One saved is one earned. Image: stevendepolo/Flickr/CC BY

The economic crisis affects most of us every day as we tighten our belts and keep our wallets in check. But like a dieter craving sweets, temptation is always there to consume beyond our means. Thankfully, there are simple things you can do when the cravings get to be too much.

Think ahead

Thinking long term can help. Instead of seeing savings and frugality as a chore, think big picture. You and your family will be happier if you aren’t overextending to pay off last month’s splurge.

Realistic frugality begins with a realistic plan. If a budget is too restrictive, it adds stress to your life. That constant pressure may lead to abandoning the budget altogether. Make your plan realistic, but not a “starvation diet.”

Include some fun

While a budget must begin with month-to-month obligations and essentials — mortgage, groceries, car insurance, utilities –  it should also include some “fun money.” If you enjoy sports, make sure to include some greens fees or club dues. If concerts or theater are your thing, figure in a ticket every couple of months.

Another way to achieve this is to keep a “fun fund,” which is reserved only for a specific goal. Instead of giving in to every impulse, focus on the really satisfying ones and put a little away toward it out of every paycheck. Maybe there is a trip you want to take, or one luxury item that you truly want. With a little patience and persistence, it can be yours.

Ways to cut corners

For the day-to-day items, there are many things you can do to cut corners. Here are just a few suggestions to get the ball rolling.

Most beauty schools and community colleges offer cut-rate haircuts and beauty services, as students need opportunities to practice their craft. While that may sound risky, rest assured most places only let advanced students touch the paying customers.

Second-hand and thrift stores are a wonderful resource for items we use every day. Flea markets, garage sales and Craigslist are good, too. Somebody once said one man’s trash is another man’s treasure. Go explore. You never know what you might find for a song.

Fuel expenses are one of the worst drains on our resources these days. Try public transportation, carpooling and consolidating trips. Remember, the less you are behind the wheel, the less you are spending.

Tell yourself ‘Wait’

The best thing you can do to stay frugal and on budget is tell yourself to wait. We see something on television, online or in a store and think we just have to have it. Tell yourself, “Wait.” How many times have we given in to that urge, only to see the item gather dust or wind up in the next garage sale? Chances are it is a whim brought on by budget fatigue, and the burning desire will go away. If the feeling persists, then maybe it is something worth saving for in your “fun fund.”

Sources

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The Frisky
Retire by 40

Saving habits have changed

Studies are showing that the economic downturn changed consumers’ savings habits. The hefty unemployment rate and the lack of credit options worked together to create a difficult situation for consumers. Adding to that problem were the mortgage issues and the suspension of corporate 401k matches. Combined, all these things caused Americans to have to tap into savings and that move left them with diminished nest eggs for the future.

The result of a decline in savings

The decline in savings is set to make some serious changes in the future of Americans. First of all, without a nest egg squared away, many people are already accepting the need to postpone retirement. No longer are workers looking to exit the workforce in their mid-60s. In today’s world, they are looking for a much longer work-life that extends well into their 70s. A growing number of Americans say they will continue in the workforce for as long as they are able.

What seems to be changing as the years go by is less Americans are focusing on saving and more are focusing on getting by. Experts attribute the change in focus to the credit lending crash of the recession. Prior to the recession, many people relied on credit for emergency bills and monthly expenses. Lenders extended unwarranted credit to sub-prime borrowers and handed out millions in funds to consumers who had little ability to realistically repay the money. When the recession began, lenders quickly shifted their priorities to mitigate loss, rather than extend more credit. That mitigation meant increasing interest rates to unmanageable levels, cutting limits and tacking on fees. Lenders were focused on maximizing their income due to the huge number of defaulted loans. Increasing the cost of credit only caused more consumers to fall into trouble.

Consumers focus on debt

Saving cash now is a priority, but many Americans are just getting back on their feet financially after suffering huge losses as a result of the recession. Surveys are showing that most money is still going to paying down debt. Consumers see the problems debt can create and are suffering through heightened interest rates. They understand the cost of credit and are trying to get rid of it as quickly as possible.

