Monthly route to budgeting

Your Money

December 31, 2006|By Gregory Karp | Gregory Karp,Morning Call

Spending money smarter in all aspects of your life can be overwhelming. So it helps to break down tasks and complete them systematically over time. Normally, that's called goal-setting, but this time of year, it's called making New Year's resolutions.

Spending your money smarter might have a domino effect and help you achieve many of your other New Year's resolutions, such as getting out of debt, saving for kids' college or stashing away more money for retirement. Or it can help accomplish some of your more hedonistic desires for 2007, such as buying a big-screen plasma TV, a trip to the Caribbean or that to-die-for pair of shoes.

To help you get started, here is a half-year calendar of low-effort, one-month tasks to set you on a path to smarter spending habits.

January: Track spending.

You may have heard this advice dozens of times, but you actually need to do it before you'll benefit. If you track every penny spent, if only for a month, some disturbing patterns are likely to emerge. You may hear yourself exclaim, "I spend what on soft drinks every month?"

The point is to identify areas of wasteful spending so you can reroute that money to things you really care about. The tracking method doesn't matter, whether with paper and pencil, spreadsheet or money-management software.

February: Food.

Begin the stockpiling method this month. Instead of buying what you need, buy what's on sale and stock up. For example, if your brand of peanut butter is on sale, buy three or four. Next time you need peanut butter, you go to your own pantry and grab a discount jar, rather than paying full price at the supermarket.

You'll need to keep a basic price list of items you buy regularly, so you know if something is truly on sale. You'll have to continue stockpiling for several months to see the full benefits. But a one-month trial will get you started.

Experts figure you can save 20 percent on your grocery bill without clipping a single coupon.

Many shoppers who systematically pair coupons with sale items claim they can cut their grocery bills in half. For more information, see and

March: Life insurance.

Granted, planning for your demise is no fun, but you may be overpaying for life insurance, which pays your beneficiaries money if you die. Term life insurance prices have been plummeting in recent years and are expected to drop an additional 4 percent in 2007, according to the Insurance Information Institute. So it's time to "refinance" your life insurance.

Annual premiums for a 40-year-old male nonsmoker buying a standard-risk $500,000 20-year level-term life insurance policy in 2007 will be about $615. Rates for women and younger people will be lower. Shop for another policy to potentially receive more coverage for less money.

Compare rates online at such sites as,,, and Just be sure to establish your new policy before canceling your old one. If you have anything but term life insurance, reconsider whether it's worthwhile. Most cash-value policies feature high fees and subpar rates of return.

April: Home phone.

If you haven't checked on the new packages offered by your phone company in a while, do it this month. Remember not to overbuy services just because the company offers a bundle. Unlimited long-distance calls will not be a deal if you make only a handful of out-of-state calls a month. Many times, paying a la carte for services is the best way to go.

Alternatives to having a landline phone include using your wireless phone as your primary phone or trying voice over Internet protocol, which uses your broadband Internet connection to place and receive calls.

May: Think free and cheap.

This month, make one visit to the library and one visit to a dollar store near you. You don't need to check out any books or buy anything at the dollar store. Just get familiar with what you can get for free or cheap.

The next time you're about to buy a book, CD or movie, you might think about going to the library instead. The next time you need holiday decorations, kids' gifts or a computer printer cord, you'll think of all the one-buck bargains at the dollar store.

June: Interest.

This month, take an interest in interest. Borrowers pay interest on their mortgages and credit cards, for example. Savers earn interest on their bank savings, money-market accounts and certificates of deposit. Examine all the interest you pay and earn.

To start, call the customer-service number on your highest-rate credit card and ask them to lower your rate. Often they will. If you don't carry a credit-card balance, open a high-rate online savings or money-market account. Today, these accounts are paying above 5 percent, compared with less than 2 percent from regular banks. Compare rates at

Gregory Karp writes for The Morning Call in Allentown, Pa.

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