsequent debt will be paid off faster that you will initially think possible. You will build up a momentum that will shrink your debts quickly.

This is the plan I am using.

Debt Avalanche

A debt avalanche is the most efficient repayment plan. It is the plan that will, in the long-term, involve paying the least amount of interest. It’s a good thing. The downside is that it may not come with the “easy wins” that you get with the debt snowball. It is the best math; you’ll get out of debt fastest using this plan, but it’s not the most emotionally motivating.

To set this one up, you’ll take all of your bills–again–and line them up, but this time, you’ll do it strictly by interest rate. You’re going to make every minimum payment, then you’ll focus on paying the bill with the highest interest rate, first, with every available penny.

DOLP

This is the plan promoted by David Bach. It stands for Done On Last Payment. With this plan, you’ll pay the minimum payment on each debt, except for bill that is scheduled to be paid off first. You calculate this by dividing the balance of each debt by the minimum payment. This gives you an estimate of the number of months it will take to pay off each debt.

This system is less efficient than the debt avalanche–by strict math–but is better than the snowball. It give you “quick wins” faster than the snowball, but will cost a bit more than the avalanche. It’s a compromise between the two, blending the emotional satisfaction of the snowball with the better math of the avalanche.

Snowflaking

For each of these plans, you can give them a little steroid injection by snowflaking. Snowflaking is the art of making some extra cash, and throwing it straight at your debt. If you hold a yard sale, use the proceeds to make an extra debt payment. Sell some movies at the pawn shop? Make an extra car payment. Every little payment you make means fewer dollars wasted on interest.

Paying interest means you are paying for everything you buy…again. Do whatever it takes to make debt go away, and you will find yourself able to take advantage of more opportunities and spend more time doing the things you want to do. Life will be less stressful and rainbows will follow you through your day. Unicorns will guard your home and leprechauns will chase away evil-doers. The sun will always shine and stoplights will never show red. Getting out of debt is powerful stuff.

Your task today is to pick a debt plan, and get on it. Whichever plan works best for you is the right one. Organize your bills, pick one to focus on, and go to it.

Assuming you are in debt, how are you paying it off?

Search Results for: feed/573/anchor-price-your-salary

Debt Snowball

Debt Avalanche

DOLP

Snowflaking