Middle Path Finance

Max it out: Get more for the money you already have.

 I seriously doubt anyone is going to get a pay raise this year, me included. We all know the economic news is bleak, lay offs, banks not giving loans, taxpayer bailouts, budget deficits, and of course the plummeting value of retirement accounts. It's enough to make your head spin.

Right before Christmas, hubby was moping around the house. He's not prone to the holiday blues, and finally admitted it was because he felt completely powerless over our plummeting retirement accounts and stock portfolio, and his doubt about his ability to keep a steady paycheck and health insurance coming to our household.

I told him that we can't control all of that. We can only control what we do. That's true for everyone. We can't control the stock market, but we can control how we react to the swings. We can't guarantee we'll have a job, but we can prepare for not having one.

This conversation led to a household reprioritizing. Things are uncertain, all we can do is prepare.

Since Christmas, we have made a significant effort to max out every dollar. Usually max out is a phrase associated with debt. I think it's time we revisit the concept of maxing out your money, and turn it into a tool for getting more out of what you already have.

We are still refining this technique, and I'm sure we will have many more tools in the arsenal come next year. In the meantime, I consider our efforts a beginning, a "Step 1" of the MPF way to max out your money. Here are the systems we have put into place so far.

We are chasing yields.

Last year my bank had the nerve to offer a measly .05 percent interest on their savings accounts. And we wonder why Americans don't save money. Insulted, I opened an Emigrant Direct online savings account and an ING Direct savings account. Both have been easy to use and have paid me an average of about 3 percent on my money in the past year.Unfortunately, thanks to the Fed and their rate cutting bonanza, that is down from 5 percent two years ago, and is dropping slowly.Today, Emigrant  and ING are both paying 2.4 percent APY.

Better than .05 percent, but I decided to see if I could get a better deal somewhere else. The first stop for any yield chaser should be Bankrate.com's list of the 100 highest-yielding savings accounts, which gives you a handy rating system for gauging a bank's stability. You can also search the highest yields by state.

FNBO Direct of Omaha, NE is offering 2.8 percent APY and recently was named Kiplinger's Best Online Savings Account in 2008. Everbank of Florida is offering 3.76, but it drops to 2.9 after 3 months.

So far, none of these yields are high enough to make the hassle worth switching, at least for me.

We are chasing rewards.

We have used an Amazon Chase Visa for several years. In that time, we have used the $25 gift certificates we occasionally receive to buy CDs, DVDs, software and computer games. It has been a great card for us, because we would rarely buy these sorts of treats for ourselves. This was our first rewards card, and since we were in the habit of charging almost everything just because it was easier than carrying cash, we figured we may as well get something for what we were already spending. The Amazon card has saved us some money. We upgraded the operating system on my computer for only $16, the rest was covered by rewards. We also bought a mattress for our baby's crib for only $7, with rewards covering the rest. We have used certificates to buy Christmas and birthday gifts, which has saved us some money. This has been great while it lasted, but the time has come to review our strategy.

Do we really need more CDs and DVDs? Or is there a rewards card out there that will give us something we need more?

In our search for a more profitable rewards card, I ran across two new rewards credit cards that could reap dividends, literally, if used wisely.

One is the Charles Schwab card, which actually deposits, in cash, an amount equivalent to 2 percent of your monthly spending into a Schwab One brokerage account. Of all of the cards we looked at, this may make the most sense for us. The market is down, and we would like to buy more stocks in the hopes that we can profit from a future upswing. We already have a Schwab brokerage account and have been struggling to find the extra cash to make deposits. The rewards are a larger percentage than what we are currently receiving, and you don't have to spend a certain amount before the rewards arrive. They are automatically deposited every month.If invested, these rewards could increase in value, due to dividends and stock appreciation. You don't get that with a DVD.

Our second choice was the CitiBank Thank You Rewards card, only because you can redeem points for a student loan payment of up to $100.

Our criteria for selecting a new rewards card is that the reward must help us meet one of our other financial or personal goals. We considered a travel-related rewards card because we hope to actually leave the U.S. on vacation soon, but were put off by the dubious value of airline miles and the restrictions placed on hotel bookings.

Maybe it's time you looked in your wallet and did a little credit card renovating. Clean house, look for better rates and better deals. The Schwab card may not be for you, but chances are if you haven't shopped around in a while there is something better out there, something that will reward you with something valuable, like cash back or money in your kid's 529 account. Visit Cardratings.com to look for and compare cards. 

The obvious caveat is that chasing rewards on a credit card makes zero sense if you carry a balance.

We are "stacking" rewards.

I firmly believe that "stacking" rewards is one of the most effective ways to stretch your budget. Stacking is using as many discounts, coupons and rewards offers as you can on a single purchase.

As an example, I recently bought some Gerber organic baby food. I had several 75 cent coupons. I went to Kroger because they double coupons, so my coupons are now worth $1.50 each. Kroger also happened to be having a special where for each $10 worth of Gerber baby food you buy, you get a certificate worth $2 off your next shopping trip. When I checked out, I scanned my Kroger card, which earned me 10 cents off each gallon of gas I pump there. Then, I paid with my Amazon card, earning me points toward the DVDs on my wish list. I earned a $4 off coupon, and I used two 75 cent off coupons that were actually worth $3. The next day, I rounded up more baby food coupons and went back. I used the $4 off coupon, plus several more of the $1.50 doubled coupons, used my store card for gas discounts and paid with my rewards Visa. It saved me quite a bit on something that I need to buy anyway.

