The Money Mom: What do we really NEED?

What do you really NEED?

It’s become a national question. With jobs and money scarce, our priorities are to protect the essentials and toss the rest.  Some sacrifices hurt; others bring surprise benefits.

To gauge America’s changing priorities, US News and World Report gathered market research, business trends, economic data, and reports from consumers into a list of things that many people seem to be significantly cutting back on, or living without completely. Here are 21 of them.  To read more, click on this link.

[Slide Show: 21 Things We're Learning to Live Without.]

Monthly payments.  I can borrow to pay for it as long as I have enough income to cover the monthly payment. New mentality: I’ve already got too much debt.

Window shopping. We are just browsing, right? Consumers have discovered that window shopping encourages them to buy tons of stuff they don’t need.

Bells and whistles. The technology arms race is slowing, with consumers gravitating to simpler gizmos like e-books, prepaid cell phones, and older, used electronics.

Clutter. As Americans downsize, do more of their own cleaning, and look for stuff they can sell online, they’re discovering tons of things around the house they can get rid of. [Cable TV. Many people are cutting back on pay-TV services or canceling them altogether, which saves $50 to $100 a month.

A home phone. How many phones do you need, anyway?

Privacy. Got room on the couch? To save on rent or mortgage payments, roommates are doubling up and grown kids are moving back in with their parents.

Prepared foods. More people are cooking at home, and they’re doing it with fewer  sauces, marinades, dressings, and other ingredients.

Tupperware parties. Sales of Tupperware and other storage products are up, since people are cooking at home more and husbanding leftovers.

Packaged cigarettes. The average price of cigarettes is about $5 a pack or $45 a carton, which mounts quickly for regular puffers.

Lattes. The $5 daily coffee is always one of the first small luxuries to go. But more people are brewing at home.

Guilt. Keeping up with all the latest trends and technology takes an emotional toll.

Extra calories. Some Americans say they’re eating less to save money and drinking more water or doing other things to suppress their appetite.

Newspapers and magazines. It’s bad news for the publishing industry, but millions have canceled subscriptions to print periodicals and started getting free news and information. Healthcare. A forced reduction in healthcare coverage is probably one of the most crushing effects of a weak economy

New gifts. Re-gifting? There’s always room to refine your strategy.

New cars. Many buyers who have traded down to a used model are surprised at the quality of the merchandise.

Comfort. Thermostats all across America are going lower in winter, higher in summer.

A daily commute. Telecommuting increased during the recession as well, and more people say they’re riding bikes or walking more to save on gas costs—or a gym membership.

Fancy dates. Online dating services like Match.com are growing, but courtship is a bit of a comedown these days.

Debt. Who needs it?

You can sacrifice and enjoy it.  You know, water sometimes is more refreshing than soda!

 The Money Mom

GoRapids.com Money Mom: Saving for College? Yeah, Right!

I just wrote out the check for my daughter’s college tuition. Ouch!! But I am so glad my family started saving 18 years ago.

Are you planning to help your children or grandchildren pay for education expenses? Or, are you thinking of taking classes yourself? The first step in planning for education is deciding what kind of financial help you want to provide.

Starting today, (YES, TODAY!) you can begin to create an education savings plan by deciding what education means to you.

• Do you feel strongly about private vs. public education?
• How much is too much to pay?
• How does your plan impact your current taxes, future taxes, financial aid eligibility, and tax credits?
• How long will it take to save what you need?

Once you have a sense for what you’d like to save for, you’ll have a better idea of how much you’ll need to put away. Your total cost can depend on several factors, such as:

• Student’s age
• Private vs. public tuition costs
• In-state vs. out-of-state tuition costs
• Financial aid opportunities (federal, state)
• Scholarship awards
• Type of degree sought
• Housing costs (on- or off-campus)

The type of plan you choose for education savings can have a major impact on your financial situation and on your children’s.

Some of the most common plans include:

1. Uniform Gifts to Minors/Uniform Transfers to Minors Accounts (UGMA/UTMA): Your child would control this type of custodial account when they turn 18 (or 21 in some states). They would be able to use the funds for education, as well as other expenses.

2. 529 College Savings Plan: A 529 plan targets college tuition and expenses. It stays under your control, plus it offers certain tax and contribution advantages like earnings won’t be subject to federal taxes, and in most cases, state taxes as long as you put your withdrawals toward education expenses.

3. Coverdell Education Savings Account: Also offers tax benefits. It has a maximum contribution limit of $2,000 per year per beneficiary for a child’s elementary, secondary, and college education expenses. Contributions are not tax deductible, but earnings are federal income tax-free when used for qualified education expenses.

Dreams can change. New opportunities can arise. As your education needs and goals evolve, you should revisit your plan and make adjustments to help you to stay on track. I chose the Coverdell Education Savings Account and placed the money in a time certificate so the principal would be protected. Any funds not used by my daughter can be rolled over to my son to use.

The Money Mom

GoRapids.com Money Mom: $10 Can Save You!

How much might the average strapped American be able to save?   Out of a hat, I picked $10. It’s a small one, but it can add up quickly. For many people and families, I suspect, $40 a month is a savings goal within reach. Many might even be able to increase their savings to $50 a month, or $10 every six days, which would yield more than $70,000 in 30 years. Bump your savings to $100 a month — $10 every three days, or about $3.33 per day — and you’re looking at more than $140,000. That is a huge cushion in retirement.

The question then becomes, where do you get your $10 increments?

“You basically have to defer consumption,” says Steven Blakely, an editor and communications director at the Employee Benefit Research Institute. But that, he adds, is only part one. “The question is, if you do manage to defer consumption, can you then save (the money)?”

Yes! And here’s how. Try any of these savings steps, starting today, and send me flowers when the $10 revival plan starts to work and you realize you won’t die broke. (Just kidding!)

Rules:

• The key is to pick at least one way you can immediately save $10 this month. If you pick more than one, that’s great. But for each $10 you save, you have to:
• Put $10 in an envelope and deposit the money in your bank at the end of the month. (No cheating!)
• Write a check for $10, put that in an envelope, and deposit it.
• Or set up an automatic transfer right now for $10 to be zapped into your savings account each week or month or three days or whatever.

Give yourself $10:

• Cut $10 out of your monthly grocery budget. (Give up four nights of dessert and you’ll save at least that.)
• Slice $10 out of your vices for the month (cigarettes, alcohol, magazines, music downloads, ice cream, pay-per-view TV).
• Use $10 less in electricity. (Turn off more lights or adjust the thermostat, you can do this.)
• Drive $10 less. (That’s about three gallons. It’s summer yet, the bike will work!)
• Bring lunch to work twice a week. (Leftovers are free.)

Just try one of these ideas. Sometimes just saving the change from your pocket can add up to $10 a month.  Good luck!

The Money Mom