25 Tips on Budgeting to Save $10 a Month

The Dog Days of Summer are winding down and if you are like a lot of people, this summer has really eaten into your budget. Do you need a break? Do you need to trim the fat and start saving more money? Let’s say you were to save only $10 a month. In 30 years you could have more than $14,000. Try following these tips on budgeting. They will all help and you may end up saving a lot more than $10 a month!

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1. Give up buying coffee – Make it at home
2. Don’t eat out/Limit how often you eat out
3. Buy Grocery’s in bulk
4. Clip Coupons
5. Fill up car with gas mid week
6. Don’t speed when driving
7. Open a high rate savings account with $1,000 for ‘Emergency Fund’
8. Limit alcohol consumption/Quit smoking
9. Lower heating when you are at work or at night to 15 degrees
10. Recycle (many places require bag tags for garbage and you can recycle containers to store food)
11. Change your diet – Don’t buy junk food
12. Pay off your credit cards
13. Shop for clothes in thrift stores
14. Turn off your lights when not in a room
15. Look online for free coupons on products
16. Bring Lunch to work the most common of the tips on budgeting
17. Car pool whenever possible
18. Turn off your computer when you aren’t using it
19. Consider games night instead of going out to movies with family
20. Get rid of old refrigerators/appliances etc
21. Unplug chargers for cell phones/digital cameras etc when they’re not in use
22. Only use dishwasher for full loads. Half loads add up and become very expensive or hand wash dishes
23. Limit long distance calling to evenings and weekends
24. Cancel magazine/newspaper subscriptions – do reading online.
25. Renegotiate cell phone/cable/internet/mortgage/insurance plans etc. Company’s want your business. Make them fight for it!

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Well good luck with following these tips on budgeting. Let us know how they go. I’d love to hear about some success stories at the end of September!

Cheers!

Brandon

Starting a Thrift Store
The Dollar Stretcher Blog
by Gary Foreman

I would like to open a thrift store either in NY or GA. How does this work and in your opinion, is this a good business? Also, are thrift stores considered not-for-profit??? And why do some thrift stores give write off for donated items and others do not?

Arlene

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A tough economy has triggered an interest in thrift stores. Right now everyone loves a bargain! So Arlene asks a good question. Is this a good business to enter?

We’ll begin by getting a better understanding of thrift stores.

Arlene points us to the first important distinction. Some are non-profit while others are not. What’s the difference? The non-profit stores exist to raise money for a non-profit charitable organization (think Salvation Army or Goodwill). Typically the stores are owned and run by the charitable organization. Employees can be paid for their work, but many volunteer because they believe in the charity.

Because the store is a charitable operation people can donate goods and take a tax deduction for the value of their donation. So most (if not all) of the product that the non-profit thrift stores sell doesn’t cost them anything. Consequently, after paying rent and utilities, much of their sales dollars benefits the charity.

The other type of store (and presumably the kind that Arlene is contemplating) is a for profit store. In this case no charity is involved. The store is run like any other business. Profits belong to the owner and they’ll pay taxes on them.

But that also means that people won’t get a deduction for donated goods. So for profit stores have to buy much (all?) of their inventory. It also means that they labor is more expensive.

So should Arlene open a thrift store? We can’t answer that for her, but we can tell her how to answer it for herself.

Begin by setting up a business budget. Estimate what your first year expenses will be. Start with the store itself. How much will it cost to rent? How much will you spend setting up displays and outside signs. Is anything required to bring the store up to building codes? Don’t forget utilities and deposits. Insurance? Any permits or local business licenses?

Add in the labor costs. Even if Arlene is the only employee, she’ll want to pay herself (after all that is the idea here!). And, when she does, she’ll be responsible for Social Security taxes. Depending on her state she might also be on the hook for worker’s comp, other insurance or state/local taxes.

At this point Arlene will have an idea of her expenses. Next she’ll estimate how high her sales will need to be to break even. For illustration we’ll make some assumptions. Let’s say that what she buys for $1 she can sell for $4 (this is an important estimate so give it proper thought). If her expenses and salary total $40,000, she’d need to sell $53,333 worth of merchandise ($40,000 divided by the profit margin of .75 or 3 divided by 4).

Bottom line, that’s a lot of product for Arlene to sell. And, it might explain why there are so few thrift stores that are not affiliated with a charity.

But, all is not lost! There are ways for Arlene to get into the resale business with much less financial exposure.

The one most similar to opening a thrift store would be to rent space in a flea market. Instead of being responsible for a whole building, you only rent a small space within the building. That dramatically reduces expenses and increases Arlene’s chances for profitability.

