Debt Free

If there is indeed a recession on the horizon, the need to economize and get the most for every dollar spent will be paramount for most people. Ironically, massive cutting backs in consumer spending will only prolong any economic downturn, but hey, a fish's got to swim, bird's got to eat.

Now, on to how you can save some money, which you can spend on shoes or just about anything else. Hey, maybe you'll want to save or invest it. There will be some terrific investment opportunities if the markets continue to drop as they've been, a few days last week not withstanding. One you'll want to personally avoid is spending your hard earned money on a pair of $150 basketball shoes, no matter how great they make your feet feel, or how envious it makes the other guys on the team.

If you're to be saving money there are many money saving opportunities if you'll take the time to find them. According to the US Department of Labor statistics on consumer spending for the year 2005 (revised totals released in 2007) average American households spent the following:

1 - Shelter and associated expenses $15,167 (32.7%)
2 – Transportation $ 8,344 (18.0%)
3 – Food $ 5,931 (12.8%)
4 – Pensions and Social Security $ 4,823 (10.4%)
5 – Health care $ 2,664 ( 5.7%)
6 – Entertainment $ 2,388 ( 5.1%)
7 – Clothing $ 1,886 ( 4.1%)

The household expenses occupying the greatest percentage of our income obviously offer the greatest potential for savings. It's notable that Americans spend, on average, more on transportation than they do on food and clothing combined. If one takes into account that many Americans have no personal vehicles, and spend relatively little on transportation, that figure looms large indeed for those who do own a car truck or van (in many cases, all three!).

Since housing is the largest single component of household expenditure, it offers, for most, the greatest potential to save them significant money every month, so I'll begin there. Here are some ways you can save money on housing and related expenses.

How to Save Money on Housing

The largest component of housing expenses is either your rent or mortgage, whichever applies. Right now one of the best things you can do would be to refinance your mortgage to take advantage of mortgage rates that seem to have fallen through the floor. Before you rush to refinance, however, you'll want to analyze your current mortgage to find out what you're paying now. Remember that when you refinance you'll likely incur additional expenses, and that the 15 or 30 year clock will reset.

As an example, if you're paying 7.5% on a $250,000 mortgage, your monthly P&I payments will run you about $1,750. If you refinance that down with a 30 year fixed rate mortgage that was at the current average interest rate of 5.47%, your new payment for P&I would drop to $1,415, hardly a small monthly savings. There aren't many single things that will net you a monthly savings of over $300. Obviously larger mortgages will have a greater potential for savings and smaller ones....well, you get the idea.

Before you go running off half-cocked, remember that there are other costs associated with refinancing that you may have to pay, such as appraisal fees, processing fees, application fees, origination fees, and title fees. Some of these you may be able to get the lender to drop i.e. application fees and others you may be able to negotiate down. As a general rule, you should try to negotiate everything if you're serious about saving money. Why? Because, if you are not paying them up front, they will be rolled into the mortgage and you'll pay interest on them for the term of the mortgage. Needless to say (but I will anyway) that this can add up to be a substantial bit of money. For every $1,000 that you pay 5.47% interest on for 30 years, it will cost you an additional $1,042 in interest alone over the life of the loan. That does not take into account any tax savings on your mortgage interest, or the time value of money, but it does show that you'll end up paying more than double what the dollar figure was on your mortgage documentation.

You should look at the fees charged by your lender first. It's there that the lender has the greatest latitude to make changes. If they are trying to charge you a fee based on a percentage of your loan, that would be where you should concentrate most of your negotiation. If they are trying to charge you 1 or 2 percent (1 or 2 points), that is going to be a rather large dollar figure. As luck would have it, it is also the fee that lenders have the most authority to change.

Remember that brokers are making money off the yield spread premium (The yield spread premium is the cash bonus received by the broker from the lender. The greater the difference between the wholesale interest rate and the interest rate of your mortgage, the greater the broker's payment.) as well as any application fees or origination fees charged by the broker themselves. It's a great bit of double dipping. You can see that the broker is already being compensated by the lender for getting them a new customer. You should have to pay as little as possible. I saved myself about $1,500 by negotiating the fee down. If I had to do it again I would do even better, so should you.

You can also save a substantial amount on energy costs depending on where you live by doing some simple things. If you live in the desert southwest you'll want to maximize the efficiency of your air conditioning system, for example. There are ways that cost very little, or no money that can provide dramatic savings. In the summer make sure the windows on the south and west side of you home are covered to prevent incoming heat and taxing your A/C system. It's best to put shades outside the home to stop the sun's energy from hitting the windows in the first place. You'll notice a dramatic reduction in your air conditioner's workload from this, especially if you have large windows facing south and/or west, and it will cost you little or nothing.

