How to Lower Costs and Expenses to Get More Disposable Income

With the current economic downturn, the buying power of the dollar continues to shrink. Paychecks do not go as far, and for many people, the financial focus at home is on the essentials. Banks and financial institutions, concerned about their own balance sheets, are decreasing the amount of loans they are making available to consumers and businesses alike, and are changing borrowing requirements. Thankfully, there are some strategies that can help you lower costs and expenses to maintain or improve your current standard of living and help you survive the recession.

Difficulty:

Moderately Challenging

Instructions

1. If you purchased your home at an interest rate above 9 or 10 percent, consider consolidating your credit-card debt in order to get out from under the high interest rates. However, Paul Dolce, a certified financial planner (CFP) in Dublin, Ohio, advises against a consolidation loan if the interest rate on your house is under 8 percent, because you will pay a somewhat higher interest rate afterward.

2. If you did not buy your house at a fixed interest rate, talk to your banker or or mortgage company about refinancing your home at a fixed interest rate, since the federal government is keeping interest rates low to encourage economic growth. You will save money during tough economic times.

3. If you choose not to consolidate your debt, consider applying for a home equity line of credit, which would also be at a low interest rate right now. According to Paul Dolce, you could potentially save up to $800 per year that you could apply to the loan principal. You can also deduct the interest you pay on bonus equity loans at income tax time.

4. Look at how much you are paying for life insurance. If you do not get life insurance as an employee benefit or if you have purchased additional life insurance policies with a larger payout, you may be able to reduce your coverage a bit. Shop around for a less expensive carrier, as well.

5. Find out if your insurance company offers a discount if you bundle you house, automobile and even life insurance together under one policy. You can usually get a good deal and save some money each month in payments on your insurance premiums.

6. If possible, open a second savings account, so you can save money for "rainy day" expenses like a new heating or air-conditioning unit. You do not have to put in a large amount of money--even $5 or $10 per paycheck will add up over time.

7. Consider temporarily suspending payments to your children's college funds if your children are under 10. Do not close out the plans; just hold off paying into them again until you have paid down your debt and have an emergency fund of $2,000 or $3,000 (the second savings account).

8. If you are retired, receiving a pension check and need extra money, consider signing up to be a substitute teacher or para. This way, you won't have to work full-time, and you can choose when you want to work. Your professional skills are valued in most community school districts.

9. Take a look at your discretionary spending, including how many times per week your family eats out. Consider taking lunch to work and eating in the lunch room (or at a park if one is nearby) and cutting back on family dinners at restaurants.

10. When you go shopping, hit the clearance and other clothing sales. Pay attention to buy-one-get-one-free offers and "10 items for $10" sales at the grocers. This is another way you can cut expenses and maybe put a little bit of money into that "rainy day" savings account.

Tips & Warnings

• There are Certified Financial Planners who will, for a fee, help you with your financial planning to help get you through tough economic times. Make sure you select a CFP who is not selling a product, and stick with independent CFPs if possible. Make sure the fee he charges is reasonable.

• Avoid Certified Financial Planners who work for large CFP services, especially if they are selling a product as part of the deal.