From the Experts at Credit.com

# Painless Penny Pinching: How to Save Big Without Feeling Deprived

These days, nobody cares much about the lowly penny. Similarly, most articles on saving money focus on getting you to do the things that hurt so you can put aside big bucks. Yet pinching pennies is a lot more important and rewarding than most people realize.

For a sense of penny-power, take a look at a typical checkerboard which has 64 squares. Starting with a single penny on the first square, imagine that every day you will double the number of coins you put on the board. On the second day, you’d put down two pennies, the third day, it’d be four cents, on day four, you’d plop down eight pennies … and so on … until you got to the last square on day 64.

## Would You Rather Win a \$50 Million Lottery … or Keep the Pennies?

If you chose the pennies, you’re right! By the time you’d get to the last square on the checkerboard, there’d be 9,223,372,000,000,000,000 pennies on just that one space. The total on the checkerboard would be \$184 quadrillion – that’s about 3.5 billion times more than winning a \$50 million lottery.

Now imagine how much you can save by pinching a few pennies here and there! But where should you start? I recommend you come up with a painless way to save some cash every single week. Pick an amount you would never notice, invest, or miss. For argument’s sake, I’ll use \$25 a week as an example, but feel free to choose a higher number.

Pinch your pennies however you’d like – in \$1 or \$5 increments – or change your savings ways every week – whatever you want. Just stick to not spending that \$25 every week. Maybe one week, you’ll go for fewer lattes, and during another, you’ll take a tad fewer taxis.

Please consider one of my personal favorites: have a great Mexican fiesta at home instead of a meal out. Olé! And after you’ve enjoyed all the taste treats, watch movies that you take out of the library — for free — and get to keep for a week.

## The Penny Pinching Possibilities Are Endless

While there’s no major belt-tightening involved, to keep your penny pinching painless, choose ways to cut back that won’t bother you one iota. Still, the rewards are so huge, it’s not a bad idea to give yourself an extra nudge every now and then, when you can.

One great way to give yourself an extra nudge is to make sure you actually use that \$25 a week for something constructive — to get out of debt or to save for the future. For now, let’s assume you save that \$25 every week. Guess how much you’ll have in 20 years: \$64,187, assuming you earn a conservative 8% in interest. Wondering about 30 or 40 years? Depending on when you plan to run for that 8:09 train for the last time, there’d be \$162,751 or \$382,109 more in your retirement nest egg. So much for small change, huh?

To prime your “frugality pump,” here are some of my favorite painless ways pinch pennies without depriving yourself of things you enjoy.

1. Brew your own. You’ve heard it before but it bears repeating. Whether at work or home, making your own coffee — even using the choicest beans and the best coffee-maker — can easily save you a bundle, especially if you compare it to buying cup after cup of the highest-priced java. I’ll drink to that!
2. Bring lunch. You know brown-bagging it will save you a lot of money over eating meals out. It’d be a piece of cake to save \$25 a week just on lunch. There’s a bonus beyond the money you’ll save by avoiding those fast food joints. Think of the arteries you’re saving … and how you can use the extra time to get in a bit of exercise. Talking a walk every day at lunch time is a lot cheaper than joining a gym.
3. Sometimes it pays to REALLY stock up, especially when the products you regularly use are on sale – at the supermarket, drug store, health food store – wherever! For example, say your favorite apple juice normally costs \$2.29 but it’s on sale this week at \$1.50. Buy all you can store because you’ll save 34%. The “yield” is actually over 52% – because \$1.50 will buy what usually costs \$2.29. Where else can you get a 52% return on a measly \$1.50 investment? What’s stocked on supermarket shelves often beats Wall Street and makes it fun to pinch pennies!
4. Spend an extra minute in the produce aisle, and you’ll walk away with plenty of healthful freebies. No, I’m not suggesting you sample the grapes, but the next time you buy pre-packaged fruits or vegetables, weigh a few bags before tossing one into your shopping cart. While a 5-pound bag of onions, potatoes, carrots, apples, oranges, etc. must weigh at least 5 pounds, the packers can’t pile the perfect weight into every bag. So they invariably put in extra. It’s a piece of cake to get a bonus half pound or more for free. Savings of 25% are routine. Try it!
5. Prefer “designer water” to what comes out of your tap? Install a water filter. You’ll save a bundle, avoid a lot of lugging, and probably end up with perfectly fine water. You’ll also be doing a good deed for the planet. A recent study found that it takes 18 million barrels of oil and up to 130 billion gallons of fresh water a year just to make the plastic bottles that contain the 41 billion gallons we actually purchase, much of which is plain, ordinary tap water.
6. Herbs and spices are almost always cheaper at the health food store or even at the drug store. If you’ve got a heavy hand when it comes to the cumin, curry, or coriander (like I do), you’ll be amazed at how much money you can save by not buying these flavorful items at the supermarket.
7. Shop smart, but don’t fall for the stores’ tricks. If you’re taking the time to read this, you probably already know to use coupons for items you normally buy. Remember to avoid fast, processed and convenience foods, take advantage of store sales, and keep your eyes out for temptations that are designed and placed to appeal to your kids.

