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The following is an excerpt from The Real Cost of Living by Carmen Wong Ulrich.



THE BENEFITS OF SAVING AND HOW TO DO IT BETTER

Saving money will save your hide. By looking at the cost of not saving, you see the benefit of saving. If you lose your job or have a drop of income in the household, you have that safety net, kind of like the ones that catch trapeze artists when they fall. Instead of painfully going kerplop, you fall, then gracefully pop right back up again to where you were. Having eight months of cash savings around can prevent you from losing your home, moving yourself and your family, losing your way of life, or even just falling behind into credit card debt that will eat away at your hard-earned dollars for years. Those savings will also be your psychological cushion. Knowing that they're there will help you relax, be healthy, focus on other things, and even say auf Wiedersehen to a job that's killing you. (This is known in some circles as FU money.)

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Peace of mind is priceless. In this case, you can build your own peace of mind, and you and your family can enjoy the rewards, at a comparably small immediate cost (sacrifice, taxes, inflation).

Most of us, in response to the icy wake-up call known as the recession, have become aware of the dire need to save cash. Our savings rate as I write is around 5 percent, which is not as good as the 8 percent or so we were saving in the 1980s, but I'll take it. So how can we save better, and more? There are three ways.

1. Automate It

When our employers take money out of our paychecks for our benefits and retirement savings before we even see it, we tend to not miss it as much. Act like your own employer: Get the money out of your account before you even see it and before you can use it. Sign up for automated, regular withdrawals from the checking account in which you deposit your paycheck; have that money go into a savings account or money market account that pays interest. This for years now has been the best way for me to save. Particularly when you're on a very limited budget, this is one savings secret that's well suited for tight living. Just don't automate so much savings that you end up using your credit card or paying overdraft fees. No sense in that.

2. Find the Money

After you've looked at your monthly budget. I'm assuming you've done that already but if not, pull together all your receipts and bills for one month, including ATM receipts and small purchases, and tally them up into categories to see where you're spending too much and where you can cut back fairly easily; look closely at your regular monthly bills. Of course, the biggest expense for most of us is our home, which may not be a manageable expense to cut down. But if you see that your home is costing you (in mortgage payment or rent, home insurance, and property taxes and maintenance) more than around 35 percent of your take-home pay every month, you've got a big decision to make. Other pricey places to look to cut expenses and transform them into savings is the cable bill, phone bills, and utility bills. Are you paying too much for these services? Most of us are, but there's nothing like a little research and time with customer service to save another $100 a month. First, check out what the competition is off ering. Then use that knowledge to call customer service for your cell phone, landline (or even consider cutting your landline altogether), Internet service, and cable bill, and ask them (nicely!) to lower your rates. After all, the competition is offering a lower amount and you really, really don't want to have to switch, but you're trying to save money in hard times! You'd be surprised how a little negotia¬tion can put another $1,000+ a year in your pocket.

A couple other cost-cutting tools can be found online. Bookmark the following sites:

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■ BillShrink ( www.billshrink.com)

■ FatWallet ( www.fatwallet.com)

■ RetailMeNot ( www.retailmenot.com)

■ CouponMom ( www.couponmom.com)

■ PriceGrabber ( www.pricegrabber.com)



3. Make More Money

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This one is the most difficult way to boost your savings, but where there's a will and a need, this one packs a lot of juice. Bringing more money in doesn't need to be as big as working an additional twenty hours a week at unskilled labor, though if you're so inclined, go for it. Take up holiday and weekend dog walking for neighbors who need to travel, which can bring in another $100 to $200 a month that goes directly into that savings account. Depending on your skills and ex¬perience, the following freelance opportunities may bring you in some extra cash in your spare time: website design, graphic design,

editing, baby-sitting, catering, and cake decorating. Or make extra money by extending your day job, such as doing your friends' taxes if you're a CPA. Just be careful. If you're not taking on an hourly week¬end or evening job but instead working on your own, make sure you keep this savings work separate from your full-time job. Your full-time job comes first, then your savings job. Just make sure that the extra funds you make don't turn into extra spending; keep your life on a one-job budget and put the extra money directly into savings.





Reprinted with permission from Perigee books, a division of Penguin Group, USA; from THE REAL COST OF LIVING by Carmen Wong Ulrich, 2010; pages 208-211.

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