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The Buck Starts Here

We present 20 easy ways for you to spend less, save more ... and maybe wind up with a lot of money someday.
by Mark J. Miller

Any good financial planner will tell you that the best way to save money is the old-fashioned way: track every dime you spend, create a budget, and live by it. Steve O’Hara, a principal at the Chicago-based Financial Strategy Network, advises clients to review six months of checkbook registers and credit card statements, categorize all spending, and then identify areas for potential savings. “Without a plan, expenses expand to fill the available funds,” he says. “You can’t get from where you are to where you want to be unless you know where you’re starting from.”

And he’s probably right. It’s just that his way requires so much . . . work.

What if you don’t want to do the heavy lifting? Chicago identified 20 ways to cut spending, save money, and wind up with a bundle of cash over time. Our standard for inclusion: no serious sacrifice required. (Well, in one case we suggest selling your car—though maintaining access to one—a significant change in lifestyle.) But some of our suggestions do require a little effort. As a bonus for your conscience: some of our tips go easy on the environment as well as the pocketbook.

What stands out about our list is how unremarkable the savings appear at first glance—in some cases amounting to just a few dollars a week. The surprise comes when you start combining multiple ways to save. Suddenly you could be looking at several hundred dollars a month in newfound cash—the equivalent of a nice raise at work—to spend on things you really want or to put into a savings account or mutual fund. As our accompanying chart shows, it’s amazing what large sums those small savings can turn into, even if invested conservatively, over a period of years.


1) Telephone


2) Cable


3) Eating in


4) Credit card cash


5) Movies at home


6) Brown-bagging it


7) Drive a used car


8) ... Or sell the car


9) Coffee restraint


10) Transit benefit


11) Download music


12) Overpay mortgage


13) Flex benefits


14) Transit card


15) Go I-PASS


16) Better bulbs


17) Heat rationing


18) Cleaning up


19) Student stylists


20) Shop for gas

Total savings (with used car)
Total savings (selling the car)

1. Reel in your land line
If you’re paying more than $30 a month for your home phone service, you’re probably paying too much. In an age of deregulation, cell phones, and Internet telephony, there’s no shortage of ways to trim your bill. One problem, according to the Citizens Utility Board: many phone customers buy flat-rate packages that give them more service than they need. Under an agreement negotiated with CUB, AT&T now offers a series of Consumer Choice plans that can reduce your land line bill. Even the most heavily feature-laden package costs only $21 a month, and the most basic package costs no more than $6 a month, plus six cents per local call. More information is at citizensutilityboard.org. At our house, the AT&T Personal Choice package was more than we needed, considering we use our land line mostly for local calls and a handful of regional “toll” calls—we try to make long-distance calls with our cell phones during off-peak hours and weekends. Dropping that plan in favor of AT&T’s “standard rates” reduced our monthly bill from an average of $43 per month to about $26.

Finally, for the technologically adventurous, there’s the brave new world of Internet telephony. Vonage, a leading voice-over-Internet-protocol (VoIP) service offers flat-rate local and long-distance service for $25 a month—and the company throws in international calling to Canada, Puerto Rico, France, Ireland, Italy, Spain, and the United Kingdom at no extra charge. Setting up requires a bit of work, but call quality and reliability have improved substantially since these services were first introduced. “When I first got VoIP, the sound quality was a bit off for maybe one out of 20 calls,” says Bob Yovovich of Evanston, who uses Vonage for his home-based consulting business. “Now that’s maybe one out of 50.”  
Annual saving: $200

2. Whine about your cable bill
Urban legend has it that you can shave your cable bill by calling up the cable company and threatening to switch to a competitive service. We investigated the legend and found that it was true. A politely worded threat to “go to the dish” reduced our monthly Comcast bill by $12—and they threw in six free months of HBO just to keep us on the ranch. Annual saving: $144