Just don’t let your guard down! Perfect example: You might think that the largest box is always the best buy. Wrong. Sometimes, two smaller boxes are cheaper, so it really pays to check the unit prices, especially on items you use regularly. In my supermarket, two smaller containers of baking soda are always cheaper than one larger size box. It makes no sense, but once you know, the savings are almost automatic.

Here are some questions to ask yourself next time you feel the urge to splurge:

1. If you didn’t need it yesterday, why are you buying it today?
2. Planning to pay with plastic? Is this widget something you want enough to take out a loan to buy? If you had to buy it with cash, would you?
3. If you spent 15 minutes or so comparison shopping, might you find a better price?
4. Can you accomplish the same thing at lower cost?
5. Would a generic be just as good as the name brand? Generics are great if you like the taste and/or can get the kids to go for them. But buying the cheaper brand and then throwing it out won’t save you a penny.
6. Might this be an impulsive purchase? Slow down! If you don’t buy it now, what are the odds that you’ll feel as though you made a mistake by the time you get home? How likely is it that you’ll come back and buy it tomorrow?

Folks focused on saving money employ many techniques to get what they want for less. The secret is to pick things that appeal to you. There’s no need to spend hours baking homemade everything, get filthy recycling vacuum cleaner bags, or pinch your pennies so tightly that you drive everyone around you nuts.

Can’t give up the morning java fix you get at Starbucks or Dunkin’ Donuts? Don’t! Instead, come up with other ways to cut your expenses by using some of the most popular strategies for saving big without squeezing every penny until it hurts. Ready, set…. start saving!

## Find Ways to Do-It-Yourself

The more you can do on your own, the less it will cost – whatever the “it” is. You’ll save money every time you fix a leaky faucet, repair a broken lamp, add on to your home, make your own baby food, become the family’s barber, or sew a work outfit.

Here are some do’s and don’ts:

• DO learn how to tackle the projects you want to get done. The more new skills you learn, the more you can save. There are free courses everywhere these days, for example, at the big box stores and sewing centers. And there’s certainly no shortage of how-to books and websites where you can get clear instructions on how to do pretty much anything. Give it a try!
• DON’T be afraid. After all, what’s the worst thing that can happen? The lamp will still be broken, or you’ll have to buy a dress. You’ll be exactly where you started, so the risks are small.
• DO choose to learn how to do-it-yourself only in areas that appeal to you. If you hate the smell and filth that accompany car repairs, don’t choose do-it-yourself projects under your auto’s hood. Stay away from oil, gas, and grease. Instead, focus on projects you want to do.
• DO start small. Replacing an entire roof can be a huge, dangerous, and pricey undertaking. Especially if you’ve never tried roof repair, begin with a small, low roof — maybe a piece of your garage that’s showing more wear and tear than it should.
• DO take a look at the various bills you pay on a regular basis. For example, do you pay for lawn care? If you (or the kids) mow the lawn yourselves, you can save money on the gardener and get some valuable exercise as an added bonus.