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A second alternative would be to hold regular garage sales. That way she has no overhead. Any mark-up on products sold goes into her pocket. One caution. Some towns have laws limiting the number of sales you can have in a year. You’ll also want to consider your neighbors.

A final alternative is to set up an online store, perhaps on eBay.com. It costs almost nothing to get started. And, it has one advantage over a ‘real’ store. The internet attracts buyers from all over. So you can specialize if you want. Many online sellers only do old books, records, vintage clothing or collectibles. Generally these items draw higher prices than most thrift store merchandise.

So what should Arlene do? Walking through the steps needed to estimate the expenses and income should give her fairly clear idea. Fortunately, it’s not an all-or-nothing proposition. She has can select the best way to get started.

Keep on Stretching those Dollars!
Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website</a>  and various e-newsletters including Financial Independence. Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom!

Three Ways Smart Shoppers Can Streamline Their Budgets - Tips on Budgeting

Written By: Jeff Cambron

When most frugal-minded folks look at an over-stuffed budget, their first inclination is to start making cuts.  While we’re all for eliminating unnecessary purchases, being frugal isn’t just about denying yourself things that you want but don’t need.  It’s also learning to optimize your spending habits so you CAN have some of those toys now and then.  Check out our three favorite shopping tips that should help you get more out of your budget each month:

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Buy at the Right Time

Timing is everything, they say, yet many people don’t know how crucial timing can be when making major purchases.  Knowing the best time to buy that new car, house or lawn mower could be the difference between saving hundreds if not thousands of dollars every year.  Rather than slashing pricey purchases from your budget, savvy savers are better off planning ahead, anticipating key purchases throughout the coming year and identifying the optimal shopping date.

Some buying dates are no-brainers that just require a little discipline.  Air conditioners, for example, are cheapest in October once the sweaty summer season has past.  Makes sense.  Sure you might feel silly shopping for a new unit while your friends are picking out winter coats, but you’ll be the one laughing once they see how much money you saved.  Other items, though, can be trickier and require a little insider info.  Did you know that January is the best time to buy a bicycle?  How about that October is the cheap season for jeans shoppers?  To help lay out your shopping strategy, check out FreeShipping.org’s “Best Time to Buy Guide” for 75 products and services.

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Cash In On Gift Cards

Unused gift cards are a multi-BILLION dollar black hole in American budgets!  It’s been estimated that there’s around $40 billion in unclaimed gift cards collecting dust in US homes right this moment.  Go through your drawers. check those jacket pockets and clean out the desks.  Gift cards are easy gifts but are sometimes just as easily forgotten.

Another simple way to stretch your budget with gift cards is purchasing discounted cards for everyday purchases.  Using websites like GiftCardGranny.com, you can find cards for brands like Best Buy and JC Penny on sale for 10-50% less than their value.  Stock up and save.

Never Pay for Shipping

After doing your frugal best to sniff out a great online deal, there’s few moments more deflated for shoppers than seeing exorbitant shipping fees tacked on to your formally fantastic price tag.  Paying for shipping in 2010 is just unnecessary and something all of use can virtually eliminate from our budgets.  Check out FreeShipping.org for free shipping coupons to over 2400 merchants like Sears and Victoria’s Secret and keep those discount prices where they belong.

Bi-Monthly Credit Card Payments - Tips on Budgeting

The Dollar Stretcher Blog

Written by: Gary Foreman

I have heard that paying on a credit card debt every two weeks, instead of paying it once a month saves on interest and could pay off the debt faster. Is this true? I have been trying to put at least $50 on the debt, every two weeks, plus pay the minimum, once a month, but not seeing much progress. Will this help in the long run, more than the short term? Is there a better way to go about paying credit card debt off than bi-weekly? 
Sue M.

Sue asks a good question. Can paying a little extra every two weeks really reduce her credit card balance? And, the answer is (drumroll, please): sometimes…

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Sometimes??? What kind of an answer is that? It’s a truthful one. But don’t worry. We’ll show you an easy way to see if your situation is one where bi-weekly payments are a good idea.

The first thing we need to do is to learn a few facts about credit card accounts. Most of us get a monthly bill. We can pay all of it, just the minimum or something between the minimum and all of it. You already knew that.

What you might not have known is that your payment is credited to the account the day that it’s received. Not on the due date on your statement. That’s important because of the next fact.

If you carry a balance on your account, the amount you owe is racking up interest charges every single day. You may think that you’re paying 14.04% (Bankrate.com http://www.bankrate.com/credit-cards.aspx). That’s the annual rate. You’re really paying 0.03846% per day.

The bank will calculate your balance daily and also how much interest you owe for that day. Anything that reduces your balance will reduce the amount of interest charged for that day and all days after.