3. Eat out a little less
The typical U.S. household spends an average of $2,434 on food away from home, according to the National Restaurant Association. Think you could cut your restaurant tab a bit? You can probably do it by eliminating just one meal out every month. “One of the biggest targets for saving is unplanned meals and eating out,” says financial planner Steve O’Hara. “It’s a part of our life we don’t even question.” Dinner for two at a quality Chicago restaurant can easily cost $100—compared with maybe $20 to buy groceries and cook at home. You’d save $80 a month just by cutting out one such restaurant visit. 
Annual saving: $960

4. Go for the cash
When it comes to reward credit cards, cash is king. Card marketers offer cards with discounts on merchandise, travel, and everything else under the sun. But experts say cash-back cards are the best deal around. “Cash back is the most straightforward reward you can get,” says Ellen Cannon, assistant managing editor of Bankrate.com. Most cash-back cards carry no annual fee, and they pay a percentage back on most purchases. The rates vary by transaction type; a typical offer is 5 percent on gas and groceries and 1 percent on everything else. The average payback is 3 percent, according to Dennis Moroney, a senior analyst with Tower Group, a financial research and advisory firm. Although plans vary, with most cash-back cards you can request a disbursement every three months for the cash that has built up in your account. The caveats: most cards have a limit on annual payouts, and you realize the benefits only if you pay off your balance every month. If you’re logging $2,500 a month in credit card charges, the rebates can yield a nice return over the course of a year. 
Annual saving: $900

5. Skip a flick
Seven out of ten Americans see a movie every week—but increasing numbers are opting to watch at home on DVD. In fact, 75 percent of respondents tell the Pew Research Center they would rather watch at home than in a theatre—and 55 percent cite cost as a reason. One of the best DVD options is to subscribe to an online mail-order service such as Netflix. There are no late fees, and a handy Web site helps you build a list of movies you want to see. Say you cut back on one trip to the theatre for two people every month. Subtract a buttered popcorn, add in $18 a month for a DVD-by-mail service, and pocket the difference.
Annual saving: $192

6. Brown-bag it
While we’re on the subject of eating out—ever thought about making your lunch once in a while? Say you spent an average of $10 to eat lunch out every day—but took your own lunch to work twice a week, which might cost you $4 to prepare at home. You’d be saving about $50 a month. 
Annual saving: $600

7. Drive a used car . . .
Buying a used car was once a risky proposition. But with today’s improved manufacturing quality, it’s one of the best deals around. “Most cars these days require fairly little maintenance up to about 90,000 miles,” says Bryan Caspersen, owner of Bryan’s Garage in Evanston. “If you can find a preowned car that’s been well maintained, it’s a better value than a new car.” With the growth of automotive leasing, plenty of cars come onto the market with around 40,000 miles on the odometer. Dealers put these cars through extensive inspections, and resell them with extended warranties. So, you can walk into, say, a Toyota dealership, plunk down about $20,000 for a reasonably equipped, brand-new Camry, and see it lose 10 percent of its value in depreciation as soon as you drive it off the lot. Or you can pick up a similar 2004 model with 48,000 miles on it for $16,000. Finance 80 percent of the purchase over 48 months and pocket the difference.
Annual saving: $2,760

8.  . . . or don’t own a car at all
If you have access to good public transportation, ask yourself: Do I really need to own a car? The cost of owning, maintaining, insuring, and garaging a car can average $7,300 a year, according to the American Automobile Association. Instead, consider selling the car and subscribing to a car-sharing network such as I-Go (igocars.org), an innovative service that gives
you convenient access to energy-efficient cars by the hour. Pay a one-time $75 membership fee, and go online to reserve a car whenever you need one; you pick it up near your home and pay an hourly rate of $8.25 for unlimited miles. While you’re saving money, you’ll feel the glow of environmental responsibility: car sharing is a great way to reduce the greenhouse gases that cause global warming.

