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Friday, June 19, 2009

Money, How Do I Save Thee? Let Me Count The Ways...

Being able to spend money without giving a second thought to it sounds like fun, but it is not really all that it is cracked up to be. The problem is that for most people, the money supply is far too inadequate to sustain that kind of behavior for very long. The hangover from that behavior is also much longer-lasting than the garden-variety hangover most people are used to.

I consider myself quite thrifty and have developed a set of behaviors that go along with being thrifty. My basic philosophy is that a penny saved is a penny earned. At the very least, it is a penny I don't have to do anything more to earn. Here are some ways I have managed to save money in the past and these things continue to work for the most part.
  • For most people, taxes are the biggest expense. It is mostly unseen and not considered a direct expense, so most people do not think about being thrifty about it throughout the year. But there are lots of things one can do to make sure the total tax bill for the year comes out smaller.
  • Contribute the full amount possible to retirement accounts. Money contributed to retirement accounts often qualifies not to be taxed. So, you can save on taxes and you are also forced to put away money for retirement. And if your employer provides matching contributions to a retirement plan like a 401(k), there is absolutely no excuse for putting in whatever amount it takes to take full advantage of every last matching dollar.
  • Check your deductions carefully and take advantage of all the deductions allowed under law. Most tax software allows you to compare your standard deduction against itemized deductions and automatically makes sure you take the larger of the two.
  • Don't throw away household things that you are done using. There may be life left in them in someone else's household. Donate them to charity. You are saving them from the landfill, helping someone else save money and you get a tax deduction for it too. Win-win-win situation.
  • Do your own taxes. Taxes in this country are so easy to do, especially for most regular, salary-earning people, that it boggles my mind that there are so many tax preparation consultants getting rich on people's laziness and ignorance. The forms have clear line-by-line instructions. If you are not into following instructions, there is software that does it for you too. And don't buy the software either: most of the tax preparation software companies have an option to do taxes online that is free. I have been using Taxact for the past several years and I am comfortable recommending them.
  • Income taxes are one area where I would avoid being overly aggressive though. The legal problems you could get into and the penalties that you could end up paying if you run fould of the law are just not worth the few dozen dollars you may think you are saving by claiming questionable deductions. So, stay away from anything that promises to cut your taxes in half and so on. For most people who draw a monthly paycheck and get a W-2 at the end of the year, there is not a whole lot of legal ways to really cut your taxes in half or even close to that.
  • Never overpay income taxes during the year unnecessarily. The government does not pay you interest on overpaid income taxes. There is nothing to be happy about getting a big income tax refund at filing time. All it means is that you gave Uncle Sam an interest-free loan for much of the year (if you really want a big refund, send me the overpayment, and I will refund it to you at tax-filing time after earning interest on it all year long). Obviously, underpaying taxes too much will subject you to penalties, so you have to be careful. But if you are a salaried person and can predict precisely what your income for the year is going to be, adjust your W-4 so that the correct amount of taxes are withheld from your pay. When I get a refund under $500 I am happy. If I get to pay some taxes at the time of filing, I am ecstatic because that means that I got an interest-free loan from Uncle Sam for that amount.
  • If you owe taxes, complete your tax preparation early, but wait to file until the deadline. If you are owed a refund, file as soon as you have all the paperwork with you. The more time you have the money with you, the more interest you are earning on it.
  • Sales taxes are another common expense that adds up over time. Know the sales tax rates in various places around where you live and find out the cheapest places for different types of purchases (sales taxes often vary by type of purchase, with food usually taxed less than other kinds of purchases, for instance). If you live near several counties, it will often work out best to do all your major shopping in one of them rather than another even if you live in another county. Sales taxes can sometimes even vary by city, so it helps to do some research.
  • Proposals come up every couple of years to apply sales taxes on internet purchases at the source. None of these proposals have become law, so there is still time to take advantage of the gap, to buy online. Most electronics and many other categories of purchases are cheaper online anyways, so even if you pay sales taxes, it will work out cheaper than buying them from a store.
  • When you shop online, avoid stores that have a local presence. Stick with stores that have just an online presence, such as or
  • Even if you go with an online store that has an in-state presence, the taxes may come out much lower than if you bought from a brick-and-mortar store because online outlets may charge only state taxes and not ding you with county or city-specific taxes.
  • Note that in most states, you are responsible for declaring all online purchases and paying state sales taxes on them as part of your annual income tax filing. But there is little to no enforcement of such laws.
  • Do your research before purchasing anything. Start by looking at reviews and prices at various sites devoted to this activity. is a good starting point for research on most items. The user rating system used at will give you a good idea about whether the product you had in mind is good and what the alternatives are.
