365 Ways to Live Cheap (11 page)
125. T
RY
U
SING THE
S
NOWFLAKE
M
ETHOD
Snowflaking is a spinoff of the “debt snowball” method described in #124. A snowflake is merely an opportunity to add a little bit more to your extra debt payment each month. For example, let’s say that you usually go to the coffee shop on Monday mornings, but one Monday you decide to skip it. Instead of spending that $7 on a coffee and a bagel, instead you add $7 to your extra debt payment. Did you find $5 in the parking lot blowing in the breeze? Use it as a snowflake and add $5 to your debt payment. Sell something on eBay? Return some aluminum cans (or sell some for scrap metal)? Get a rebate? Receive an “economic stimulus” check or an income tax rebate from the government? Snowflake them all!
126. K
NOW
Y
OUR
C
REDIT
R
EPORT AND
W
HAT
I
T
M
EANS
Countless businesses utilize your credit report to assess how trustworthy you are. From the obvious (car loans, home mortgages, credit card rates) to the surprising (insurance rates), your credit report (and scores calculated based on the content of your report) has a great deal of influence on the amount you have to pay on almost everything. Even worse, errors on your credit report can cause all of your rates to go up, costing you a lot of money. Fortunately, it’s easy to find your credit report for free, check for and correct errors on it, and ensure that it remains strong in the future by following these tips:
You can get your credit report for free, no strings attached, from the federal government at
www.annualcreditreport.com
. This site allows you to exercise your legal right to check your credit report from each of the three major credit reporting agencies once a year. Use this site and download your report so you can know where you stand.
Correct any errors on your credit report—debts you paid off that aren’t reported, stuff that you have never seen before, and so on. Contact the organization that’s claiming a debt (their phone number is usually on the report) and get the issue straightened out.
Don’t be late with payments and don’t open up credit cards unless there’s a good reason for it. Check your credit reports once every year so that you can quickly find out if anything false has popped up on your report.
127. P
AY
O
FF
Y
OUR
W
HOLE
C
REDIT
C
ARD
B
ALANCE
E
ACH
M
ONTH
The best tactic of all with credit card usage is to avoid finance charges in their entirety, and you can do that on most cards by paying off the entire balance each month. Every time you carry a balance forward on your card, you’re essentially agreeing to hand over money to the credit card company in exchange for nothing more than their permission to not pay the debt until next month. Don’t pay that fee—pay off the whole balance instead. If you’re spending within your means, this should be easy. It should only be challenging if you’re pushing the limits of what you can afford or spending far beyond it.
128. U
SE A
C
REDIT
C
ARD
T
HAT
A
CTUALLY
B
ENEFITS
Y
OU
Once your credit is in good shape and you’re not overrun with debt, a credit card can become a tool to make regular purchases much easier and earn some useful rewards. If you get into a healthy routine of paying off your credit card debt each month, then a solid rewards card can be as good as money in the bank. There are many good card offers out there. Look for those that offer mileage bonuses to people who drive a significant amount, or cards that offer strong bonuses at the businesses you already use the most, like specific grocery stores or gas stations. A solid rewards card can earn you 3 to 4 percent in rewards or rebates on your everyday purchases. The key, though, is to pay off your balance every month. If you fail to do that, then you lose the benefits of a rewards card.
129. D
ON
’T S
IGN
U
P FOR
S
TORE
C
REDIT
C
ARDS
J
UST FOR
T
HAT
O
NE
-T
IME
B
ONUS
Many stores have an in-store credit card that is offered to you at the register, usually with some intriguing pledge like 10 percent off your current purchase. While it’s tempting, it’s not worth signing up for several reasons. First, the interest rates on in-store cards are often incredibly high, some approaching 30 percent annually. That means that for every $100 you leave on the card, they charge you $30 a year for that service. Second, the card itself tempts you to go back to the store, as it has the store’s logo loudly branded on it. When you see it in your wallet, you’ll think you can go there and buy more things and not have to actually pay the bill, but the bill comes around later and it’s expensive. Third, every time you open a new credit card, you not only get a small negative impact on your credit report, but you also slightly increase your chances of identity theft. Add them up and a store credit card simply isn’t worth the $10 or $20 you might save right then.