Retirement in the future

Experts say that retirement savings, including Social Security benefits and pensions, should add up to 80% of pre-retirement income. They tell customers that making that 80% goal is not difficult. In general, most consumers can meet the goal with a strict rule to save 7-10% of their monthly payday cash now. Though budgets are stretched, most Americans can reasonably find the money to save. Most savings goals for retirement can be reached if people understand how to manage time and budgeting.

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Many thrifty people are searching for investment options for cash now that they’ve made the maximum allowed retirement-fund contributions. Financial experts have been saying it for years — “invest your money for retirement” — and a new survey shows that a growing number of people are listening. These people are now in the enviable position of having made the maximum allowable contributions to their retirement funds and not knowing what to do with their additional savings.

An example of good saving

Scott and Amber Rowson of Columbia, Missouri, have contributed the maximums allowed to their tax-deferred retirement accounts. They budgeted strictly enough to contribute the maximum from Scott’s state-job salary and Amber’s self-employment SEP IRA. Their two children’s 529 college education accounts are fully funded, too. Amber said, “Now that our children’s savings are taken care of and our retirement funds are maxed, we want to know where our money should go . . . over the years we’ve gotten good at squaring away a portion of our earnings and it seems illogical to just stop now.”

Ways to save after retirement accounts are funded

After retirement funds are maxed out, one option is to contribute directly to a Roth IRA. Of course the benefit is that withdrawals in retirement will be tax-free and it’s a great place to sock away more cash. There is a new change in the rules for a Roth IRA for 2010. This year everyone regardless of income can convert a traditional IRA to a Roth IRA. There is a cost, however, because taxpayers must pay ordinary income tax on the entire amount converted. Still, the strategy can pay off for taxpayers like the Rowsons. They can make the conversion and split the tax liability between 2011 and 2012.

Another option for savings

When it comes to managing cash now that retirement accounts are funded, people also can start investing in taxable accounts. Despite their taxable nature, there’s no penalty for making withdrawals from them. The benefit for the Rowsons is that Amber is self-employed and if her business suffers from market fluctuations, she can tap into any her savings whenever she needs to, without additional taxes or penalties.

Don’t forget about life insurance

Another option for the Rowsons, and anyone else wise and thrifty enough to max out their retirement contributions, is to look into alternative investments. The Rowsons’ retirement portfolios are packed with standard stock and bond options so any extra money can go into alternative savings like cash-value life insurance. This would provide another way to enjoy tax-deferred earnings as well as liquidity. Amber said, “I like this option because it gives me another safety net if my business slows down or if I decide that I want to do something different in a few years and get stuck in a learning curve.” For someone like Amber, who wants to move into real-estate investing, this could be the most viable option for the family’s future savings.

It’s an enviable thing to have maximized retirement savings

For anyone in the enviable position of having maximized retirement contributions, the question of what to do with cash now is an important one. Depending on the investor’s individual circumstances, some options may make more sense than others. Experts advise that the best thing for avid savers to do is simply to to continue saving, one or or another. There are always wise options when it comes to saving for the future.

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Retailers need money, too!

It may sound crazy, but consumers do have an advantage in today’s retail market. Everyone is looking to make some money and retailers are no exception. According to a recent article on The Motley Fool, if you are out shopping for a particular consumer item, it is definitely to your advantage to inquire about a discount.

Motley reports that a 2007 survey by Consumer Reports found that 90 percent of persons who bargained with sales people got a discount on at least one sale over a three-year period. Considering that the survey was done before retailers became desperate to keep customers, it is likely that the results for consumers would be even better now.

Where to look for a bargain

There are discounts to be had on all kinds of products and services if you don’t mind asking. Some people are better at bargaining than others so sticking to major purchases to start with is probably your best bet.

Do your research first

If you know the best prices ahead of time you’ll be better prepared to negotiate. If you enjoy getting out and really seeing everything, you can comparison shop the old-fashioned way by going from store to store or calling around. For those who prefer a less hands-on approach the process can be much quicker and easier. Many online sites offer a price comparison on products and tell you where the item is available for the lowest cost. You can also go from store to store online and compare for yourself.

