Monday, March 9, 2009

Saving $900 a Month

There are two ways to have more money in your pocket -

1. Earn more
2. Spend Less

Since June when I began this blog and started my journey to get $900 a month, I've been working at both of these. To earn more I work several part time jobs, sell items on eBay, Amazon and Half, do surveys, mystery shop, and have done peer to peer lending through Prosper.

These have been very successful, but the savings I have managed to find in my budget are just as, if not more, important. Why more important? Because they happen each and every month - without additional work on my part. I thought I would take a look at my original budget, how it has changed, and how I have found some wonderful ways to keep money where it should be - with me!

Insurance - One of the first things I did was call my insurance agent. Through making some changes on my auto and life insurance contracts, I was able to save myself $31.44 a month. This may not seem like much, but it really adds up when you look at it over the course of the year. One decision I made was to always pay all my bills (including these) with the least number of payments. A number of my bills (including water and trash) will allow me to pay in monthly payments or pay annually or semi-annually. By paying up front, you can usually save yourself some service fees. I know that it is only a few dollars each month, maybe. However, there is another trick to this, and that is to pay yourself those monthly payments into an interest baring savings account. Then, when the bill comes not only do you have the money at hand but also you have been earning interest on it all year long!

Mortgage - This was just luck of the draw, frankly. My taxes on the cabin in the woods went down $80 last summer. It was a nice, unexpected bonus. Then my home insurance dropped $20 when I took my ex husband off the policy. He had had a special rider on the home insurance for his electronic and camera gear. No more gear in the house, no more money spent insuring it! Total savings equaled about $100. This is very likely to change this year. My assessed value on the cabin went down slightly, but the assessed value on the house jumped. The two will not cancel themselves out, so I may have a larger house payment coming up.

Bad Accounting - When I first made my budget I didn't realize that I had a bug in the system. It took me awhile to figure it out. It wasn't an actual technical glitch - it was just faulty thinking.

I have a Flexible Spending Account through my office. An FSA is an account for health insurance costs. Money comes out of your paycheck, pretax, and then goes into a reserve. Whenever you have a deductible or prescription cost, you submit it to the FSA and they reimburse you out of your account. Its brilliant and I love it! However, here's what I was doing - Each week I was putting $25 a week into a savings account for "emergency savings." Somehow though, every month I was always running low in my checking account. It seemed every time I turned around, I needed to dip into that "emergency" money. I couldn't figure out what was happening! Well, the problem was in how I was handling those FSA checks.

Say I had a medical bill for $100. I wouldn't budget for it because I knew my FSA would cover it. After I paid the bill, I'd submit my receipt and two or three days later I would get a $100 check in the mail. The problem was that I wasn't treating that check like the reimbursement it was - I was treating it like income. So, instead of just putting it back in my checking account I would go do something with it - sometimes really good things like putting it towards my credit card. That money though was not budgeted for my credit card, so I was constantly shooting myself in the foot. Why was I doing this?

Two reasons really, one was that the money from my FSA didn't feel like it was connected to the doctor bill, which might have been days before. The other reason is that back in the day when I was living well beneath my means, I could do that. I could treat FSA checks as income. I think I got in that habit and never thought twice about it... until my budget wouldn't balance.

To solve the problem I put $250 in my "super short term grab it from an ATM emergency fund," and then made a vow to leave it there unless it was actually an emergency. Then I vowed to put FSA checks straight into my checking account like the reimbursement they were. Finally I shifted $50 a month into my "slightly longer term interest earning emergency savings account."

Total savings for fixing some bad financial management mistakes - $50 a month.

Flexible Savings Account Changes - Speaking of my Flex Plan... last year I had pretty high medical needs. I was in therapy and with other regular run of the mill health concerns, I upped my FSA withdrawals by quite a bit. It was a smart thing to do. However, this year I don't need as much, so I scaled back considerably. Difference from last year's paychecks to the ones starting in January? $73.36 a month.

I'll be getting even more out of my paycheck since I have changed my tax withholding, but I'll leave that for another post. The point is that sometimes by making relatively small adjustments, you can get considerable savings. I know these aren't for everyone, and some, like having your taxes go down, are pure luck. (And luck I might not get next year.) Still, going through your budget and looking for every way to save, could put some coin in your pocket - money you have already earned.

Photo by: s2photo


Mo said...

a penny saved is a penny earned. its an oldy but a goody! have you read that book, Your Money or Your Life? by any chance? Also and oldy but also a goody.

J. Money said...

i still think it's awesome as hell that you strive for an extra $900 every month!!! can you imagine if EVERYBODY did this? whew....

keep on doing your thang over there :)

Dawn said...

Mo - I haven't been I've been thinking about hitting the library lately. Thanks for the tip!

J. Money - it can be done! It requires some work, but it isn't impossible. I wish more people did this - it might solve a lot of folks' woes.

Miss M said...

Saving money gets downplayed too much, but it's relatively simple to do. If you look at those little recurring costs over a year they start to add up. Glad you found some easy ways to cut back. The assessed value on my house better go down this year, I'm still getting taxed like it's the height of the bubble.

Dawn said...

Miss M - frankly, in my opinion I would rather save than earn more. Both is optimal, of course, but saving is SO easy! It happens month after month with no work - heck, you can't even say that about passive income.