## Impulsive? Take a Hike when You Shop!

Do you or other members of your family tend to make budget-busting impulse purchases? If so, here’s some great news for you: When people walk away from items they’re considering, 90% of the time they won’t return. So simply move on. If you really want it, you can always go back.

For many people, leaving the credit cards at home helps them cut way down on impulse spending. Again, research shows that people will spend more – an additional 30% or more – when they’re using plastic rather than cash. If the plastic’s not in your pocket, maybe you’ll lose interest before you get around to coming back to make the deferred purchase. If you lose interest, it wasn’t worth it in the first place, right?

Paul Richard, executive director of the Institute of Consumer Financial Education, came up with another smart strategy to try before you buy: Take the time to visualize three other ways you could spend that money. Make this a habit and you may just find yourself stopping impulse purchases dead in their tracks.

Of course, the absolute best way to deal with impulse purchases is to avoid temptation. If you know you’re likely to be tempted to buy things you don’t need, stay out of malls and put those mail order catalogs directly into the trash.

## Put Those Customer Service Reps to Work!

It pays to ask some questions of the service representatives at places where you regularly pay bills. For example, consider your long distance carrier. Even if you never do anything else to save money on your phone bill, ring up your current phone company and ask if you’re on the plan that will cost you the least. Despite all those ads trumpeting their great deals, most folks still pay top dollar. Why pay your carrier’s highest rates when simply asking the right question can save you money?

Whether it’s to get a better credit card interest rate, lower insurance premiums, or cheaper heating fuel, sometimes, all you need to do is ask. It also pays to ask and ask again, at least once a year. Knowing what the competition offers will put you in a much better position to negotiate with the companies you currently do business with as well as with others who will happily compete for your business. So make a few calls. The money you save will be your own!

Even if the person at the other end of the phone gets huffy, don’t be intimidated and don’t hesitate to go up the chain of command. You have nothing to lose, and chances are, you’ll get a better deal. Most businesses now realize it’s a lot cheaper to keep current customers happy than to prospect for new ones.

As you comparison shop – be it for insurance, cars, contractors, attorneys, plane tickets, a refrigerator, or new lawn chairs – let ‘em know you’ll be getting at least three estimates, and that you’re going to go with the one who offers the best price. Also, be sure to snitch. If you find out that a mail order house or Shopkeeper Jones offers the very same item for less – ask Shopkeeper Smith to keep up with the Joneses’ and beat the best price you’ve found.

Tips to Remember:

• “Not asking is an automatic NO!” To guarantee that you’ll save a lot of money over the years, memorize this phrase. Ask for what you want, be it a lower rate, a fairer price, or better service, so you don’t go through life faced with automatic NO’s!
• Remember that persistence pays off. You can get a refund on shoddy merchandise, a discount on your phone bill … you name it! Be firm, polite, and ask to speak to a supervisor whenever the service representative can’t help you.
• If you’re not partial to the phone, comparison shop on the Internet. Competing online retailers can lead to some great deals. Just don’t forget to include shipping in your comparison. You can also …

## Get the Help of a Friend

If you’ve got a touch of phone phobia, get a buddy to help you dial for dollars. It’ll boost your confidence and your effectiveness – and make it less scary if you’re more easily intimidated than you’d like. You’ll brainstorm together before you pick up the phone – and while you’re on it, for that matter.

Certainly don’t hesitate to ask the service representative to hold on for a moment while you get some pivotal coaching from your friend. Think of all the times they’ve put you on hold! And always feel free to call back later when you have another thought – or more courage.

Sharing the experience turns something that may seem to be a chore into something fun. It’s exciting to take on “the system” together and win — which is likely to be the result if you keep at it.