“When we sold our car, I didn’t know how I’d feel,” says Jim Neils, who went car-free several years ago and joined I-Go. “But it’s been great. I don’t have to worry about anything.” Jim and his wife, Lynn, who live downtown in Marina City, typically use I-Go to run errands for two or three hours on weekends. There are half  a dozen cars within six blocks of them, and when they’re done using one, they park it in its designated spot and walk away. I-Go is designed to work best for customers who also use public transportation, so cars are positioned mainly in the city and in suburbs with good access to the region’s public transportation network. I-Go takes care of everything from maintenance and insurance to parking fees and fuel. 
Annual saving: $6,400

9. Cut back on caffeine
OK, so we’ve all heard this one before: don’t spend so much at Starbucks. But if you’re a caffeine fiend with a fondness for grande lattés or cappuccinos, you may be spending $80 or more a month—just for coffee and steamed milk. Consider skipping your fix just one day a week and saving money instead.
Annual saving: $153

10. Use your employer’s transit benefit program
Here’s another way to save on public transportation: enroll in an employer-sponsored transit benefit program. Under these plans, you’ll save money by using pretax income
to purchase transportation; employees can set aside up to $110 a month in a pretax account to pay for their use of public transportation. More than 2,300 local companies are enrolled in the RTA/CTA Transit Benefit program, and 83,000 employees take advantage of the benefit. 
Annual saving: $487










*No invlation built into scenario
*Annual return of 8%—this is typical ten-year return on total stock market index funds

Source: Financial Strategy Network, LLC

11. Skip the CD and download your tunes
In this age of the MP3 player, you’re probably ripping CDs into your portable player. Why not skip that step and save a little money? When you buy music online in the first place from a service like iTunes or Rhapsody, you’ll save $3 to $4 on the price of an album in the store. Our savings assume you’re buying one CD a month. 
Annual saving: $48

12. Speed up your mortgage payments
Consider what you’d save by paying more than you owe every month on your mortgage. “If I add $100 to my mortgage payment every month, I get a guaranteed return on that extra payment,” argues financial planner Steve O’Hara. The math: Say you’ve got a mortgage rate of 5.5 percent; the interest you would have paid on that $100 is now a savings that you’ve pocketed. That’s the equivalent of earning5.5 percent on your money—better than most certificates of deposit pay, O’Hara points out—rather than paying that rate to your mortgage holder. In addition, over a year you’ve converted $1,200 of debt into equity in your home. “You’ve moved [that money] from the liability to the asset side of your personal balance sheet,” O’Hara says. True, you’ll forgo the benefit of the tax deduction on mortgage interest—an annual $430 if you’re in the highest tax bracket. Our calculation takes into account your increased equity and savings on interest, adjusted for the lost tax benefit.
Annual saving: $806

13. Flex your benefits
Almost all major companies today offer employees flexible spending accounts, which let them set aside pretax income for use on predictable, recurring expenditures such as medical and dental visits, vision, child care, and medication. When annual benefit enrollment time arrives, employees estimate the amount they will spend—most set aside about $1,000, according to Karen Frost, a health and welfare benefits expert at Hewitt Associates in Lincolnshire. The dollars are taken out evenly from each paycheck, before the taxman takes his bite, and workers submit requests for reimbursement as the year rolls along. Some companies even issue debit cards that automatically draw funds from employees’ pretax accounts, relieving them of reimbursement paperwork. Our savings estimate is based on Hewitt’s tracking of employee averages.
Annual saving: $340

14. Get a CTA Chicago Card
Why more Chicagoans haven’t signed up for the Chicago Card (or sister Chicago Card Plus) is a mystery. In return for using these electronic fare cards, the CTA will give you a $2 bonus for every $20 you load on them. Chicago Cards must be reloaded with cash at CTA vending machines or off-site Touch-n-Go devices; the Plus card is tied to an online account and your credit card, and reloads automatically whenever the account value falls below $10. Both cards enable you to pay $1.75 a ride compared with the $2 cash fare. Yet use of the cards comes to just 17 percent of total ridership, a spokeswoman for the transit agency says. Still, if you take the train or bus to work five days a week, 50 weeks a year, the bonuses add up. Order cards online or by phone at 1-888-968-7282. You can also find order forms on CTA buses and at rail stations.
Annual saving: $100