  • Also check out Epinions for more user reviews. The range of products reviewed on Epinions is not as great as many other online store sites, but the site is better policed and they have volunteers cleaning up bad reviews, so the reviews you do see are likely to be more thorough, complete and unbiased.
  • Use price comparison sites like MySimon, PriceGrabber, etc. to find all your options for buying a product you have decided upon. You may also want to FatWallet to find out if there are coupons or other specials on the product you are interested in before you make the final purchase. Make sure you compare prices after adding in taxes, shipping and handling charges and other amounts.
  • Check out prices at eBay also before buying something at any store. Not all the stuff sold on eBay is used. There is lots of brand-new merchandise sold on eBay on a daily basis. Check the descriptions carefully, though, to avoid mistaking a used item for a new one.
  • Lastly, when you make the purchase, you may be given the opportunity to save a few dollars by applying for a store-branded credit card or by using a new checkout service (like google checkout). I frequently take advantage of these opportunities repeatedly by applying for the credit card, for instance, then cancelling it after one monthly statement. That leaves you open to apply for that card again in the future to get a few more dollars off.
  • If you purchase frequently at auction sites like eBay, set yourself a budget for any item you are interested in and stick to that budget come what may. Auctions are frequently emotional affairs, but you don't have to fall for that.
  • If you decide to buy the product at a local store, see if they have a price-match policy that will allow you to get a competitor's online price at the store. That can save you a few dollars. If not, you can cut a few dollars off the price by applying for and getting a store credit card at the time of checkout. Once again, cancel the card after paying off the purchase so that you can get the card again in the future if the opportunity is right.
  • Always keep track of prices for the product you bought for at least 2 weeks, but preferrably a whole month after you buy a product. Most stores have a price-match policy where they will refund you price-drops that occur during that time-frame. Some stores like do not have such a policy, but they still accept returns up to 1 month from when you bought a product. So, if the price-drop during that timeframe is significant, you may save money by returning the product and rebuying it in spite of the return shipping charges which you have to account for.
  • Mail-in rebates save some money, but be very careful about the terms and conditions of the offer to make sure you qualify for the rebates. When you send in the materials for a rebate, always keep a copy for yourself so that you can follow up if you don't receive the rebate in a timely fashion. Avoid mail-in rebate offers from unknown companies (this is particularly true of online cell-phone stores. Many of them have bad reputations for not keeping up their end of the bargain when it comes to mail-in rebates).
  • Extended warranties are practically never a good idea. Unless the item you are buying costs several thousand dollars and a replacement would place immense strain on your finances, don't fall for the smooth talk of extended warranty salesmen (or women).
  • Never carry balances on your credit card accounts. If you do, start saving up money to pay them off as soon as possible. I use credit cards purely as a convenience (I don't have to carry large wads of cash around), and to take advantage of the float (basically, you don't have to pay for a purchase until 30 to 45 days after the purchase, so you get to earn interest on that amount).
  • If you carry balances, you don't get that float. All your purchases are charged interest from the moment you make the purchase. Moreover, none of this interest is tax-deductible. It is much better to take out a home-equity loan to pay off all credit card balances since the interests are much lower and the interest is also tax-deductible.
  • I also only carry credit cards that give me cash-back benefits. The best known such card is Discover, but Chase and other providers also offer such cards. Note that most such cards have high interest rates, but that does not bother me in the least since I don't carry any balances on the cards.
  • I never pay annual fees for any credit card I carry. If you do pay annual fees for benefits such as earning airline miles, weigh them carefully against the benefits to see if they are worth it. Most credit cards with annual fees rely on the inertia of their customers to keep charging the annual fee rather than realizing what it is costing them and cancelling the card.
  • Avoid late charges and other problems by arranging for the credit card company to debit your bank acount for the payment automatically every month. This will also save you postage charges and check-printing expenses.
  • When you go grocery shopping, always shop with a list and stick to the list. Shop right after a meal if you can, rather than just before one.
  • Find out of the way, smaller stores rather than the big chain stores to do groceries in. Most of these local, smaller stores have a larger variety of fresher produce and carry most brand names that the bigger chains carry, but at lower prices.
  • Don't get carried away by pseudo-scientific nonsense and waste money on organic produce and other fads.
  • When you compare products, always do it on a unit quantity basis. Products are packaged in packages of different sizes, so the prices can not be compared directly across brands in many cases. Compare prices per unit weight for products that are sold by weight. For products like laundry detergent, compare prices per load. For toilet paper and paper towels, check for prices per square foot. Don't get fooled by marketing speak like Mega-pack, Double-roll, Super-size, etc., etc. Always compare the per unit price before you spend your hard-earned money on any product.