Make sure all your ductwork in the attic and/or crawl space is well insulated. If it's not, you're losing much of the heat or cool you're paying for before it ever reaches the vent into your house. Many older homes are deficient in this area. (Try this in the spring or fall, that way you're not in your attic in the heat of summer or the cold of winter. Trust me, that's no fun at all) It may be an unpleasant job to wrap all your ducts, especially if you have to go into a 2' crawl space under a 60 year old house, but it can pay handsome dividends. While you're down there, take a look at the pipes and the insulation under your floor. Not only can you save money by ensuring your floors are well insulated, but you can keep your floor much more comfortable during cold winters. Check with your utility district, state, or county. Many have programs to help offset the cost of such home improvement projects.

Make sure all vents in unused or little used rooms are closed. There's no sense in wasting money there. Check all doors and windows to make sure they are caulked and weather stripped. It won't cost much to do this, but imagine if you will a larger hole. A 1/8” crack at the bottom of a 36” door is like having a 4” square hole in the door. If you came home from work today and found a 4” square hole in your door, you'd probably rush out to Home Depot for a new door, so don't let the seemingly little cracks go untended.

If you have old hot water radiators, put foil reflectors behind them to prevent heat from going directly into the wall behind them. That reflective foil will redirect heat into the room where it belongs and increase the apparent efficiency of the radiator. Lastly, President Carter may have been a complete moron when it comes to things economic and foreign (maybe things economic were foreign to him?), but he had it right when it comes to setting back the thermostats in the winter and raising them in the summer. It costs not a dime, but you'll reap nice rewards from this simple strategy.

How to Save Money on Your Car

Ah, now the next household spending category, and one of my favorites, the automobile. As an underfunded Porsche enthusiast (underfunded to the point where I don't own one) all things wheeled and motorized are near and dear to my heart. Unfortunately they're the same to my wallet. Let's face it, Americans spend a ton of money on their vehicles and associated expenses. Probably way too much when it comes right down to it. We're lucky we don't have the high fuel taxes that some of the poor Europeans have to pay, although there are many here who would love to emulate the Continentals on this point.

If they choose to give up their vehicles to take it, public transportation is said to save the average American $6,200 annually (publictransit.org figures, no agenda there) even if they are overstating it by 50%, that's a healthy amount of savings. Many people think only about fuel costs when deciding to take a trip by car. I know, I see many otherwise-highly educated friends make this mistake all the time. You should think about all the other costs associated with driving your trusty car. Every mile you drive is that much closer to the time you'll need to buy tires, brakes, an oil change, and any other maintenance your ride may require. The next time you pull in for your 60,000 mile service you'll know what I'm talking about.

In case you're tempted to skip it, or any other maintenance, don't. You may void your vehicle's warranty and any maintenance you fail to perform will only hasten your car's demise, requiring you to shell out big dollars for another one. It's a great example of false economy. The number one you can save money in your car is not to drive it. Obviously that won't get you to work, so the next best thing you can control is how you drive. Remember, smooth. I see so many drivers that seem to think the accelerator has only two settings, on or off. Consequently they do a bit of herky jerky to get down the road. Hey, that might be you. The next time you're driving, concentrate on how you use the gas pedal. If you find you're constantly giving it gas and then letting off, practice holding a constant speed while keeping the engine revs constant. You'll be rewarded by getting much better gas mileage and no laughs behind your back as a bonus.

If you have to run premium gas for your car, fine. Personally, I would check this before I bought the vehicle, because the thought of using premium for a daily driver gets me all worked up every time I pull into the gas station. If you don't have to use premium gas you're only wasting money by doing so. If you use top tier (not the same thing as premium) gas from the likes of Chevron, Conoco-Phillips, Shell, or Texaco, you're getting the enough detergent to meet the demanding Top-Tier detergent standards in all grades of fuel, not just premium. You're not hurting your car by using regular or mid-grade if your vehicle does not require it, unless you experience heavy knocking or pinging noises from the engine without using premium. If you do need premium to avoid these noises, and your car is only supposed to require regular gas, you should get service, as you have other problems.

So the key points to save money with your car are

• Control how you drive – No quick stopping, Don't maintain speed until right before you have to stop, and then stomp on the brakes. Anticipate a bit. Remember, every time you have to use the brakes you're turning your hard earned gas money into waste heat.

• Only use premium fuel if you have to. If you don't your wasting $.30 a gallon.

• Make sure your car is well maintained. The easiest thing you can do is make sure your tires are always inflated to your auto maker's specifications, as you'll find on the door jamb sticker. The other easy and inexpensive thing is to keep a clean air filter installed. A dirty filter will kill engine efficiency and waste gas.

• Clean out your car. Hauling all your tools and other garbage around takes extra gas and costs you cash. It doesn't even cost you anything except an hour of your Saturday.

  Shop around for everything you use on your car, such as repair and auto insurance. Comparing prices for the same level of service from different autocare providers or insurance comapanies can generate a pretty substantial savings, so do it. 

Tomorrow I'll look at some ways you can some money on other things on the list, such as food, health care, entertainment and clothing.

Can You Really Burn Water in your car as a way to dramatically increase your gas mileage and save money on gas? Some people insist you can. I don't know if you can, but it sure sounds good. Look at this.