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10 tips for navigating lean economic times

The unemployment rate is in the double digits, and layoffs continue to be commonplace. Maybe you're among the multitudes of workers who have managed to survive the layoff hatchet, but you're being asked to adjust to furloughs and pay cuts instead. How can you cope with this hurtful state of affairs? Consider these tips.

1Face the reality of the new situation: Most people dread the idea of creating a household budget. But it's crucial to know where your money is going or needs to be going. To find out, track your spending in writing for a month. Then do what you can not to spend excessively on things you don't need.

2Reflect on your wheels: For a time, could your family get by with one vehicle? If that isn't possible, could you get out from under a car payment by replacing a more expensive car with a less expensive one?

3Increase your deductibles: Deductibles are the sums of money you have to fork over before your insurance policies come to the rescue. You could save a bundle by contacting all of your insurers and bumping your deductibles up by a few hundred dollars apiece. If, for instance, you learn that your auto insurance deductible is set at $500, consider increasing it to $1,000.

4Shun credit card debt: Unfortunately, many people dealing with money worries can get into trouble with credit cards. Credit cards can be your friends — but only if you pay balances off in full and on time each month. If you're already weighed down with debt, try this: Transfer your credit card balances to a card with a lower interest rate. You'll save $730 if you transfer a $2,000 balance from an 18 percent card to an 8.25 percent card and then pay off your balance at a rate of $50 a month. Even better, transfer balances to cards with rates of 0, 1 or 2 percent if you can and concentrate on paying them off entirely while those low rates last.

5Try this eye-opening experiment: Pay in cash. In a world where plastic is king, this can be one sure-fire way to wrest control of spending. "I created the 'Seven-Day Cash Challenge' that has clients put away the credit card and use cash — not a debit card, but cash — to pay for most everything for seven days," said Edward Gjertsen II, a financial planner. "This helps them quickly realize how much flows out in everyday expenditures."

6Don't skimp on retirement savings: Saving for retirement may seem like a low priority when you're feeling squeezed. But in many cases, you can view your contributions to a 401(k) or 403(b) tax-deferred retirement plan as an instant raise. That's because many employers will match your contributions up to a certain point. Even if you don't get a match during these dark economic times, get in the habit of socking away at least some money for retirement. You'll be glad you did so at tax time, and in your later years as well.

7Save on child care: Can you arrange with your child care provider to switch your child to a part-time schedule? Could you ask grandparents or other relatives to watch your child, even for one or two days a week? You also could apply for scholarship help at your day care facility or switch to a low-cost preschool program offered by the public school district.

8Drop the gym membership: Unless you go to the gym faithfully and rely on it to stay sane, save money by canceling your membership and finding ways to exercise for free. Some ideas: Walk regularly on the beach; take up mall walking; work out at home, with an exercise show or DVD that you enjoy, or with low-cost free weights and a mat for stretching and toning.

9Sell some stuff: By throwing a garage sale or taking advantage of Web sites such as Craigslist (tampa.craigslist.org/) or eBay (www.ebay.com), you can make some extra money relatively quickly and reduce clutter around your home and garage at the same time.

10Understand your money personalities: This tip is for couples. To survive this crunch, you need to be on the same page, and this can be difficult if you have wildly different money personalities. Take a quick quiz at Moneyharmony.com (www.moneyharmony.com/MHQuiz.html) and use the results as a springboard for a frank conversation. This ultimately can help you work together as a team.

Laura T. Coffey can be reached at laura@ tentips.org.

Sources: Financial Planning Association (www.fpanet.org); The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke by Elizabeth Warren and Amelia Warren Tyagi

10 tips for navigating lean economic times 01/04/10 [Last modified: Monday, January 4, 2010 3:05pm]
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