130. B
E
A
CCOUNTABLE
— U
SE
Y
OUR
F
AMILY AND
F
RIENDS
Recovering from debt is a challenge, and it’s very easy to slip back into old habits. To keep yourself in check, utilize your family and friends to help you through these challenges. Tell them what you’re going through, talk to them when it’s tough, and have them help you steer yourself away from spending temptations. The support that family and friends can offer you is tremendous. Look to them as a valuable resource as you learn to truly live cheap.
131. A
SK ABOUT
F
EES
W
HEN
S
HOPPING FOR
L
OANS
If you’re in a situation where you’re about to acquire a new debt, make sure you understand all of the fees you’ll be charged when you get that loan. Many loans are saddled with lots of little fees—ask about all of them. Better yet, ask for them to be waived. If you can get even one or two of the hidden fees removed from your loan, it’s worthwhile, and the worst they can do is say no. Take the time and challenge all of those little fees, it can really pay off.
132. S
IGN
U
P FOR
A
UTOMATIC
R
EPAYMENT
P
LANS FOR
S
TUDENT
L
OANS
Upon entering repayment, many student loans offer a small rate reduction if you sign up for an automatic payment plan. Do it, without hesitation. Not only does it directly save you money (remember, 0.25 percent of $40,000 is $100), but it also helps to ensure that you’re never late with a payment, saving you from the cost of late fees. This is one of those rare opportunities where jumping on board with an offer from the company can save you real money, so don’t miss out on it.
C
HEAP
T
ACTIC
$
FOR
E
LECTRONICS
134 Consider Whether You’ll Actually Use the Item in a New Way
135 Pick the Model Now, Then Wait Six Months
136 Know the Features You Need Before You Shop
138 Shop Around, Both Online and Off
139 Look at Refurbished Models
140 Ask about Retail Returns or Open-Box Items
141 Check for Discontinued/Floor Models
142 If You Get a Rebate Form, Fill It Out Immediately
143 Send in the Registration Form Immediately—But Don’t Fill It Out Completely
144 Keep Your Warranty and Receipts
145 Keep It Clean and Minimize the Dust
147 Read the Manual Carefully, Especially on Rechargeable Items
148 Use Rechargeable Batteries
133. N
EVER
B
E AN
E
ARLY
A
DOPTER
It’s always a big temptation to be the first person on your block to be the proud owner of the latest hot item. It’s fun to show off that gadget a little, but what’s easy to forget is that the privilege of showing off that new item is incredibly expensive. You’ll pay a huge extra amount up-front to be one of those early owners, plus the item is much more likely to be fragile and to wear down quickly if it’s one of the early versions of the item, meaning it’ll have to be replaced that much faster. Instead, if there’s a hot new item you’re tempted to have, exert a little bit of patience. You’ll save yourself the “early adopter fee” and likely have a more reliable version of the item, which will save you even more.
134. C
ONSIDER
W
HETHER
Y
OU
’L
L
A
CTUALLY
U
SE THE
I
TEM IN A
N
EW
W
AY
It’s easy to see an item used by someone else and quickly convince yourself that the item will in fact change your life. But step back a minute and ask yourself how this device will actually improve your situation from the current condition. Will this device enable you to do something tremendously new compared to what you can do right now? Or is it just a minor change, like a small increase in display quality or a touch-screen improvement on a device you have right now? If it’s just a little change, ask yourself whether that little feature is really worth the high price tag, particularly if it requires you to upgrade lots of other things as well (like the upgrade from videocassettes to D
VD
s) or requires you to start paying for a service for what you were getting for free (like the upgrade from A
M
/F
M
radio to satellite radio).
135. P
ICK THE
M
ODEL
N
OW
, T
HEN
W
AIT
S
IX
M
ONTHS
If you’re still convinced that you want a particular item, agree that you will purchase the item in six months if you still want it. Spend that time researching the item, considering whether or not you’d actually use the item, and waiting for the price to come down or a newer version to come out. If you decide that you’re going to buy a newer model, start that six-month clock over again. The most likely result of this six-month wait is that you’ll either forget about the item or realize that you don’t actually need it, in which case you’ll have saved yourself a significant amount of money by being patient.
