Speaking of Savings

WHAT SAVING LOOKS LIKE MONEY ΟVEΞR ΤΙΜΕ Keeping more of your take-home pay is more than a way of surviving in a tough economy; it can also be a powerful statement about getting off the work-spend treadmill, rejecting the greedy and sometimes even predatory practices of some financial institutions and corporations, and becoming more self-sufficient overall. Here's what saving more of your money looks like over time. HOW MOST OF US SPEND OUR PAYCHECKS NOW The U.S. Bureau of Labor conducts a detailed annual survey on how people spend their money. Here's what the average consumer's spending looked like in 2010. How the Average Consumer Spends Money All Other 10% Expenditures 5% Apparel and Services 38% 7% Housing Entertainment Transportation 11% Health Care Food Insurance and Pensions 13% 16%**** WHAT SAVING MONEY LOOKS LIKE In 2011, Americans saved 5.4 percent of their disposable income, up from 2.7 percent five years ago. But most financial planners say we should actually be saving about 10 percent of our take-home pay. | 5.4% of your money 10% of your money $80,000 ... .................... $74,000 $70,000 $60,000 $55,500 $50,000 $40,000 $37,000 $39,960 $30,000 $29,970 $20,000 - $3,700 $18,500 $19,980 $10,000 - „$1,998. $9,990 $0 1 YR. 5 YR. 10 YR. 15 YR. 20 YR. Does not include interest WHERE WE'RE CUTTING BACK A survey by the American Express Spending & Saving Tracker revealed that 31 percent of American households are planning to cut back spending in the next few months. Dining and entertainment are among the top ways they plant to spend less. Top Ways We're Cutting Back 81% 55% 46% 42% 37% Eating at home vs. dining out Making better use of the clothes in Watching movies at home instead of in Purchasing less expensive beauty products Waiting longer between salon / barber visits our closet a theater WHAT SAVING IN SPECIFIC CATEGORIES LOOKS LIKE OVER TIME Housing Whether paying monthly rent or a mortgage, housing costs are by far the largest area of spending for most adults, so it's more important to identify ways of saving in this area. For some, renting your home can yield better savings over time. But doesn't renting just mean throwing your money away? J.D. Roth, author of Your Money: The Missing Manual, offers a real-world example that challenges that notion. The Scenario Two hypothetical married couples plan to live in two similar homes in the same neighborhood northeast of Seattle. THE HOMES RENTING BUYING 3-bed, 2.5-bath, 1,840 sg. ft. house Monthly Price: $1,495 3-bed, 2.5-bath, 1,850 sq. ft. house Price: $424,950 THE FINANCING RENTING BUYING Monthly rent payments 20 percent down payment 30-year fixed interest rate of 6.25 percent THE APPROXIMATE MONTHLY COSTS RENTING BUYING Rent/Mortgage $1,495 $2,093 Insurance $20 $163 Property Tax Tax Savings $407 *$327 Maintenance $354 TOTAL $1,515 $2,690 *less standard deduction. Though the renters won't see any financial return You can also argue that a large portion of the buyers' payments aren't going to yield returns. Consider insurance, on their monthly payments, the buyers are facing a more 78% expensive monthly bill. property taxes, maintenance, and-worst of all-interest on the mortgage that's "thrown away" each month. If the renters took the monthly difference ($1175) between renting and buying costs, and put it in a traditional savings account with only 1% interest, they'd save roughly $495,371 after 30 years. This hypothetical scenario won't apply to everyone. To see if renting or buying a home is a better option for your own scenario, try running your own calculation using a Buy-Rent Calculator from the New York Times at http://www.nytimes.com/interactive/business/buy-rent-calculator.html Energy You probably don't think about your power bill too much. That's just the way utility companies like it because they're raising their rates by an average of 6 percent every year. If your monthly power bill is regularly over $100 a month, you should get a few estimates from reputable solar companies to see how much money putting some panels on the roof could save you. $118,001 $101,000 $20,000 in Solar New Jersey $98,909 $20,000 in Solar Long Island, NY $75,500 $46,000 $20,000 in Solar San Francisco, CA $55,998 $20,000 Savings 1% Interest $-2,500 $24,500 $41,000 -$10,500 -$14,000 $8,500 $23,452 $23,023 $20,606 $22,092 YEAR 3 YEAR 10 YEAR 16 YEAR 18 If you live in a state with high electricity costs, investing $20,000 in solar can yield greater savings over a 20-year span than putting that $20,000 in a bank with solid interest. Does Solar Make Sense For You? Use the solar estimate tool at http://ibog.org/solar-estimate to find out how much solar would cost in your state. If electricity is cheap where you live (under $0.12 per kilowatt hour) and there aren't any solar rebates available for homeowners, solar may not make economic sense for you yet. If your payback period is under 10 years, however, you should get a few solar estimates. SECRET #1 SECRET #2 SECRET #3 to Saving Money With Solar to Saving Money With Solar to Saving Money With Solar Request estimates for small, medium, and large systems to see what your ROI looks like for each. Sometimes just shaving off a percentage of your bill actually makes more economic sense than going whole hog. Many states only allow homeowners to install as much solar as they need, but a few wily homeowners deliberately run up their power bills for a few months before getting an estimate so they can legally install solar systems producing excess energy. Their excess solar power goes into the grid, where utility companies have to compensate them for it. (Note: this is a minority of homeowners.) After purchasing solar panels, many homeowners also opt for electric space heaters to eliminate their monthly natural gas costs, too. OTHER WAYS TO SAVE YOUR MONEY Question Your Bank Public outcry may have recently prevented Bank of America and Wells Fargo from charging debit card users a monthly "activity" fee, but consumer watchdogs report the average American is still paying between $500 and $620 every year in avoidable banking costs. Ask your financial institution how much you're being charged for things like overdraft fees, not keeping a minimum balance, using an out-of-network ATM, talking to a teller, and online bill pay services. If your bank's fees seem high, switch to a reputable financial institution with a no-fee pledge (Schwab, ING, and Ally have no-fee options) or check out your local credit unions. Make sure any bank you consider is backed by FDIC. Credit unions should be insured by NCUA or ASI. Drive Safe, Save Money Both the U.S. Department of Energy and Edmunds.com recently found that drivers who follow the speed limit and don't engage in aggressive driving tactics (e.g., rapid acceleration and sudden braking) enjoy anywhere between 12 to 55 percent better gas mileage. Avoiding excessive idling was also "more important than we assumed," according to Edmunds, giving a surprising 19 percent boost to fuel efficiency. Guess that's why UPS doesn't allow their drivers to make left-hand turns! Get Smart About Your Smartphone The average iPhone owner pays about $1,900 a year for their service (considering the device, service contract, and data fees), begging the question: are smartphones financially smart? In their 2011 "U.S. National Carrier Plan Showdown," Android Authority recently pointed out it's possible to get unlimited minutes, texting, and data for as little as $40 or $50 a month these days through providers like Boost and VirginMobile. Single Versus Multiple Savings Goals A recent study of 82 families found that families who were given multiple savings goals (e.g., college, health care, retirement) only saved 6.21 percent of their disposable income, whereas families given a single savings goal (i.e. retirement) saved 10.6 percent of their disposable income. Researchers say multiple goals seem to create a "deliberation" mindset in which people see their goals as competing with one another, whereas a single goal creates an "implementation" mindset, resulting in greater action and higher savings. SOURCES. BUREAU OF LABOR STATISTICS | SMARTMONEYCOM | BUSINESSWEEK| RICKFERRLCOM| JOURNAL OF MARKETING RESEARCH GETRICHSLOWLYORG | PC WORLD CBS| AMERICAN EXPRESS One Block JOff the Grid GROUP DISCOUNTS ON SOLAR HTTP://1BOG.ORG