OK, so making an extra payment every two weeks is a good idea, right? Not necessarily. It could be that you have better options.

We’re going to do some calculations. But, let’s be honest and admit that most of us don’t like math. So if you’re math-phobic you can just skip the next two paragraphs. You don’t need them to get to the right answer.

Sue is putting in an extra $50 two weeks before she sends in the rest of the bill. So how much does that save her? To borrow $50 at 14.04% will cost her $7.02 per year or 1.9 cents per day. So paying $50 14 days early would save Sue 26.6 cents.

But the stamp to mail in the check will cost nearly twice that. Not to mention that her time is worth something. So sending in an early check actually costs her more than she saves.

So how can Sue tell when it makes sense to send in an extra early payment? Actually, that’s not hard at all.

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It makes sense to pay your credit card bill more than once a month if any of these are true:
- you can make your payments online
- you have the money now, but might spend it before your credit card due date
- the amount that you’re sending is $200 or greater
- you feel that you need the discipline/deadline of weekly or bi-weekly goals

If not, just pay your bill once a month.

The most important thing you can do to pay off a debt is to pay more than the minimum amount. Every time you do, you reduce the amount of interest that you’ll have to pay for every day in the future. So the biggest effect on Sue’s balance is the extra $50. That’s true whether it’s a separate payment or if she adds it to her regular monthly payment.

Also, remember that you can pay your bill early. If you really want to save that 26 cents, just mail the bill a week before it’s due.

Here’s hoping that soon Sue won’t have to worry about early payments. All she’ll need to do is to pay the entire balance when the bill comes each month.

Keep on Stretching those Dollars!

Gary

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Gary Foreman is the editor of The Dollar Stretcher.com and e newsletters including Financial Independence. Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom!

Tips on Budgeting

Written by: Robert Stretch

If you’re looking for ways to save money on your mortgage these days (and who isn’t?), then this post is for you. Everyone’s feeling the pinch these days, and the largest expense for the average household is the cost of housing. Thankfully, there are some easy steps you can take to decrease your monthly mortgage payment or even reduce the total amount that you’ll pay on your mortgage throughout the life of the loan. Here are just a few of the options you have if your mortgage is a bit overwhelming.

1. Pay a Few Extra Dollars Each Month, Save Thousands in the End. By paying just $100 more a month on your loan, you could easily save between $50,000 and $100,000 over the life of your mortgage (potentially more if you have a large loan). Simply put, each dollar that you pay as soon as possible is one less dollar that will accrue interest over the years of your payments. If you have any wiggle room in your budget, even $50, consider putting it to your house payment.
2. Use a Government Sponsored Loan Program to Purchase a Home. Because they are underwritten by various government agencies, FHA, VA, and USDA loans can save borrowers a substantial sum over traditional loan programs. Each is ideal for lower income buyers or those who have had some credit trouble over the past few years, and each features a variety of financing options, including low or zero down payment and the ability to roll closing costs into the loan.
   

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3. Choose a Bi-weekly Payment Plan. If your mortgage has the option available, choose a bi-weekly payment plan instead of a monthly one. Since most people get paid bi-weekly, synchronizing your mortgage payment with your paycheck can make budgeting much easier. Plus, you’ll end up making the equivalent of one extra monthly payment a year, saving you money on interest later.
4. If Your Payment is Too High, Refinance. Refinances are at an all time high lately, and it’s no wonder. Refinancing your loan can save you plenty of money each month, particularly if you’ve been paying your mortgage for several years without refinancing before. Since interest rates are incredibly low right now and since you’ve paid a bit on the principle of your loan, you’ll most likely get a lower monthly payment. In addition, refinancing can give you the opportunity to consolidate other debt or get cash out of your house for improvements.
5. Consider an 80-10-10 Mortgage. This option is actually two mortgages that are combined to eliminate the private mortgage insurance payments that buyers pay if they do not have the traditional 20% down payment. 80 percent is financed as a first mortgage, 10 percent is a second mortgage and the other 10 percent is typically a cash down payment. These loan payments are tax deductible, while PMI payments are not.

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Most importantly, consult a financial advisor or mortgage loan professional for all of your options before you proceed with any of these steps. A loan advisor is an expert and can use a variety of resources to get you the best rate, payment, and financing for your specific situation.

Learning to Invest Early: Why It’s So Important - Tips on Budgeting

Written by: Breana Orland

Everyone knows the value of investment. Putting away your spare bit of change is your nest egg for the future. If you want to retire early (or even on time), it is vital to have a sizable investment portfolio. Young people tend to know about investment options but think they can’t afford to start the process themselves. This is a common and critical mistake. Investing early is not only a good idea, but it is easy and can start with the smallest of contributions.

