Tuesday, January 29, 2013

How to Save More Money Now

Tricks to help you make, save and potentially grow some green.
By Jayme S. Ganey

The economy is in flux, but that doesn't mean you're destined for a downward financial spiral. The following tips will help you manage your bills, stash away savings and set yourself up for the future.

Place Your Bills on a Budget

Utility payments, along with mortgages and car notes, are typically one of the largest monthly payments. Opt for budget billing: You pay a preset monthly amount based on your annual average energy consumption, advises James Petty, senior vice president of Regions Mortgage in Atlanta. If your home consumes more energy than the budgeted amount pays for, the difference can be added to a single bill or split over several months. If you use less energy, your account will be credited. Call your utility company for details.

Negotiate a Better Credit Card Rate

Don't pay 23% interest on credit cards. Visit CardRatings.com and search the comparison list for a better deal with lower ongoing rates and perks like airline miles, cash back and gas rebates. Keep in mind: Most introductory rates of 0% can expire in six, 12 or 15 months, so pay your bills on time and build up positive credit to negotiate a decent rate.

Pay Your Mortgage Principal First

While mortgage interest rates are low, Jordan Goodman, personal finance expert and author of Master Your Debt: Slash Your Monthly Payments and Become Debt-Free, advises that you apply extra payments to the principal to build equity in your home. Owing less on the principal means less interest over the life of the loan, which eventually equals smaller mortgage payments and more money in your pocket. You can also consider borrowing money against the equity in your home to pay off higher-interest-rate loans. For example, you can take out a home-equity line of credit (HELOC) and pay your credit card, student loan or auto loan out of it, since, as of February 2012, HELOC rates were averaging approximately 5% interest, according to Bankrate.com, vs. the higher interest rates on other loans. HELOCs, which are revolving lines of credit at variable rates, can sometimes be refinanced or converted into fixed-rate loans. To get started, you need positive cash flow, sufficient equity and a high credit score. Visit TruthInEquity.com for more information. Keep in mind that you put your home at risk of foreclosure if you can't make the required payments.

Make Your Kids Match Your Money

Paying for your children's college tuition is an investment, so treat it like one, says Ellie Kay, author of The 60-Minute Money Workout: An Easy, Step-by-Step Guide to Getting Your Finances Into Shape. When you invest, you seek to have your stocks work for you and you expect a regular report on progress. So think of your students' contribution as your 401(k) company match: Tell them they need to match your investment with their own money from a work-study job, scholarship or part-time gig to help pay for books, meals and gas. They also need to provide you with a report of their performance. A bonus: They'll be more invested in doing well if they're paying for part of the ride.

Move Your Money Around

If you think you’re paying too much for loans, you probably are. With the low interest rates currently available, you should shop around for the best deal. Adrian Nazari, CEO of CreditSesame.com, which helps consumers optimize their loans, recommends charting all of your loans: home, auto, student, credit cards. Write down whom you owe, what you owe, the current interest rate and the terms. Optimizing your loans allows you to move money where it is needed. If you have a credit card with an 18% interest rate, for example, consider transferring the balance to a lower-interest-rate card, which will allow you to pay down the balance faster.

Adapted from the January/February 2012 issue of Essence. © 2012 Time Inc. All rights reserved.

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