Investing Unit 3: Summary

1. Pay yourself first. Have automatic contributions from your paycheck or checking account go to a savings or investment plan. Money that you do not see is often easier to save than money you have and must then set aside.

2. Find money to save by refinancing your mortgage. Cutting your rate by a percentage point will probably pay off if you plan to be in your home for an additional 18 months (Note: This depends on the closing costs required).

3. Switch to a credit card that charges a lower interest rate, but be aware of low rates that increase after 6-12 months. Be ready to switch cards again.

4. If you are offered a no-fee, no-points home equity loan, sign up. Use this line of credit to pay off higher-cost debt. Do not use it to increase your debt load.

5. Pay ahead on your mortgage. An extra $25-$50 a month can make a big difference in the amount of interest you pay as well as the number of years you pay. Or pay your monthly payment in two installments (if allowed) — one payment 2 weeks before the due date and the other on the due date. You will reduce the total cost of the mortgage and the length of the loan.

6. If you are incurring late fees or extra finance charges because bills come due before you get paid, ask to have the due date changed to after payday.

7. To cut your utility bill, unplug the extra refrigerator or freezer that is used infrequently. Also lower the thermostat on your water heater to 120 degrees, install high-efficiency showerheads and faucets, switch to compact fluorescent bulbs in fixtures that are on at least 4 hours a day, replace an inefficient heating and cooling system if you are likely to stay in your current house for a decade or more, and check with your utility to see if they have programs that will pay you to insulate your home.

8. Sign up for overdraft protection on your checking account; dodge unnecessary bank fees; avoid keeping large balances in your checking or savings accounts earning low interest rates — invest them in higher-yielding investments; and compare costs of checks from your bank and other sources for the best buy. Join a credit union for potential savings on your banking and credit transactions.

9. Shop for the best price on all your insurance needs. Reduce costs by having home and auto insurance with one insurer, installing safety devices in your home, canceling private mortgage insurance when you have sufficient equity in your home, purchasing life insurance only on breadwinner(s) or primary care-givers, and avoiding single-disease health insurance policies.

10. If available, use your employer’s plan that lets you set aside part of your salary to pay medical bills with pretax dollars. Carefully evaluate health care plans available to you and select the one that best meets your needs.

11. Comparison shop for the best prices on prescription drugs. When available use generic drugs for both prescription and over-the-counter drugs, and utilize mail-order pharmacies for drugs taken regularly.

12. If you smoke, stop. It is bad for your health and costs about $800 a year for a pack-a-day smoker. A year after you quit, check with your life insurance agent for reduced premiums.

13. Save big by buying a nearly new rather than a brand-new car. Other savings related to your car include pumping your own gas, buying the octane fuel recommended for your car, raising your collision and comprehensive deductibles to $500, and avoiding four-wheel drive vehicles unless needed (they cost more up front and you pay more for gas, tires, and insurance). If you buy a new car, order from the factory, selecting only the options you want unless the dealer is willing to discount the price of unwanted options.

14. Buy in bulk at discount and warehouse stores. Always shop with a list to avoid impulse buys and use coupons when appropriate. Try store brands for considerable savings.

15. Instead of beginning your landscaping projects the first warm day of spring when plants and related materials are most expensive, wait until the items go on sale.

16. Encourage your college-bound students to apply for scholarships and offer to pay them a lump sum to graduate on time to avoid having to pay a fifth year of college. If your child attends college at least 150 miles away, check with your agent regarding lowering your auto insurance premium (it could drop as much as one-third). Even if the student takes the car to school, costs may be lower due to the location of the school.

17. Maximize contributions to your tax-deferred retirement plan and contribute to an IRA. Even though you may not be able to deduct IRA contributions from your income, the money in your account grows tax-deferred until it is taken out.

18. To save dollars on your entertainment and education budget categories use the local library. They have the latest books, magazines, journals, and newspapers as well as music compact discs, Internet access, investment research, and a host of other services.

19. Other quick ways to add cash back into your budget include canceling subscriptions to magazines you do not read or could access at the library, dropping club memberships you do not use, canceling credit cards you no longer use, disconnecting cable or satellite television or at least dropping some of the options you probably have, and trimming back the options you carry on the telephone.

20. Catch your coins and bank your surprises. At the end of each day, put all your loose change into a savings container and once a month deposit the collection into your savings account. Whenever you receive a raise or unexpected money such as a gift or contest winnings, put all or part of the money into your savings account.