How To: Manage your Expenses

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Bu Shubham Singhvi

The expenses can broadly be divided into two categories:

• Variable Expenses

• Fixed Expenses

Variable expenses are more day to day and managing your expenses would largely mean managing variable expenses.  Some ways to save on variable expenses are as follows:

• Buy Sunday’s newspaper (e.g. Washington Post) for many useful grocery coupons. While you can use the coupons to cut your weekly grocery bills- you must also refrain from buying things you don’t really need. It’s easy to get lured by the tempting coupons and end up buying the cosmetics that you never use.

• Never ever go out shopping for groceries with a hungry stomach! Studies show that you tend to buy lot more unnecessary food items if you are hungry while shopping.

• Avoid eating out. Prefer take-outs if you must. Use the calculator on your cell phone to calculate the gratuity tip to avoid over-tipping- unless you are overly impressed with the service! 15 to 18% of your bill is just fine. ALWAYS look for deals in websites like Restaurant.com. You can save real good money.

• Its a good idea to prepare coffee at home and carry it in travel mugs instead of stopping by at Starbucks every day. You could be saving more than $750 a year if you cut down just one cup of Starbucks coffee a day. That could probably buy you a 42′ flat screen LCD TV!!

• Join Fan clubs of the movie theaters that you frequent. You will often be rewarded with free refreshments and even free tickets. Most theaters have discounted matinee shows. If your schedule permits- go for them. You can even buy the movie tickets from clubs like Sam’s Club and BJ’s. They usually sell packs of five to ten tickets at much lower prices. For example, Costco is now selling 5 premier super saver tickets for $37.50. These tickets can be used in any Regal Entertainment Group’s theaters for any movie. In most cities you would be saving around 30% on cost.

Fixed expenses may not be flexible in the short run. However, here are a few tips you can consider for cutting down on them:

• Cash in on the home equity. If your value of your (according to your lending bank) house as, say $300,000 but your loan is of only $250,000, you can borrow another $50,000 at the home loan interest rates. This would have double benefits- the home loan interest rates are generally cheaper than other loans (like auto or personal loan) and you will also enjoy the same tax benefits on these loans as you do for the home loans. You can use this extra money to finance your vacation, your next car or your extravagant wedding!

• Consider re-financing your home loans. Discuss the restrictions and penalties with your current and prospective lender before plunging into re-financing.

• If you are paying very high house rent, you can consider buying a house instead. Good research, however, is highly recommended before the house purchase. Given the current economy, the house may not give you sufficient returns when you plan to sell them off.

• Request for quotes from competing insurance companies and compare them with your current premiums. Bargaining with your current insurance company would mostly work out. You can always switch if they refuse to match the quotations. Buying all the insurance policies from the same provider may also save some money. Membership of organizations like AAA would also reduce the auto insurance. In addition, AAA membership can also fetch you discounts at other places like hotels.

• Check your utility bills. Check if there are channels that you never watch but are paying extra for them. If you are at work all day and barely use your internet at home, paying extra for high speed internet may not be worth it. Unplug the appliances that you are not using. Remember to unplug your cell phone and laptop chargers, microwave ovens etc. Believe it or not, you can save up to 40% of your bills just by unplugging!

• Buying second-hand stuff can sometimes be a good deal. If you planning to buy things like a bed for your guest bedroom, there is no harm in trying to buy second hand items garage sales or from craigslist.org. Its good to check the things thoroughly and always try to bargain on the price. You can get good deals if you search patiently.

How do you manage your expenses?