Know all the little tricks

Do your research on the best times of the year to buy the item you’re looking for. If you can’t wait until that time,try to shop when stores are uncrowded and sales people are more eager to make sales. Also be aware of price-matching discounts offered by some stores. Different retailers have different rules, so be sure to have it all straight ahead of time, but the gist is that if your find a lower price elsewhere (not online usually) then the competing store will beat the price by a certain amount. This can be a quick way to get a great deal. Some of the locally owned businesses may be even more likely to bargain with you because they have no corporate office to contend with; they make the call about what price they want to offer.

Don’t go over the top

It is important not to get so carried away with your bargaining that you lose your cool. Sometimes the price simply can’t be lowered.  Even when the price can be lowered, the salesperson may only be willing to lower it for someone who is being reasonable. If you need to walk away for a few moments or a couple of hours to regain composure or to really think about the deal, then do so. It may even work in your favor to walk away for a while because the salesperson may become even more impatient for the sale and offer a better deal. So get out there and enjoy the wealth of savings available to you.

Divorce can seriously complicate finances like unsecured loans, savings and investments. If divorce is in your imminent future there are some things to begin thinking through. First of all, set some post-divorce financial goals. You want to stay focused on where you want your retirement savings to be, how much money needs to be in a college fund, and how you are going to reduce your debt. Second, make sure you review all your paperwork regarding shared accounts. This can include savings accounts, credit cards, loan documents, unpaid tax bills, and estate planning strategies. Finally, research your state’s QDRO, or Qualified Domestic Relations Order. This is a document that will prevent your spouse from making retirement account withdrawals while the divorce is in progress. Remember that if at all possible, it is highly advantageous to settle disagreements amicably and avoid paying thousands of dollars in lawyer’s fees.

The first order of business when facing a divorce

The first order of business should be protecting your financial situation. You’ll need a trusted lawyer who is well-versed in divorce and settling assets. It is crucial to hire a lawyer who knows the laws that affect divorce proceedings and the impact they have on your finances.

Dividing assets

Normally assets accumulated throughout the marriage are up for splitting. The exception to this rule however, is inheritances individually gifted. When assets are split, the court will consider each spouse’s earning ability, how much each contributed to the overall household assets and the length of the marriage. There are states that have exceptions though. In community property states like Arizona, California, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, all assets are divided equally between spouses.

Debt and the divorce

One of the biggest issues to address in a divorce is debt. Divorce does not eliminate debt. In fact if you are in a community property state, debt is split down the middle just like assets were. The caution in these states is that half the debt from one spouse, is shared by the other. Unsecured Loans, credit cards or retail credit can all plague the spouse who never created them. If you are in a non-community state then debt belongs solely to the spouse who incurred it.

The issue of debt is also relevant if married couples had joint accounts. These are important to address immediately because your spouse could continue to rack up debt and then leave you with it. All accounts that are shared should be frozen. Notify creditors of the situation and most will stop all charges to the account. Almost every major credit lender has a procedure to handle divorces.

Retirement assets settled

Money that is kept in a 401(k) account or pension plan can be divided up in a divorce. The amount included in the division is made up of funds accumulated from the time the marriage began to the time when the marriage ended. To claim a portion of your spouse’s 401(k) you need to have a court ordered QDRO and submit it to your spouse’s plan sponsor before the distribution period is finished. Some couples also opt to leave retirement funds untouched throughout a divorce. Particularly if the amounts for each spouse are close in value, this can be a viable option in handling the situation.

Estate planning

Finally, although unsecured loans, credit and savings are important, so is your future. Be sure to review your will and other documents to ensure that money is going to a new beneficiary. Those getting a divorce are cautioned to not wait to address the issue of estate planning. Review and amend an estate plan while carrying out the divorce proceedings. Though it is a difficult time for anyone when he or she is going through a divorce, securing their future is important. Taking pains to handle money wisely can protect assets and your future.