15. Get an I-PASS
Most Illinois drivers recognize a good deal when they see it. That’s why 79 percent of all tolls collected are paid with I-PASS. The $5.3-billion tollway congestion relief bill approved by the Illinois Tollway board of directors in September 2004 doubled the price of cash tolls but kept rates unchanged for I-PASS users (and guaranteed them half-off tolling through 2015).
To get your savings, plunk down a $10 refundable deposit for an electronic transponder for your car, and put $40 in prepaid tolls on your credit card. When the credit is depleted, it recharges automatically. Pick up a transponder online at illinoistollway.com, in any Jewel store, or by phone at 800-UCIPASS. If you’re a regular tollway user—say, a daily suburb-to-suburb commuter—the savings can make a big difference.
Annual saving: $660

16. Screw in a better bulb
Thomas Edison’s incandescent light bulb got its first big test more than a century ago at the 1893 World’s Columbian Exposition in Chicago. Maybe it’s time for a technology upgrade? If you’d like to get with the 21st century and reduce your electric bill, consider the compact fluorescent light bulb. Improvements have made their glow sufficiently warm and bright that they’re tough to distinguish from incandescents. More important, CFLs use 75 percent less electricity than traditional bulbs—which means you can save money and help the environment.

Steve Heller first experimented with CFL bulbs in a six-flat he owned, where law required lighting 14 hours a day on every landing. “The savings were so immediate and dramatic,” he recalls. “I saw a $75 monthly electric bill drop to $30. They paid for themselves in two months.” Heller, a lawyer living in West Rogers Park, went on to retrofit his house. “Now, anywhere I can put a CFL, I’ve got it,” he says. The typical U.S. household has 50 incandescents; replace just ten of them in your house with CFLs, and bask in the glow of the savings.
Annual saving: $114

17. Don’t heat the house when you’re not around
Why blast your furnace when you’re asleep or not home? For between $30 and $50, you can install a programmable thermostat that allows you to set back the heat (or the air conditioning during summer) a few degrees while you’re out of the house or asleep at night. Simply set the thermostat to return to a comfortable range an hour or so before you return home or wake up. The Citizens Utility Board recommends setting back your thermostat three degrees dur-ing the workday, and six degrees at night.
Annual saving: $228

18. Tidy up once in a while yourself
If you use a cleaning service every week, you’re spending at least $4,000 a year and probably much more. Ask yourself if you really need weekly service—or if you could do that work yourself once a month. The exercise is good for you. 
Annual saving: $960

19. Save on looking good
A good women’s hairstylist is worth every penny at $60 for a basic cut. But today’s seasoned pro is yesterday’s apprentice . . . and today’s students will cut your hair for $14 any weekday at Aveda Institute Chicago (2828 North Clark Street; 773-883-1560), a school that trains beauticians. Don’t worry—your student will be supervised by a licensed professional instructor. You can walk in or make an appointment, but be prepared to spend a little time. “A student isn’t going to get it done in an hour like a licensed hairdresser would,” says Dan Vesterdahl, Aveda’s director. “A student might take as much as two hours, depending where they are in our program.”
Annual saving: $370

20. Don’t overpay for gas
Chicago drivers pay the seventh-highest gas prices among metropolitan areas nationwide, according to the U.S. Energy Information Administration. The typical driver puts on about 12,000 miles a year, which can easily ring up a $1,500 annual fuel tab. If you must drive, at least don’t overpay. Web sites like gasbuddy.com and gaspricewatch.com use volunteer spotters to help you find the best gas prices right in your own ZIP Code. In mid-January, GasPriceWatch showed that the price of regular in my own neighborhood ranged from $2.29 to $2.59 per gallon. 
Annual saving: $180 


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