Make Your Money More Valuable

The latest labor department statistics say that 6.3 million Americans have been unemployed for six months or longer, which is the largest number of unemployed workers since the government began keeping track in 1948. That number is more than double the amount of workers that were unemployed back in the early 1980’s, which is the next worst period of unemployment the U. S. has experienced.

What’s even worse is that since the start of this recession, back in December of 2007, the number of long-term unemployed has risen by five million people.

And exacerbating these numbers is the fact that 2.7 million more people are expected to become unemployed without assistance from the government by the end of April of this year.

The old rule of thumb was to keep 6 months worth of cash on hand to get through any layoff/unemployment period. With Labor Department statistics like these it is more than likely anyone out of work will take longer than 6 months to find gainful employment.  That’s why I think you really need a year’s worth of savings. 6 months worth of cash on hand is no longer going to cut it in this economic downturn.

So what do you do if you have some cash on hand but need more in order to get you through any layoff/rough period? You can do two things. One, add to the money in the bank by developing alternative streams of income.  You’re already doing exactly that just by being a League of Power member. Every Monday my favorite pal Mark Patricks details ways to make money no matter if the markets are going up or down. His philosophy is to always be prepared. His weekly correspondence opens your eyes to the financial world we live in and allows you to profit from it- no matter if the news is good or bad.

You can also lower your expenses so that the money you do have lasts longer. Lowering your expenses makes the money you have in the bank more valuable to you. Let me give you an example of what I’m talking about…if you spend $5,000 a month and have $50,000 in the bank then you have enough savings to live off of for 10 months. If you cut your expenses to $3500 a month (I’ll show you a few minor tweaks that will lower your monthly spending in a minute) then you can live off the money you have in the bank for over 14 months (an additional 6 months versus previous estimates)! Your money instantly became more valuable without adding a single penny to it.

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So by lowering your expenses you make your money work harder and longer for you. But how do you lower your expenses? You can stop paying some bills, but that will put you in a worse financial state in a matter of months. You can turn off your electric and sit in a cold house for a month, but you will suffer great health problems ie hypothermia from the cold February air. So that alternative isn’t really viable either.

Realistically you want to approach this from the best angle. The best angle involves knowledge. You must first know what you spend on average each month.  This is done by totaling all of your expenses and studying them so you have an understanding of where your money is going.

For example say you go to the grocery store and spend $150. Did you save money? It’s impossible to tell without a metric to compare that number to. If you are at the point where you want to start saving money and don’t know what you currently spend then make this week your metric, no matter what expenses pop up!!

So write down what you spend this week. No matter what you spend your money on, keep track of what you spend your money on.

Quicken provides great software to track your expenses. You can even use the software with your smart phone. I like using the software with a smart phone because I always have my phone with me. It takes but a minute to input your latest purchase into the Quicken software on your phone. Quicken will track all inputted expenses and categorize them into groups you set up.

Once you become aware of what you are spending you will know if you have saved money or not the next time you review your purchases. I prefer to not only know what I am spending but create an actual budget for all of my money. My budget keeps me in tune with what I am spending, the cost of goods, and allows me a sense of pride when I stay at or under budget.

It doesn’t matter what you make or how you spend your money as long as you know HOW you spend.

Once you have a metric to compare your spending against you can work towards lowering your expenses. Thus allowing you to make our money last longer.

Look at the areas you spend the most money in because they provide the largest area for cuts.

A big area of spending is usually household spending. And this is what I consider my SPEC-IAL-ITY!

Yesterday I saw a 24 pack of spring water on sale for $5.99. If my family drinks one of these 24 packs a week (that averages out to only 6 bottles a week for a family of 4 or 12 bottles a week for a family of 2. Both of which are ridiculously low averages.) Then it will cost us almost $300 a year just in drinking water alone! Tap water costs 5 cents a gallon and there are roughly 3 gallons in every 24 pack of bottled water.  Tap water costs only 15 cents for the same amount of water as contained in the 24 bottles of water you bought. If you switch to tap water you can conservatively lower your expenses by almost $300 a year!

Imagine if you combined that savings with another cost cutting idea. Let’s look at another household expense that you can cut to lower your bills. This week at my local supermarket there is a special running for an 8 pack of paper towels for $4.99. If you have kids you probably go through paper towels like water (no pun intended). If you spend $10 a month on paper towels that works out to $120 a year. If you switch to dishrags that allow you to rinse out after each use and reuse you can save yourself that $120.