Investment is a long-term commitment. It’s simple in that the longer you invest the more money you earn. Unless you are a professional market player, investment income is not earned in bulk. Start with one hundred dollars today. If you stick with low-risk investment strategies you will have more than one hundred dollars next year. Budget monthly contributions to your portfolio and over time your results can be very impressive. The trick is simply to get started.

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Once you have something in savings it’s important to remain committed to long-term goals. If you can save enough to contribute between $1000 and $5000 in your investment portfolio before you reach thirty years old, you will see handsome rewards come retirement time.  Finding money for this is as easy as tucking away the money you spend on one of your weekly lattes or impulse buys at the store counter.  A little really goes a long way.  You just have to stay focused on the fact that investment is long-term.

That sounds easy, right? Not so fast.  Sure, you can throw money into investments without batting an eye, but you will either be going into it blind or relying on someone else’s ‘expertise’. For maximum return it is essential that you educate yourself on the tricks of the trade. You need to be aware of what options compound interest more frequently.  Compound interest is the most reliable bread winner in the investment world. With regular interest you just get interest on the amount you contribute. With compound interest; the interest earned is periodically added to your contribution which readjusts the total amount to earn interest on during the next period. Basically it’s earning free money off of the free money you already earned! Being knowledgeable about your investment options will help you find the ones that compound interest more often.

You should also be aware of the stock market so you can micro-manage your stocks. Personally knowing the investment process gives you more control over your future. It will allow you to take a portion of your contribution and place it in higher-risk and higher-yield market options. Learning methods such as taking advantage of short-sales can give your nest egg a whole other level of success.

At the end of the day, the earlier you learn how to invest, the more successful you will be. The longer you save the more money you will have! Knowing the basics and just a few industry tips will set you on a path to a long and happy retirement.

Breana Orland is a writer for  College Grants. Breana also gives advice on the pursuit of higher education and career options for young adults.

Facing our Financial Problems - Tips on Budgeting

Facing Our Financial Problems
The Dollar Stretcher Blog
by Gary Foreman

Most of our ‘problems’ are really nothing more than undealt with discomforts. The moment we get up the resolve to look them in the face and do something about them, they vanish. Our real problems are the ones we are afraid to look in the face.
- Rabbi Shraga Silverstein

Everyone has problems. It seems to be part of the human experience. But, if you’ll look around you it’ll become obvious that not everyone handles their problems the same way. Some are crushed by troubles. Others are relatively unaffected.

Knowing what separates the two groups could make life much easier. So with that in mind, let’s examine Rabbi Silverstein’s comments.

The natural question is why are we so reluctant to face our problems? What is it about us or the problem that causes us to avoid any confrontation? Are there any clues on how to change our behavior?

What is it about certain problems that make us afraid to look at them? Based on my own experience I’d have to say that there are some problems that seem too big to solve. For instance, owning a home that’s worth tens of thousands of dollars less than the mortgage. A big, immovable mountain of a problem.

Then there are the problems that we know how to solve but don’t want to make the necessary changes in our life. I know of families that rarely cook at home because no one who lives there has learned to cook. Facing the problem means that someone is going to become responsible for learning how to cook and then providing a homecooked meal. If you just ignore the problem you don’t have to face making a decision about cooking.

There are other problems that truly scare us. Some baby boomers are afraid to face their retirement. They’ve neglected retirement savings and now they’re afraid that it’s too late to do anything about it.

College students have a similar problem. Many of them know that they shouldn’t be using student loans and credit cards for charging pizza. But, they tell themselves that since they’re still in school that they’re not required to be responsible yet. So they don’t face up to the problem that they’re creating.

Is there an answer? Well, we can take Rabbi Silverstein’s advice and force ourselves to confront our problems head on. One way to make that easier is to not try to solve the whole problem in one day. Take the ‘too big mortgage’ as an example. You don’t need to pay all of it off now. What’s needed is the money to make the next monthly payment. Breaking the problem into small tasks makes it much easier to face. You’re not facing the whole problem. Just the little piece that you need to handle today.

Or the family cook. They don’t need to commit to preparing every meal for the rest of their life. Maybe just prepare a home cooked meal two days a week. It’s not a complete answer, but it’s better than turning away from the problem and eating out every day.

I’m no psychologist, but it’s probably true that success breeds success. So for each day that you face a problem you make it easier to face it again tomorrow. After a few days the problem is vanquished (even if you might need to keep after it for years – as in paying off your mortgage).