## How to Hondle

Do you hate to bargain, but love to get bargains? No worries! You’re not doomed to pay full price on everything for the rest of your life. Instead of haggling, try to “hondle,” which is a Yiddish word that suggests a gentler, kinder, more humorous approach to getting what you want for less. “Hondling” can turn even the most timid into stress-free super-savers. Here’s what to do:

• Know your bottom line. What’s the thingamabob worth to you? Decide in advance and don’t pay more.
• Ask for help. People like to be helpful, and it usually keeps things friendly if your approach is something like, “Money’s so tight these days, can you help me out on the price?” However you put it, say it with a smile.
• Don’t show your hand. If it’s clear that you love the gizmo, and must have it, you won’t be offered a rock bottom price.
• Shop late. While the early bird may get the worm, you might get a much better buy if you shop late. End-of-month quotas to fill, end-of-day flea marketers who don’t want to drag the stuff home, and people selling snow blowers in June are likely to go for low-ball offers.
• Play “Let’s Make a Deal!” You’ll get a chuckle, if not a special combo price, by saying, “Let’s make a deal,” when you want to buy a few items at once. Try it next time you’re at a tag sale, consignment shop, or flea market. This has been known to work in department stores too.
• Start small. Make a low offer, in the hopes that you’ll still end up with a good price, even after some healthy give and take. But watch out, especially when you’ve fallen in love with the widget. Someone else may take your potential score home.
• Look and talk at the same time. Examine the item carefully and explain what you see. Pointing out even slight imperfections, especially if you’re nice about it, may help you get it for less.
• Have patience for the process. You won’t get the best deal if you’re in a hurry. “Hondling” takes time.
• Know when to walk. Not sure you want it at the current price, but can’t seem to get it at a lower one? Start to stroll. Maybe the salesperson will follow … and meet your price. If not, think of all the money you just saved!

## Negotiating No-No’s

• Don’t buy it if you don’t need it. If you’re mildly tempted by a price reduction, but aren’t sure you want something, it’s probably a bargain you can live without. Sleep on it.
• Don’t reveal your bottom line. Never tell salespeople how much you can afford per month. Why take a chance that they’ll make sure your final cost is at least that much?
• It’s no bargain if you put it on your credit card, and don’t pay the bill off by the due date. Interest could run anywhere from two to five times more than your carefully negotiated price. Suddenly it doesn’t seem like such a steal!
• Don’t get angry or give ultimatums you don’t mean. But do feel free to push it a bit. What do you have to lose by trying for a better deal? Just keep it light and friendly.
• Don’t buy NEW if you can possibly avoid it. Cruise on over to sites like Craigslist, comb the newspapers, pennysavers, supermarket bulletin boards, and tag sales for good, used stuff – be it a washing machine or ice skates. Used items costs a lot less than new things and they’re often better made. You might even find what you are looking for right in your community, at the best price of all – free!
• Don’t shop when you’re in a bad mood, tired, or hungry. You’ll buy stuff you really don’t want and you’ll end up angry at yourself for having spent the money.
• Don’t dicker if the price is already fair. Why take advantage of someone just to save a buck? If it’s a “steal,” someone’s probably being robbed.
• Don’t be an “Ugly American” when you travel. Over the long haul, will you really treasure the trinket more if you pay a dime or two less?

Many of the recommendations you’re likely to hear – like caulking around doors and windows, insulating switches and outlets on outside walls, or covering the air conditioner in winter – won’t cost much. Others won’t even get your hands dirty, like resetting the timer on your thermostat or lowering the water heater temperature. Some utility companies even offer grants, no or low interest loans, or partial payment for energy saving improvements. Ask! The money you save will be your own, month after month. Your lifestyle won’t have to change, and you’ll be doing your bit for the environment.

You can get free assistance with research at your local library (as well as free DVDs, videos, and books). The local community college may offer free career counseling. The possibilities are endless. Just ask!

## Can You Put Something Else on the Table?

Trade and barter opportunities abound everywhere. So when you see something you’d like, try to trade something you already have or a skill of yours for it. For example: “I’ll cut your grass this summer if you’ll paint a portrait of my family.” “I’ll watch your kids Saturday night if you’ll take mine next Friday.” “I’ll fill Johnny’s cavities if you do my taxes.”