  • The only exception to this rule is when it comes to paper towels. We use only Bounty paper towels because they are very tough and are almost like rags. We reuse paper towels several times before starting to use a new one (just wash them, squeeze them dry and spread them out on a counter top to dry, and they are good to go again). Bounty lasts through several reuses while most other brands do not. So, even though the initial purchase price is a little higher, the reuse pays back the difference and more.
  • Don't be too brand-conscious for most products. Most of them are about the same and many don't justify the higher prices just because they come with a better brand name. Store-brands are often comparable to national brands in quality, but cost much less.
  • If you are brand-conscious, invest in a sunday newspaper every week. You can recover the cost of the paper by using a couple of coupons on brand-name merchandise every week. Also check online at sites like for printable coupons. But if you don't mind buying off-brand, don't bother with coupons. Even after the coupon savings, most brand-name merchandise will be more expensive than their off-brand equivalents.
  • Don't think that you are always getting lower prices when you shop at membership bulk-purchase stores like Sam's Club or Costco. I have found that many items are cheaper on a per-unit basis at Walmart than at Sam's Club. Also take into account the likely wastage when you buy 10 lbs of something and can't use up all of it before it expires, or you get tired of it and decide to throw away what is left after using half of it.
  • You also have to invest in more storage facilities and may even have to purchase a larger refrigerator to take advantage of some of these bulk-purchases. It may be better in the long run to buy fresh in smaller quantities unless you have a large family.
  • In any case, remember to weigh off any savings against the often hefty membership fees before making the final decision. Try to join together with other folks in the neighborhood and share the membership fees to save some money.
  • Don't succumb to impulse purchases. When you think you need something, try to distract yourself so that you forget about the product for a few days. See if you still feel you need it after those few days. Most purchases turn out not to be essential or even very useful. You see someone using it, you think it is cool and it turns out to just be a waste of money.
  • Almost never buy software. There are free alternatives to almost all the software you would ever need or use. I will have to devote an entire post to the software I use, but the general idea is that if you search, you will find well-regarded free software that can do pretty much anything paid-for software is supposed to do.
  • Examples of free software that is equivalent to or better than paid-for software is Open-Office, DVD-Flick, etc. The first step to identifying free software is to figure out what you are going to use it for. What are the features you need, what are the features you think would be useful, etc. Then, do some searches online to locate what you need. Start at and then keep digging at sites like and Gizmo's Freeware site.
  • The important thing to remember is that there is probably free software to do pretty much anything you want to do, especially if you own a Windows PC.
  • Unfortunately, software is a pretty specialized area, so I will probably end up putting together my thoughts on free and open-source software in a separate post.
  • Set the thermostat a couple of degrees below where you would have set it. You can always make yourself comfortable at that temperature by throwing on some socks and an extra layer of clothes. You need those anyways when you are ready to step out, so there is no harm in wearing them indoors too.
  • Set the thermostat at least 5 to 10 degrees cooler in the night than during the daytime because your bed covers will keep you much warmer during the night.
  • Avoid using the air-conditioner at home. Invest in a couple of good fans for each room.
  • Pack a lunch to work everyday. Eating out is not only less healthy than eating home-cooked meals, it is also much more expensive. Imagine saving $10 on a daily basis every single working day of the year.
  • Give up sodas. They are just carbonated sugar water. They are loaded with empty calories and provide no benefits over a refreshing drink of fresh water from the tap.
  • Quit smoking. It is one of the most expensive habits to maintain, and your lungs and other body parts will thank you for it.
  • Don't buy lottery tickets. Lotteries are just an additional tax on the stupid (the government relies on self-declaration and payment of this tax). The odds of winning a lottery are not much different whether you buy a ticket or not anyways!
  • Don't buy new cars every couple of years. Stick to a car for as long as you can and drive it into the ground before you buy another. This will save you several tens of thousands of dollars over a lifetime, dollars which will enable you to perhaps retire earlier or live more luxuriously in retirement. When you do buy a car use an online service like to save you the hassles of haggling and playing other games with your local car dealer.
  • Check out your local public library for not just books, but also movies. Even if your local library does not have the particular book you want, they can arrange for an interlibrary loan to get you the book. Most people read a book only once, so don't waste money acquiring books that will either just sit around collecting dust or will get thrown out after one read.
  • If your library has a good video section, take full advantage of it. My local library has a wonderful DVD section that is almost comparable to the local blockbuster store for variety and selection. But it costs me nothing to rent a DVD from my library as opposed to several dollars to do the same from Blockbuster or Hollywood. I can also keep the movie for longer and most public libraries will not charge you late fees unless you are egregiously late in returning materials.
