Even in the face of a sluggish recovery, Americans are doing a better job of getting their budgets under control. The total amount of personal debt fell during the first quarter of 2013 to its lowest level since 2006, according to the latest figures from the New York Federal Reserve.
Our reductions in mortgage debt and credit-card use show that Americans are recognizing that controlling their debt level is a key element of living within their means. But it’s also important to make the most of every dollar you spend.
To ensure your budget will get the job done, here are three key areas where you can hopefully reap some savings.
1. Make Bank Fees a Thing of the Past
Banks have mastered the art of nickeling and diming their customers: At this point, they charge fees for just about all of the basic services they provide. Whether it’s a monthly charge just for having an account or the countless extra fees you’ll pay for everything from checking-account overdrafts and late credit card payments to using out-of-network ATMs, you can watch a remarkable amount of money exit your account on a monthly basis for very little benefit.
Moreover, many banks are pushing those fees higher, with Bankrate reporting that checking-account fees rose to a record-high level. Just a single overdraft cost an average of more than $31 in 2012 according to Bankrate.
Still, it’s not all that hard to avoid bank charges. One way is to simply stop making the mistakes that lead to extra fees. But if you’re not sure you can avoid bad banking behavior, look instead for banks that aren’t as harsh with their fees. For example, while free checking is getting rare among the largest institutions, smaller banks and credit unions often offer more attractive deals.
Take steps to minimize fees in all of your banking relationships, including mortgages, auto loans, and other loans and deposit accounts. Every dollar you save is an extra dollar in your budget.
2. Be Smartphone-Smart
Think your smartphone came “free” when you signed with your carrier? Look more closely: Behind that no-upfront-cost offer is an expensive long-term commitment.
Major carriers all hope that you’ll focus on the subsidized cost of a phone, which is often as low as zero. Instead, calculate the cost of the phone over the length of your two-year contract commitment. You can easily end up paying $100 or more per month for comprehensive plan packages, meaning that “free” smartphone’s true cost add up to $1,000 to $2,000 per year. And even once your contract is up, it’s not as easy as it should be to switch to a cheaper carrier.
In some cases, paying more upfront will save you money in the long run. Some carriers don’t subsidize their phones, but they charge much lower monthly payments. Your net cost over time ends up lower, so be sure to explore those alternatives before you buy, and pick the best smartphone plan for you.
3. Make the Internet Pay Off For You
Budgeting doesn’t mean that you can’t spend money. It does mean you should be smarter with your shopping. The Internet has plenty of tools to help you save money when you shop.
Physical stores have overhead and other costs that Internet retailers don’t have to pay. As a result, most physical stores charge a bit more to offer the convenience of giving you instant access to the products you want.
But if you don’t actually need something right this second, the savings you’ll often find at Internet retailers will give you a nice discount. Moreover, most Internet retailers have greatly reduced their shipping charges, with many offering free shipping on many orders.
Sometimes, online retailers can give you extra savings opportunities you can’t get elsewhere. Online coupon sites like retailmenot.com give free access to promotional codes that give you lucrative discounts. That can stretch your budget’s resources even further in your favor.
A Budget You Can Live With
Sticking with a budget is hard work. But by doing simple things, you can stay within your budget and still get everything you want.
With the various incentives to use credit and debit cards, cash can often seem like an afterthought. After all, obtaining, tracking, and toting it can seem more hassle than it’s worth. But if credit-card swiping is turning into mindless spending with month-end statement shock, it might be time to switch from plastic back to paper.
A once-weekly withdrawal from a no-fee ATM can help keep spending on everything from incidentals to luxury items in check. Want to take it up a notch? Try budgeting and paying cash for purchases larger than the daily latte: groceries, gas, mass transit tickets, or an evening out.
Bank of America offers its customers the chance to Keep the Change. The premise is simple. For every purchase a customer makes with his or her debit card, Bank of America will round up to the nearest dollar, and deposit the difference into your savings account. The bank will even match the difference for the first three months, up to $250. The catch? B of A charges a $12 monthly maintenance fee for customers who don’t use direct deposit or maintain a $1,500 minimum balance.
The old-school alternative? A mason jar and a daily ritual of emptying pockets and purses of any loose change left over after paying for items with cash.
Toss your spare change in a mason jar
There’s something inherently charming about the old Holiday Club and Vacation Club accounts. They call to mind days when every $5 received in a birthday card was squirreled away; when banks still gave out toasters, and lined their counters with jars of lollipops.
It might sound quaint, but the discipline works. Socking away a few dollars a week over the course of several months to help fund a vacation or holiday shopping adds up. The cash out at the end of the term is like winning the lottery — one lump sum comprised of tiny, barely noticeable amounts throughout the year.
Join the club
Previous generations knew their banker by name, knew his or her children’s names; they swapped stories, were part of the same community. While it’s temping and convenient to complete most banking transactions online or rush in and out of a branch when needed, what’s lost is a personal connection that email alerts and social-media posts simply can’t replace.
There are tangible benefits to getting to know local branch staff. Having a face-to-face connection with bank staff can be helpful in resolving charge disputes, being kept abreast of rate changes, and getting information on specially tailored products.
Say hi to your neighborhood teller
Before the days of the large international bank, most people had their financial needs met at the corner savings and loan. If big banking has lost its appeal, seek out smaller, local banks, many of which aren’t publicly traded, or credit unions, which are not-for-profit. The difference between these two types of banks and large, publicly traded ones is that banks that don’t have to appease shareholders can focus on its customers first.
According to the Independent Community Bankers of America, local banks focus on "personal service, local credit decisions and ownership, and reinvestment in the community." And according to the Credit Union National Association, credit unions exist to provide financial literacy for their members, serve the needs of their members regardless of means, and offer lower rates than traditional large banking models.
While no one would recommend stashing savings under a mattress or issuing I.O.U.s for groceries, adopting some old-fashioned tactics for financial management might be just the ticket to thriving in the modern world.
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