Money Tips of the Day

Use family creativity to enhance family finances. Get the whole family together to list ways you can increase your savings. Make it fun by giving points or prizes for every idea listed. Sometimes the most useful plans come from ideas that seemed silly at first. Gradually test the ideas, and stick with those that work well. Working together to reach financial goals is fun and makes the reward even sweeter!

Encourage your child to begin long-term saving. Many large, no-load mutual fund companies allow kids to contribute to their own Education IRA. The money contributed doesn't have to be earned income; it can be gift money. This may be a good way for your child to begin saving for education after high school.

Save money on your insurance costs. Pay your premium annually or allow automatic deduction from your checking account to save finance charges. Usually the less bookkeeping a company has to do, the lower your premium will be.

Prepaid phone cards are a convenient, inexpensive way to make long-distance calls. However, rates, reliability and service vary depending on the card you choose. When you buy a prepaid phone card, ask:

• What is the cost per minute for phone calls?
• Is there a minimum charge per use even if the phone call is brief?
• Is there an easily accessible 800-phone number in case you have questions?
• When does the card expire?

Keeping your financial papers organized can help you save money. Every day as you receive bills 1) open them, 2) check their accuracy, 3) throw out fillers, and 4) file bills in a To Be Paid file. Then, set aside time once or twice a month to pay all bills in the file.

If you plan to use a moving company for your next move, be sure to get several cost estimates. Consumer Reports found that people could save significantly by choosing a low bid. Also, use the estimate "walk through" to ask movers for money saving tips. For example it may be cheaper to mail your books at book rate, or to have a piano specialist prepare your piano for the move, than to have the moving company handle it.

Once a year take time to make a net worth statement. List all your financial assets and debts. Examine the statement carefully. Compared with last year, have your assets grown and your debts decreased? Are your assets distributed appropriately between long-term investments and liquid assets available for emergencies? Use this financial statement as a guide in setting your financial goals for the year ahead.

Use some of your leisure time to develop new skills. Using your own time, energy and skills to meet your needs or wants is a time-honored way to cut expenses. Learn to cut hair, change the oil in your car, make gift items, or make great pizza from scratch. You will save money, and you may have fun along the way!

When it comes to saving for long-term goals, starting early is of great value. An 18-year-old woman who makes a one-time Roth IRA contribution of $2,000, earning a 10% return, will have an extra $263,000 at age 67. If she continued $2,000 contributions every year, her retirement account will exceed $2 million.

How can you know if you have too much credit card debt? One rule of thumb is you owe too much if you owe three times the amount you pay off in one month.

Pay off your credit card debt. Remember, paying on a credit card balance that costs you 18% in annual interest rate charges is the same as earning 18% on an investment -- a very good rate of return! Start paying extra toward your balance today.

Money decisions affect everyone in your household. Plans to save money or cut debt will be accepted better when everyone has input. Try to have regular family meetings to discuss money issues. Encourage everyone to speak freely at the meetings, and be prepared to compromise.

When your children are young, the thought of college expenses seems both very distant and daunting. Use the following strategy to save for college expenses early and let time work for you. As your children age and your child care expenses decrease, divert the money you used for childcare expenses into college savings. Because you're not used to having this money to spend, it will be easier to save.

Insurance protects your future income. Do your current insurance policies protect your financial security adequately? Use the interactive University of Illinois Extension website, Is your FINANCIAL SECURITY at risk? to evaluate your insurance needs.

Renting-to-own may seem like a great way to buy a new appliance. However, it can cost you more money to rent an item than to buy it on credit or pay cash for it. For example, a $580 color TV could cost you more than $1,400 through a typical rent-to-own plan. Think twice before you sign a rent-to-own contract.

Looking for ways to simplify your financial life? Pay your savings account regularly. Make your saving bill a part of your spending plan, just like rent or utilities. Make this a bill you pay automatically each month.

Do you find it hard to pay unexpected home repairs? Each month set aside an amount equal to 10% of your mortgage payment to pay for your next emergency home repair.

How secure is your financial situation? Review these five key steps toward financial security:

• Obtain enough health, life and disability insurance.
• Pay off your debts.
• Save enough money to cover three months of living expenses.
• Save for retirement using a 401(k), 403(b), or Individual Retirement Account (IRA).
• Consider buying a house.

Cancel extra credit cards. Extra cards mean more fees and a temptation to overspend. One to two major credit cards is ideal for most families.

Give your older children opportunities to manage money. For instance, put them in charge of buying their school clothes. Set a dollar limit, help them estimate how they will use these dollars, and then let them make the purchases. Be clear that they will live with the consequences of their decisions. Learning to handle money takes practice.

Compare your company's health plan with your working spouse's company's health plan. Be sure that you're not paying for overlapping plans that you don't need.

Sixty-six percent of all grocery purchases are impulse purchases. Shopping with a list can save you money every time you go to the store.

Looking for a way to save money with little effort? Pack a lunch two days a week. If you usually spend $5 a day on lunch, you will save about $300 a year.

Do you contribute regularly to an investment such as a mutual fund? Consider using the dollar-cost averaging technique. Dollar-cost averaging is buying the same dollar amount of the same investment at regular intervals such as each month or quarter. This technique can be helpful in long-term investing.

Help your teenagers learn the value of money. Encourage them to calculate how many hours they must work to buy a new item. For example, for a teenager with take-home pay of $5 per hour, it requires three hours of work to buy a $15 CD.

How much do you pay each month for services that aren't important to you? Do you subscribe to magazines you don't read or belong to a gym you don't use? Check out this list of recurring costs -- what are they worth to you?

• phone services such as call-waiting or caller ID
• cable TV
• computer on-line services
• magazine subscriptions
• book clubs
• gym fees
• cellular phone
  

Before you buy a new car this year, consider waiting one more year. Instead of spending money on a car, put $2,000 into a ROTH IRA and let it grow for 20 years. At 8% interest, in 20 years you will be $9,322 richer and you won't even remember what year you bought that new car!

A research study showed that people who had a financial plan had saved at least twice as much as people without a financial plan but the same income. Having well-defined financial goals is an important part of money management. So, write your goals today and begin to save.

Invest in your company's 401(k) or 403(b) savings plan. You win in two ways: 1) you don't pay income tax on the money you invest and 2) most companies match investment dollars -- typically 50 cents for every dollar you invest. This is a win-win situation for retirement savings.

Make it a habit to save money you receive unexpectedly, such as bonuses, gifts or salary increases, to reduce your debt or increase your savings. Over your lifetime, this will make a major difference in your overall net worth.

An estimated 12% of all life insurance premiums go toward unnecessary insurance each year. You probably don't need specialty coverage such as credit-card life insurance, life insurance for children, accidental-death insurance (such as airplane flight insurance) or dread disease insurance. Review your life insurance policies carefully for duplicate or unnecessary insurance.

[ return to top ]

E-mail:

Consumer and Family Economics
Department of Agricultural and Consumer Economics
University of Illinois Extension
University of Illinois Urbana-Champaign