5 Tips for Saving when Unemployment is Rising

As we creep into Labor Day we learn that the unemployment rate rose in August to 9.7% from July’s 9.4%. The U.S. Department of Labor announced September 4 that this rate is the highest in more than a quarter century. There are now an estimated 14.5 million jobless Americans.

I know what it feels like to lose a job. In early 2003, I lost my six-figure television job as a Wall Street Journal reporter for CNBC. Like millions of others in corporate America, I, too, was laid off in a cost-cutting move.

After my layoff I didn’t immediately rein in my spending. I even made some serious money mistakes that I’d never advise anyone else to make. For example, I took $80,000 out of my 401(k) plan.

I tell you my story in the hopes that you won’t be ashamed of the money mistakes you’ve made or that you can even learn from the mistakes I made in the past and not even make them.

Here are 5 tips for saving if you’ve been laid off, fear you might or just need to save more.

1. Don’t raid your 401(k). If you lose your job, leave your 401(k) with the same account if you can. Otherwise roll it over directly to a IRA or Roth IRA without taking any as cash. You will have 20% withheld for taxes if you took cash. And there’s a 10% early withdrawal penalty if you’re under age 55, as well as the missed opportunity of tax-deferred growth.

2. Pay bills on time. I know that is easier said than done for some people. You can save hundreds of dollars a year on late fees if you simply pay your bills as you receive them or set up automatic payment plans.

3. Curb eating out. You can save $1,825 a year by cutting out an average of $5 a day on fast food purchases and $3,650 a year for an average of $10 a day. Take a week or two and track your restaurant spending habits. Tabulate every bagel and coffee. You might be surprised by how much money you’re wasting on these purchases.

4. Become a frequent library patron. Borrow videos, DVDs, CDs and books from the library instead of purchasing them. If you’re used to buying even just 10 DVDs a year at $10 – $30 a pop, or downloading 50 MP3 music files a year for $0.99 – $1.99, or renting several videos a month from Netflix or Blockbuster, you’ll save hundreds of dollars a year by simply borrowing them from the library instead.

5. Take a level-headed friend shopping with you. If you’re the type who just can’t stop spending, bring a friend with you who can keep you focused. Don’t bring the friend whose Visa bill is constantly more than her rent, but do bring the one who knows not to squander rent money for a new pair of shoes one doesn’t really need. A friend with a good head on her or his shoulders will keep you from making outlandish purchases and wasting your money. Take that friend’s advice without holding it against her or him.

5 Tips for How and Where to Save Money

By Lynnette Khalfani-Cox, The Money Coach

We all can take advantage of some money-saving strategies, whether or not we have Financial Deficit Disorder. Whether you want to save money to buy a house, sock away for retirement, college or a rainy day, here are five tips, adapted from my book “Your First Home: The Smart Way to Get It and Keep It,” that will help you slash your expenses.

1. Save on Your Car. There are a lot of expenses involved with having a car: gas, maintenance, insurance, parking, and a monthly payment if you have a loan. To save on gas and parking, you can give up a paid covered parking spot and park for free on the street, or take public transportation into the city to avoid feeding quarters in a meter or shelling out cash at a garage. To save on car insurance, opt for a higher deductible in exchange for 10% to 25% off your annual premiums, or ask your insurer about good driver discounts, discounts for having an alarm system, or lower rates for taking a defensive driving course. You can even save on your car loan by refinancing it, just as one might a mortgage, but without the closing costs. Try Capital One Auto Finance, which offers refinances in 15 minutes.
2. Save Money on Food. I know you already know you can save money if you went to fast food or sit-down restaurants less often, but you can also save money by keeping those loose coins in your pocket. Stop making daily runs for coffee or ice tea, or even donuts or a bagel before work. (You can buy a whole bag of bagels from the grocery store for the cost of just one bagel at some delis, so why not just grab one out of your cupboard instead?) And avoid those trips to the vending machines for junk food. Many people spend about $5 to $8 a day on drinks and snacks, amounting to $1,200 to $$2,000 a year! While you’re saving by buying those bagels and snacks at the grocery store instead, don’t forget to clip coupons and use them to save even more!
3. Save Money by Kicking Bad Habits. If you have a habit that’s hurting you, financing or health-wise, it’s time you kicked the habit. For example a chain smoker could save $300 a month or $3,600 a year! If you’re a drinker, cut down from three drinks on your nights out to just one and save yourself $10 – $20 by the end of the night.
4. Save Money on Utilities. Leaving appliances plugged in when you’re not using them only adds to your electric bill. Unplug toasters, coffee makers and blenders until you need them and only run dishwashers and washing machines when the load is full. If you make a habit of all this, you’ll save 10% on your energy bills.
5. Save Money on Entertainment. Stick to free or low-cost forms of entertainment. For example, choose free museums — or even if it is a paid museum, most offer a free or discount day, attend then. Walk around a lake or have picnics in the park. If you’re a partier, get to the club early before they start charging a cover. For those of you who wouldn’t be able to resist buying more drinks because you’re there longer, then opt for a party at a friend’s house.

Your First Home: The Smart Way to Get It and Keep It

For these and other money-saving tips, see Chapter 3 of my book “Your First Home: The Smart Way to Get It and Keep It.