What do you think of being afraid to face our financial problems? Do you have a story that would be instructive or inspiring? If so, please share it with us via email.

Keep on Stretching those Dollars!
Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website and e-newsletters including Financial Independence. Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom!

When It is OK to Settle Tax Debts For Less & When You Can't

Every year many taxpayers fall into bad financial problems and they cannot pay the taxes that they owe. I strongly believe that everyone should pay their fair share and in no way should they settle their taxes for less just because they do not want to pay. However, there are times when it does make sense to allow an individual to settle tax debts for less. The IRS system is setup to maximize tax revenue or collections because it benefits the country as a whole. Sometimes, though, it makes financial sense to allow someone to settle their taxes for less. I have come to the realization, in some cases, that letting a taxpayer settle for less actually results in the IRS collecting more money in the future. If you are not in a situation where the existence of a tax settlement would benefit the country financially then you will be required to pay back your taxes in full in one way or another.

When You Can Settle For Less

You are probably wondering how the IRS benefits if they allow people to settle their taxes for less. Sometimes individuals are in such financial straits that if the IRS were to force them to pay their taxes, using forced collection mechanisms, this would limit their ability to ever regain financial strength. For example, say an individual owns a small business and gets behind on their taxes and in order to pay their taxes they would have to sell everything they own, including their business, which would leave them without a job or revenue producing assets. This person then would most likely collect unemployment, which would ultimately cost the US people more of their tax money than if they just allowed the individual to settle the taxes for less. There are two main ways the IRS will allow individuals to settle their taxes for less under this sort of reasoning:

• Offer in Compromise: An Offer in Compromise is a complex tax filing whereby a taxpayer will make an offer to pay the IRS less than the total amount they owe. The IRS looks at a taxpayer’s “Reasonable Collection Potential,”or RCP, which is the total value of their assets (if liquidated) plus disposable income over the next four to five years. If the IRS believes that the amount in the taxpayer’s offer is more or equal to their RCP, then the IRS will accept the offer.
• Partial Payment Installment Agreement: A Partial Payment Installment Agreement is a payment plan that the IRS will accept in some cases if the taxpayer is under financial hardship, owes over $10k, and does not qualify for a normal Installment Agreement. Since the payments are smaller than the required payments with an installment agreement it is likely that the statute of limitations will expire before all taxes have been paid off. The typical statute of limitations on tax debt is 10 years. If the IRS does not collect the full out amount in that time period then those taxes are no longer due.

There are other mechanisms that the IRS provides that allows individuals to settle for less. They allow individuals to remove or abate penalties through “penalty abatement” if they can show reasonable cause for not filing or paying their taxes. You may think that this is not in the best interest of the IRS financially since they can force them to pay and get away with it, but it kind of is. The IRS uses steep penalties in order to encourage people to file and pay their taxes. By having more individuals stay in compliance, operating costs are minimized because the IRS does not have to go out and pursue taxpayers that have not filed or paid their taxes. Therefore, with penalty abatement, the IRS can be forgiving because they realize that steep penalties exist and it would not be fair to charge all people.
When You Cannot Settle For Less

So if the IRS does not think a tax settlement will benefit the U.S. people financially or maximize tax revenues then it will not happen. You can attempt to file for an Offer in Compromise, but it will be rejected leading to a waste of your time and money. The IRS does offer alternatives for those individuals who cannot pay in full and do not qualify for settling for less. Below are two of these alternatives:

• IRS Payment Plan (Installment Agreement): With a payment plan the IRS will allow you to make monthly payments towards the tax amount owed. The IRS has many different forms of payment plans depending upon the tax amount owed. It is in your best interest to work with the IRS on a payment plan as soon as you know you cannot pay your tax debts because it can significantly decrease penalties that the IRS will charge you.
• Pay With Credit Card: The IRS does encourage people to put their taxes on a credit card if they cannot pay. Sometimes this can be a good idea if you know you can pay off the credit card in the near future or you have a very low interest rate on your credit card. If your credit card does not have the limit or carries a high monthly interest rate on outstanding balances it is a good idea to enter into an IRS payment plan instead assuming you could not receive a lower rate from a financial institution.

No matter how your financial standing looks and no matter how much you owe in tax debt there is a road to compliance. If its logical to pursue a tax settlement for less than what is owed, you should try to pursue this option if you think it will help you financially in the future. The IRS is willing to work with all taxpayers. It is important to be up front about your problem and take actions towards resolving it as soon as possible.

This guest post was provided by TaxDebtHelp.com, a site that provides IRS tax debt help articles and services for taxpayers dealing with major tax problems. Visit the site for more information on various tax payment plans and other tax settlement solutions.