Especially if you have more time than money, trading some of your expertise instead of money can be a great way to pay for things you need. And, who knows? Maybe you’ll get creative and trade your talent to add some luxuries to your life – things you couldn’t afford to buy. Be imaginative! Home renovations, car repairs, and vacations are just a few of the pricey items that can be bartered.

Be careful, though. Bartering can wreck a relationship unless everyone’s very clear about the terms. “I didn’t agree to fill three cavities.” “I never agreed to a room-sized portrait.” For small barters, there’s probably no need to make a big deal of the agreement, but for major projects, write out what each person will do, when they’ll do it, and who pays for what supplies.

At its simplest level, do the barter directly. Design an ad for an auto body shop in exchange for getting your dented fender fixed. Build a deck for the orthodontist as payment for your child’s braces. Swap day care for computer skills or a refinished antique chest for a week at a charming bed and breakfast. The possibilities are endless.

Tip to avoid being stiffed: Unless you’re confident that the other person is reliable and capable, hold off completing your end of the bargain until you’re satisfied with what’s being exchanged.

There are barter exchanges and clubs around the country that create opportunities for a broader range of trades by letting people accumulate credit for their products and services. So you can paint a real estate office, but use your credits to buy a computer – assuming the real estate agent and the computer store belong to the same barter club as you do.

Exchanges publish member directories and report the transactions to the IRS. (Yes, unless you’re swapping two objects or services of identical value – “If you baby-sit Tuesday, I’ll watch your kids on Thursday,” for example – it’s taxable.)

But they do come and go … so it’s wise not to accumulate too many credits, lest you be left in the lurch if your barter club shuts down.

## Think about What Ben Franklin Would Say

In Ben’s day, before there were taxes on income, he was right when he said: “A penny saved was a penny earned.” Today, he probably would be talking about dollars instead of pennies, and Ben would have to say the following mouthful: “A dollar earned leaves 67 cents after taxes, whereas a dollar saved is \$1.49 you’ll never have to earn, assuming you pay the national average of 33% of your income in assorted taxes.” (This statistic is courtesy of the nonprofit, non-partisan Tax Foundation.)

I know it’s not as pithy, but since 1913, when income was first taxed, the gap between earned and saved money has widened. Ben would be amazed to discover that a penny saved today is worth over twice as much as a penny earned. That’s because we pay for most of what we buy with “after-tax dollars” – the 67 cents out of every dollar that we can actually spend on something other than taxes.

The key to absolutely safe, tax-free investing today is saving money. Fortunately, this doesn’t mean doing without. Penny pinching is one of the best ways to realize double-digit returns on your money, risk-free and guaranteed. Even seasoned investors would be hard-pressed to find similar returns, especially on small sums.

Ben Franklin might want to revise another of his well-known sayings: “In this world nothing is certain but death and taxes.” Now that you know the strategies world-class penny pinchers use, it’s certain that you can save yourself a bundle, painlessly!

And remember to pick up those pennies!

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• http://www.credit.com/ Credit.com Credit Experts

We’re glad to hear it. Developing good habits while you are young can pay big dividends later.

• http://www.credit.com/ Credit.com Credit Experts

We’re glad it was useful to you!

• NJ_3929

While there are many good ideas in this article, the initial comparison to the exponential growth of pennies (i.e. doubling every square) is completely misleading. Unless, of course, there is some saving/investing method that generates and compounds 100% returns in each iteration.

• EastBayer

A “conservative” 8% interest? That’s ridiculous, and you know it. There are very, very few “safe” investments that beat inflation these days. That’s why “high-interest” savings accounts yield less than 1%, and with such low interest rates, people have been turning to the stock market to get any sort of return, which has in turn raised those prices significantly. It’s OK, there is value in saving, but pretending that compounding at unrealistic rates of return will play a significant role in the accumulation of wealth is doing a disservice to your readers.

Use a coupon and take the “saved” money and put it in a piggy bank. You’ll be surprised how much accumulates! Buy an unbaked pizza (Walmart Market Choice is good) and cut it in half and freeze it. When you want delivery pizza, pop half in the oven and bake. \$3.75 instead of \$15-\$20! Put the difference in savings.