Buying without a credit card
The person at the head of the long grocery store checkout line is holding up traffic. She’s handing over a stack of coupons and writing a check. Despite her seeming lack of respect for everyone else’s time, she could be someone worth emulating.
Clipping coupons can be a great way to save money. And writing a check, paying with cash or using a debit card instead of a credit card is a great way to stay on a budget. It is possible to live without credit cards and still buy anything you want . . . or at least everything you need.
Video: Checking Account Tips
The difference between need and want
A need is an unquestionable necessity, like a gallon of milk. A want is often a frivolity, like a candy bar. If you’re trying to avoid debt, it’s important to know what things you’d like to have but can live without . . . and then live without them. A budget is key. It’s simply a method of knowing how much money comes in each pay period and how much goes out.
Developing a budget is as easy as this:
- Estimate your income.
- Estimate your expenses.
- Create and use a financial record-keeping system.
- Live within your budget for a couple of months.
- Fine-tune it if necessary to make it realistic.
Reducing expenditures on needs
Part of living within your means is learning how to reduce expenditures. You have no choice but to buy necessities. However, you can save on them. Here are just a few tips for cutting the cost of food:
Shop at more than one store and compare prices. - Make a shopping list and stick to it.
- Clip those coupons and use them, but don’t buy something you don't need just because you have a coupon.
- Buy fresh foods and cut back on processed convenience goods.
- Buy store brands instead of heavily advertised national brands.
- Stock up on sale items.
- Check the expiration date of perishables to be sure they won’t spoil before you can use them.
- Compare unit prices.
- Consider joining a wholesale club. Determine if what you’ll save on purchases will negate the membership fee.
More cuts to make
Here are some additional tips to help you reduce expenses:
- Invite friends over instead of going out.
- Repair damaged clothing.
- Don’t take the kids out for entertainment. Play a board game together.
- Donate used items to charity for a tax deduction.
- Give up bad, expensive habits like smoking.
- Always turn off lights when you leave a room.
- Reduce heating and cooling costs with a programmable thermostat.
- Cut back on phone services, club memberships, magazine subscriptions, cable TV channels.
- Shop used – at the Salvation Army, Goodwill, consignment shops.
- Switch from universal and whole-life insurance to term insurance.
- Don’t go to malls for entertainment.
- Take a brown-bag lunch to work.
- Start a garden.
- Use public transportation or carpool.
- Go to the library for DVDs and CDs.
- Buy a smaller house.
- Cut down on vacation spending.
Video: How to Balance a Checking Account
How to save, what to save and why
Now that you’ve got your expenses under control, it’s time to think about putting some money in the bank. Here are a few guidelines:
- Pretend you owe the bank some money and pay this fictitious bill every time you get a paycheck. Put a minimum of 10% of everything you earn in this savings account.
- Ask your employer to send some of your pay automatically to a checking account. Keep enough money there for all budgeted expenses.
- Keep your checkbook balanced.
- Carry as little cash as possible.
- If you feel you must have a credit card, use it only for unexpected difficulties, such as a car repair.
- Gradually build up an emergency -- loss of job -- savings account until you have about three to six months’ income in it.
- Reserve additional money for predictable future expenses such as home repair and keep it separate from what you’ve saved for major emergencies.
- Remember that you will need, on average, about 70% of your current income to maintain your present standard of living after you retire. This is money you can invest in a long-term, high-interest bank Certificate of Deposit, in stocks or in bonds.