Just making these two changes allows you to lower your expenses by $420 ($300 from water savings plus $120 from dishrag usage savings) a year. Just think how much longer you can live off your money by doing two things differently.

Many people try to save by eliminating the small, daily luxuries like a $3 morning cup of coffee. Unfortunately, people that spend money on daily luxuries like a coffee from Starbucks tend to not give up these treats easily. In fact, if they try to give up their $3 morning cup of coffee, they usually find something else to spend their money on later in the day.  This happens because that $3 daily luxury gives you a small bit of happiness.  The switch from bottled to tap water and paper towels to dishrags was easy because neither of those things were bringing me much joy. Stick to making changes that don’t make you feel like you’re giving up something you really enjoy.

Big expenses are easier opportunities to save money rather than small, everyday purchases.

Transportation can be a big expense.  You could save up to 15% on your auto insurance if you qualify for low mileage rates. Many unemployed and people who work from home qualify for this discount.  If you’re not driving to and from work each day the miles you put on your car decreases greatly. Call your insurance company and explain how many fewer miles you’re driving then ask for a reduction in your auto insurance rates based on this new information.

And don’t think I’m not following my own advice. I did exactly this. I called my auto insurance company and explained that I work from home and detailed how many fewer miles I’m driving. Check out this website to get an idea of how much money you can cut from your auto insurance policy if you qualify for lower mileage. This one tip allowed me to lower my bill by almost $200 based on a 6 month premium.

If you’re a multi-car family that drives a lot try making one car the primary car.  This way you’ll at least be able to keep the mileage low enough on one car. Many times it’s as simple as a phone call to save money.

Another way to save money on your auto insurance is to drop duplicate coverage! If you have medical/ hospitalization insurance then drop the additional medical insurance you have on your auto insurance policy. Uninsured motorist coverage in your auto insurance policy pays for injuries caused by another driver who is uninsured or by an unidentified hit-and-run driver. If you have health insurance then this is duplicate coverage.

When you call your insurance company, don’t be afraid to ask about all the possible discounts.  Usually there are ton of other things that will drop your insurance premium:

1)    Having a college degree

2)    Multi-car discounts

3)    If your teenage driver gets good grades in school

4)    Group discounts for organizations you’re a part of

5)    Paying online instead of mailing in payment

6)    Combining insurances

Just a few of these things could save you hundreds of dollars each and every year.  I wouldn’t be surprised if there was a discount based on the month you’re born.

That’s another pile of money you’ve just cut from your expenses. So far you’ve lowered your yearly expenses by $620 ($300 from switching to tap water plus $120 by switching to dishrags plus $200 from your auto premium)! You’re doing great so far but let’s see some more easy areas in which you can lower your household expenses.

In just about any house you will have a TV, internet, and phone bill. If you move all 3 to one provider, you could save $20 or more per month- that’s $240 a year. Check your mail for bundling offers or visit lowermybills.com to find out which company is offering the best service bundle in your area. Then make the switch and save!

When any of my friends ask me how to easily cut household costs I say DIY ( Do It Yourself).  Don’t pay someone what you can do yourself easily. For example a gym membership costs approximately $50 a month. If you drop your membership in favor of jogging around the neighborhood you can pocket the savings of $600 a year and still feel like a million bucks.  Another DIY is cleaning! Think about how much your maid service costs you. $75 a month? $100 a month? If you cut your maid service you could see a savings of $1200 a year!

So far these household tips have resulted in lowering your expenses by $2660 a year. And you’ve only changed a handful of things.

Remember any chance to lower your expenses will allow you to live a little bit longer off your money. These are trying times in our economy and life can be unpredictable. Your job that you thought was secure can be gone in an instant. And the statistics I outlined at the beginning show you that getting another job isn’t always going to be that easy.  It’s so important to make positive changes that will get you through any rough patch. Remember to increase your income streams and lower your expenses to get you through any financially trying times.

Thanks for tuning in this week. I enjoy our weekly meetings. I hope you do too. Catch you next week for more savings and fortunes.

Keeping Money In Your Pocket,

Nancy Patterson

P.S. URGENT TAX SAVINGS UPDATE – Did you donate to Haiti this year?

Millions of you did. If you donated money, food, etc.  to the Haiti earthquake relief the U.S. government wants to give you a gift. They are allowing you to take a tax deduction on either your 2009 or 2010 taxes if you donated to Haiti earthquake relief efforts before March 1st. Even though you donated the money in 2010 you can use it as a deduction on your 2009 taxes! Now that’s a great gift.


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