The Financial Crisis

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Analyze your spending.
Look closely at what you've spent for the last three to six months, says Ed Moore, CFP and president of Edelman Financial Services. "And look for spending (you) might regret." As you examine your expenditures, ask yourself, "What dollars satisfied a need, what dollars satisfied a want and which expenditures might not have satisfied either?"
David Bach, author of "The Automatic Millionaire," says not to forget even your smallest purchases: Where do you spend small amounts of money on a daily basis? For many, it's something as seemingly insignificant as a few bucks for a cup of gourmet coffee, but it adds up. That doesn't mean you necessarily have to give up your java break. Bach says you do, however, need to change your thinking. Notice exactly now much you are spending and where.


Make a budget.
"Without exception you have to do a written plan, called a budget," says Dave Ramsey, author of "The Total Money Makeover." Listeners to his national call-in radio show tell him once they make a budget, "they feel like they got a raise." The reason, he says, is "managed money works harder."

But there's no one-size-fits-all budget. "It varies from month to month," Ramsey says. So sit down and plot how each dollar will be spent "on paper, on purpose before the month begins." (For more on budgeting basics, read "A simpler way to save: the 60% solution.")


Never pay retail.
"Everything's negotiable," says Bach, who learned this money lesson from his grandmother. "Almost everywhere she went, she could talk the price down," he says. And that's still perfectly acceptable in many retail situations, he says.
Also know when to shop. For example, buy clothing in season. That's when the retailers consider it past the season and put it on sale, says Clark Howard, co-author of "Clark's Big Book of Bargains."


Try store brands.
"Every time somebody goes to the supermarket, I want them to try one more store brand," which Howard notes costs up to 40% less. "To get people to change everything isn't possible. But to get them to change one item at a time is less difficult." (You'll find other ways to save in "20 ways to slash your grocery bill.")


Buy used.
New is nice, but for the best buy, think pre-owned. Bach points to the classic example of a used car. After two years of depreciation, you can get a good, high-quality car at virtually half price, says Bach. "And if you ever do buy a new one, plan on keeping it five to 10 years," he says.
Whatever you're buying used, Ramsey says to focus on high-quality merchandise, "not torn up, junky or dirty."
Secondhand shopping isn't just for those who have to watch their pennies, either. Ramsey recalls a millionaire friend who picked up a $38,000 Rolex for $18,000 from a reputable jeweler. "That's how he got to be a millionaire," Ramsey says. (M.P. Dunleavey has more thoughts on buying used in "Why first-class folks love second-hand stuff.")


Pay cash.
"When you spend cash, it hurts," says Ramsey. "And you spend less."
Ramsey recalls a study several years ago that showed when shoppers spend cash, "you spend 12% to 18% less than when you spend plastic because of the emotional pain."
Plus, he says, you can get a better deal when you use cash as a negotiating tool.


Pick your credit card wisely.
If you must use a credit card, make sure it's one that gives you something. Look for a no-fee card with a rewards program. Mark Oleson, director of the Financial Counseling Clinic at Iowa State University, recently signed up for a AAA-branded no-fee card that rebates 5% of all gas purchases. The credits are applied automatically to his account every month. Now he's getting $2 gallon gas for $1.90 without changing his buying behavior. (For an easy way to compare card rates and perks, try MSN Money's Credit Card Analyzer. )


Shop around for auto insurance.
You want your car protected, but make sure you get the most cost-effective coverage you can. Howard recounts one ecstatic caller to his radio show who compared rates and sliced his annual premium by $1,433. "That's the easiest money for someone to grab," he says. Anecdotally, Howard says, the typical savings by shopping around for better auto insurance rates is around $1,000.
While you're at it, look at your coverage and deductibles on an annual or semiannual basis, says Oleson. Can you afford to raise the deductible to lower your premium? Are there any overlaps in your coverage that could be eliminated? (Learn more at our car insurance Decision Center.)


Dial up phone savings.
Your cell phone certainly comes in handy, but is your plan really worth what you pay? "There are lots of people who sign up for calling plans for cell phones who don't need them," says Howard. He says a more economic choice might be a prepaid plan.
Do you travel with your cell phone? Be sure you don't face roaming charges. A better telephone-travel move might be a discount calling card. "I'm a big believer," says Howard, who finds that the average per-minute price on the cards runs about 2.9 cents per minute, a far cry from regular or in-room long-distance charges.


Change your mortgage payment method.
Make biweekly payments instead of monthly house payments. You don't change the amount; simply send in half a payment every two weeks. That means, says Bach, you make an extra payment every year and can slice nearly seven years off the average mortgage.


Use family and community resources.
This is something that a lot of new parents discover when faced with the cost of expensive baby goods that their child soon will outgrow. "Rather than going out and buying a new crib, this and that, there's a lot of sharing," says Chris Farrell, author of "Right on the Money!"
You can also do the same thing at other stages of life with furniture, appliances, electronics and clothing. Farrell employed the strategy to get rid of a fairly recent desktop computer when he switched to a laptop. "A lot of us are in situations where we spend money on something we wanted, but it's outgrown its usefulness," he says. "And someone else could get pleasure out of it."


Pay yourself first.
Automatically transfer part of each paycheck to a retirement account before you get your take-home pay. "Learn from the government, which figured out years ago (people) can't budget," says Bach. His rule of thumb: Save one hour a day of your income each week.

In addition to the longer-term retirement account, also save for short-term emergencies. How much? "I think (a salary contribution equal to) 30 minutes a day is a good start," says Bach.

And while the goals of the two accounts are different, the savings method is the same: Pay yourself first.


Exercise restraint.
Finally, call upon your willpower when it comes to spending. Want to save money on your phone bill? Hang up. Want to use less gas? Stay home. Do you really need a bread maker when you have an oven?