Ways to stay afloat

Thrifty consumers can survive in a turbulent economy.

Published online on Tuesday, Feb. 26, 2008

Inflation and recession together can make life miserable for consumers, experts say. Here are some tips for coping, whether you are on the edge of bankruptcy or simply looking for greater financial security.

RESTRUCTURE

Call your creditors

If you can't make a minimum payment, call your credit card company or mortgage lender, said Martha Lucey, president and CEO of ByDesign Financial Solutions in Fresno.

Often, the companies will temporarily lower an interest rate, which can make the payment affordable, she said.

If mortgage payments are an issue, "It's crucial -- crucial -- that they talk to their lender or that they talk with a housing counselor," she said. "There are more options available to homeowners now than ever before."

Change your insurance

You must save money by raising the deductible on your auto insurance, said Marcia Brixey, a Visalia native, author and founder of the Seattle-area nonprofit organization Money Wise Women. That can save 15% to 20% on premiums.

This only works if the consumer has the cash to pay for repairs, she said.

"If you're never going to file a claim for a $500 loss, you've got the wrong deductible," she said.

Cut debt

Pay off credit cards, starting with the ones with higher interest rates. Negotiate with credit card companies for a lower interest rate; they want to keep you as a customer. And pay cash.

"Stop charging," said Jane Bragg, a certified financial planner in Fresno.

Refinance

Look for a cheaper mortgage. Interest rates have declined, but you still need good credit as many banks have tightened credit requirements. "If you can lower the interest rate 1%, then do it if you're going to stay in that house for any length of time," said Stan Dorrance, a certified financial planner in Fresno.

Save more

Pay yourself first through automatic deductions to 401(k), your credit union or bank and savings plans. Having a financial cushion during tough economic times can pay big dividends. Financial planners say people should strive to save 10% of their income.

SHOP SMART

Buy a used car

Try purchasing a vehicle that is one or two years old, said Greg Womack, author of "Wisdom and Wealth" and a certified financial planner in Oklahoma. Buying used can save between $10,000 and $15,000, he said. Cars depreciate very quickly, frequently by half in the first few years. Often, cars that are just a few years old -- and sometimes still under warranty -- are in good shape and a good deal, he said.

Plan your meals

Create a weekly menu. That reduces the chance you'll be tempted to eat out, said Kim Danger, family savings expert for Coupons.com. Planning also reduces impulse purchases at the grocery store, she said.

Patty Davidson, adult nutrition education program manager at the University of California Cooperative Extension in Fresno, said don't shop when hungry. And leave the kids at home to avoid demands for pricey name brands.

Resist temptation

Brixey urges shoppers to calculate how many hours of work it will take to pay off a purchase. Wait 24 hours if buying something more than $100, then think about it again. Carry only one credit card, wrapped in red paper with the word "EMERGENCY" written on it, to force yourself to think twice.

CUT BACK

Scrutinize spending

Whether it's coffee at Starbucks or caller ID on your phone, everyone has unnecessary expenses they can eliminate, Brixey said. Analyze two weeks of spending to discover hidden expenses. For instance, extras on your cable TV bill, like Cinemax, HBO and Showtime, can add up to $50 or $75 a month, she said.

"You have to know where your money goes before you can save it," Dorrance said.

Find small savings

Brown bag it for lunch. Clip coupons. Buy staples such as toilet paper at discount stores. Monitor the thermostat, car pool and watch Sunday ads for coupons. Wash clothes at home versus dry cleaning.

"Shop the walls; avoid the aisles" in supermarkets, said Paul Richard, executive director of the nonprofit San Diego-based Institute of Consumer Financial Education. "Think of saving as a game."

Miranda Jackson of Fresno plays it smart. Her three small children, Tate, 3, and infant twins, eat a lot, so she saves on the food bill by cooking fresh fruits and vegetables and by buying "what's in season." She also prepares homemade baby food for her 9-month-old twins, daughter Brenna and son Cash.

Increase your cash flow

Hold a garage sale. Get a roommate. Get a part-time job.