  • If your tastes in movies and other video material is very esoteric, you might want to sign up for a good online store like Netflix because they tend to be cheaper over the long run (if you are disciplined about watching and returning movies quickly) and they also have a much more diverse and extensive collection than any brick-and-mortar store out there.
  • When shopping for travel, here are some sites to keep in mind: check prices on the major outlets like Expedia, Orbitz, etc. In addition, check some smaller and less-well-known sites like kayak. Some of these sites provide low price guarantees (if your air ticket becomes cheaper between you buy it and when you are supposed to travel, they will refund you some of your money).
  • Check out Farecast for trend information about whether prices are likely to fall or rise in the future. You can use that to decide when to buy your tickets if you have a long lead time.
  • In addition, if your plans are flexible, you might get good deals on priceline and other sites. Always start your bids low and go up slowly.
  • Pack and travel light to reduce not only your hassles and possible health problems from shlepping heavy bags around, but also because you don't have to pay baggage fees, etc.
  • Shop extensively for rental car rates. You can use a comparison site like BreezeNet, but they sometimes do not catch all the special rates that are available on the rental company's own website. In addition to major companies like Hertz, Avis, etc., look for rates at lesser-known rental companies like Dollar, Budget, Thrifty, National/Alamo, Advantage, Enterprise, etc.
  • Also try local car rental companies by doing google searches for car rental companies in the city you are traveling to. These companies will normally not put their prices up in a central repository to be picked up by comparison sites like BreezeNet. It can be more inconvenient to rent from such companies, though, because they may not have an airport presence. You sometimes have to call them from the airport after you arrive and they will pick you up and take you to their location to complete the paperwork and give you the car keys.
  • Hotel rates are similarly variable and you should do research on good comparison sites like in addition to the individual hotel chains' websites.
  • If you don't mind more budget accomodations, you can try a good youth hostel site like hostelworld. They list not only what most people think of as youth hostels (with dorm-type accomodations, shared bathrooms, etc.), but also low-budget hotels that actually have private rooms and baths. Very of these properties have any age or other limits on who can rent from them, so go ahead and give them a try.
  • Save gas by keeping your vehicle tires at the right air pressure or slightly over-inflated. Quite unintuitively, under-inflated tires are more likely to expose under the stress of long-distance driving than over-inflated tires. It is because under-inflated tires have to flex a lot more and the flexion builds up heat which can cause a blow-out.
  • Don't idle longer than you have to. Even in cold weather, drive slowly rather than just sitting idle with the engine running.
  • Buy the lowest grade of gas your vehicle's user manual asks you to use. Higher octane does not give you higher gas mileage.
  • All brands of gas are pretty much the same. Don't fall for marketing-speak and pay higher prices for gas with detergents and other additives.
  • Additives to your engine oil and/or gas that claim to improve gas mileage, clean out your engine, solve world hunger or end wars all over the world are nothing but snake oil. Don't waste your money on them.
  • Drive slow and steady rather than accelerating and decelerating suddenly. Anticipate slow-downs well ahead of time so that you can slow down by taking your foot off the gas rather than stomping on the brakes.
  • Excessively high speeds on the highway consume disproportionately large amounts of gas. Don't drive slowly enough to cause accidents, but avoid excessive speeds. If you are driving slower than the rest of the traffic on the road, stay in the right-most lane.
  • Keep your windows up. Opening them, especially at highway speeds, increases wind resistance and decreases gas mileage. Driving with the AC on and windows up saves gas compared to driving with the AC off and windows down.
  • Don't overload your car with unnecessary stuff. A lighter vehicle consumes less gas than a heavier one, so don't tow unnecessary trailers or carry bags of gravel in the trunk when you don't need to.
  • Analyze the line items on every bill you receive and see if you are paying for something you don't need. For instance, if you are paying for a discount long-distance calling plan on your landline phone, but use your cell-phone for making all your long-distance calls, get rid of the line item on your land-line bill. Same goes for cable channels you never watch and things like that.
  • Pay particular attention to things that utilities add on to bills as "insurance to pay for repairs". These are usually big scams that have tons of exceptions, have very low maximum payouts and are very expensive.
  • Analyze your bank statements to make sure you are not paying monthly fees, per-check charges, etc. If you are, shop around for a different bank. Banks, again, rely on the inertia of their customers to continue earning junk fees for things that other banks provide for free.
I am sure I am missing dozens of other tips in the list above (not including the software-related tips for which I have to write up a new post anyways). Some of the tips may require one to be less image-conscious than before perhaps (driving a car for 10 years is obviously not going to look as cool as driving up in a new-looking car every day), but this is about substance, not image. This is about living a more financially secure life, not about being flashy. This is about having the right priorities for a more fulfilling life rather than one spent chasing the latest fad at the expense of long-term financial safety and security.


Meg said...

Overall, a very good post. However, I disagree with a few bits. But as I can't seem to copy and past the notes I made (or anything else) into this box for some odd reason, please see:

Anonymous said...

All brands of gas are *not* the same:


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