Friday, December 8, 2006

15 ways to grow money

Tired of “experiencing cash-flow interruptions”? Want to increase your net worth? The best way to accumulate money is to stop spending it on things you want but don’t really need, and to save and invest so your dollars will begin working for you. “Building your net worth doesn’t require a small fortune, but you do have to change spending habits and practice more self-control,” says Sherrin Ross Ingram, author of Wealth Mentality (Jourdan & Brown Publishing). By taking big and small steps, you can reduce expenses and achieve your financial goals. And if you follow just a few of these 15 tips, you can save $5,000 or more in just 12 months:

1 DON’T PASS UP FREE MONEY. “You can’t afford not to participate in your company-sponsored retirement plan. If your employer matches your 401(k) contributions, it is like free money,” says Gall Perry-Mason, coauthor with Glinda Bridgforth of Girl, Make Your Money Grow! (Broadway Books). And if your job offers a pretax savings plan for medical or child-care expenses, Ingram adds, “don’t pass it up.”

2 PAY ON TIME. Fees and penalties for late credit-card payments add up, and they take their toll on your credit rating, says Ingram. Pay more than the minimum due on credit-card bills so you can cut both the time you spend paying off the debt as well as interest payments.

3 DON’T BLOW A WINDFALL. Avoid scratching your spending itch when you get a bonus, an income-tax refund, a holiday monetary gift and any other extra money. Use it instead to pay down debt, put it into a savings account or invest it.

4 SHARE YOUR SPACE. Consider taking in a roommate, family member, friend or tenant to help cut rent or mortgage payments and utilities in half, says Bridgforth. If you shell out, say, $800 a month in living expenses, with a roomie, you can halve your costs and save $4,800 a year. The savings can be invested in your retirement account or socked away in an emergency fund.

5 GET A LOW-COST RIDE. “Because cars decrease in value the moment they’re driven off the dealer’s lot, it makes sense not to invest too much money in them if your net worth needs accelerating,” counsels Bridgforth. Expensive cars cost more to insure and repair, and their resale value can plummet significantly after three years, she adds. Compare prices and market values at, then shop around, and always negotiate the sticker price.

6 BECOME A LANDLORD. The equity in a home is a large source of wealth, says Robert G. Allen, coauthor of The One Minute Millionaire: The Enlightened Way to Wealth (Harmony). “But owning rental property is a powerful wealth builder. You buy property and someone else pays you rent, which often covers your expenses from owning it,” he explains. Meanwhile you increase your current monthly income, build long-term wealth, and receive tax deductions. The depreciation annual write-off on a $100,000 property amounts to more than $2,000, he points out.

7 TAKE A COFFEE BREAK. With a luxury latte going for about $3.50, you could easily shell out more than $1,200 a year for that daily caffeine fix. Purchase regular coffee or buy a jar of instant and make your own at the office, and you’ll save about $1,000 a year.

8 DON’T GET CLEANED OUT. Dry-cleaning bills can put a big dent in a budget. Perry-Mason suggests that you save on cleaning bills by using Dryel–or some other do-it-yourself dry-cleaning product for lightly soiled clothes–or washing items in Woolite. If you spend, say, $20 a month on professional dry cleaning, do it yourself and save up to $200 a year.

9 CLIP COUPONS. By snipping coupons from Sunday’s paper, you often can reap a windfall because many stores will double the amount of the coupon. This can save you as much as $20 to $30 each time you shop, about $1,040 a year.

10 SAVE ON TALK. You can save from $20 to $45 a month ($240 to $540 a year) by cutting off the extra features your telephone service provides or by switching to a company that charges two or four cents less per minute per call. “Many people are just too lazy to switch,” Allen says. “But that laziness costs them.”

11 BOX-LUNCH IT. Take your own lunch to work; if you normally spend $10 a day, that’s an extra $50 in your pocket on Friday, a saving of $2,500 annually. Leftovers from eating out or from last night’s home-cooked meal can make great lunches.

12 REFINANCE YOUR MORTGAGE. If you want to reduce your monthly mortgage payment to free up some cash, refinance at a lower interest rate if the estimated closing costs are low enough to make refinancing worthwhile. And if you call afford a higher monthly payment, go with a 15- or 20-year loan because you build equity faster and pay much less in interest, Bridgforth advises. For example, she points out, “with a $100,000 mortgage at 6 percent for 15 years, you pay $843 monthly in principal and interest, and $51,894 in interest over the life of the loan. With a 30 year mortgage, you pay $599 monthly but $103,961 in interest over the 30 years.”

13 DON’T EAT ALL YOUR EQUITY. “Excessively consolidating your credit-card debt into your refinanced mortgage or equity line of credit will devour your home equity and significantly lower your net worth,” Bridgforth cautions. If you run your credit cards up again and again and remedy the problem by using equity from your home, you may walk away empty-handed when you sell.

14 The sticker price of any item is rarely the lowest price a merchant will accept, says Ingram. After you decide what an item is worth to you and how much you’re willing to pay, then ask the merchant to give you “a better price.” That way you’ll know how much bargaining room you have.

15 PLAN AHEAD. “The more long-range planning you do, the cheaper your life becomes,” says Allen. For instance, if you buy an airline ticket less than a week before you’re ready to travel, you will generally pay full fare. If you get it three months in advance, you can save up to 50 percent, he reveals. Buy it two weeks before and you can knock 10 to 20 percent off the purchase price.

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