There are as many ways to stack rewards and coupons as there are people. Here are some that I find particularly interesting:

• LizaJane over at SavingAdvice.com recently bought a laser printer from Staples. That's not that interesting, but how she used her money certainly was:

  "I signed onto Staples via Ebates, which had a 2% cash back reward instead of the usual 1%. My printer was $199, plus I bought a cord for $25 and an extra black toner cartridge for $57 (and then got $30 off because I combined it with the printer purchase), so the grand total with tax was $263. My 2% back will be $5.26. Ebates also has a $10 bonus, which this should qualify for. So, I should get $15.26 total back there.
  
  The $100 Staples Easy Rebate will come in the form of a Visa gift card. Then, because I have a Staples rewards card, there should be some rewards money due to me at the end of the quarter. And, on top of all that, I used a credit card that pays me cash back. It's a small percent, but the small bits and pieces add up!"

• DisneySteve, another SavingAdvice.com blogger is also using perks wisely:

  "We went out to lunch today at a local restaurant that we like. They were having a special deal on gift cards: buy $100 worth and get $20 free. So we did just that. Not only that, but I charged them to my Discover card which has a 5% cashback bonus at restaurants through December, so I'll get $5 back on the purchase. That means I actually spent $95 and got $120 worth of gift cards. Coincidentally, our meal today came to exactly $25.00 which means the meal was basically free. We spent $95 (after the Discover cashback), got lunch for the 3 of us and walked out with $95 remaining on the gift cards."

Retailers have so far been reluctant to cut back on coupons and loyalty card programs because they know that a lot of people won't shop there if there is no special deal attached. Credit card companies are the most likely to trim rewards because the programs are expensive and retailers are threatening litigation over the merchant exchange fees they are charged every time someone pays with a credit card. In the meantime, get the best deal you can.

We finally came up with a smart monthly spending plan

I hate budgets. Hate. hate. Hate. But at some point, you just have to have one if you are going to really get ahead. We had to do something drastic to get our monthly spending in line and rethink our priorities, so we had a No Spend Month. You may not have to do something that extreme to get things under control. But for us, the result of No Spend Month was money in the bank and a renewed sense of discipline and purpose, two things that are very valuable in uncertain financial times. As a result of No Spend Month:

• We have an allowance. Hubby and I each get a $40 weekly allowance that we are allowed to spend on whatever we please. It is important to have fun money, even when you are on a tight budget, because it keeps you from feeling completely deprived and one day making a huge financial misstep because of that. The allowance has been fun. We use it to take each other on dates, which means more because we are using our "own" money. We also use it for things like cosmetics and video games, little indulgences that make us feel good but don't cost a lot. This way, we do not have to feel guilty.
• We have tamed the grocery budget. It's ghastly to admit this, but at one point we were spending $950 a month on groceries and eating out. For two adults and a baby. Ghastly. Our monthly budget is now $125 a week, for groceries, eating out AND gasoline for our two cars. We have cut our food budget in half, and added fuel to that category. Our grocery savings weren't magic. The biggest difference was that we started shopping for pantry-stockers at Aldi. We love it. We can buy a cartload of food and it never costs more than $40. We now clip coupons, but only for items where we insist on using a brand name. We look at the sale fliers for all of our local grocery chains and plan our weekly meals and match sales without coupons. Also, we cook more vegetarian meals. It hasn't been a sacrifice for us. Now that our budget is under control, we are making subtle changes. For instance, we have decided to eat less meat, but to pay more for the meat we do eat. i.e. grass-fed, hormone free meat from Whole Foods instead of CAFE meat from the store.We are also incorporating more organic foods into our diet, all without busting the budget. We never thought this would be possible.We also save fuel by running all errands on one trip and using our most fuel-efficient car for all trips longer than 5 miles.
• We save first, then live on what's left. This is a very very important. If you want to save but only save what is left over at the end of the month, you aren't going to get very far. Save first. We have set a high target: 25 percent of our take home pay every month goes directly to savings. We have the money wired out of the checking account and into one of our high-yielding savings accounts every two weeks. It's gone before we even wake up on payday. We have to live on the rest. No cheating. It's helping us significantly boost our cash cushion, which is our No.1 priority in this troubled economy.
• We're doing the cheap fix-its around the house. During No Spend Month I realized I had the materials for half a dozen home projects that need to be done, so I didn't need to spend any money to knock some things off of the to-do list. The rule now is that we won't buy supplies for a house project (barring a phenomenal sale) until we have finished the projects we already have supplies for. This may not seem like a big budget item, but every little bit helps.

We DIY as much as possible
The Wall Street Journal ran an article recently about the resurgence of DIY. Apparently I am not the only family that is now "insourcing" household tasks. OK, I admit we have never been the high-powered couple with the nanny and the housekeeper. I think it's a luxury to have a babysitter 4 hours a week.

But, we are expanding our arsenal of DIY projects. For instance, we have planned an ambitious veggie garden this year. To save money, I am starting most of the plants from seeds this year.

Also, a leaky toilet ruined the floor in our half bathroom. I had the original installer give me a quote to fix it. It came back at $500, about $300 more than I wanted to spend. Mind you this is a tiny bathroom. I will be attempting to do the work myself. If I get hung up and have to call the installer, I will at least have saved money by removing the toilet, sink and old tile myself.

Coupons Coupons Coupons.

I never was much of a coupon clipper until recently. I thought of coupons only as something at the grocery store. That was my mistake. Coupon deals have gotten much more generous in the last few months, as everyone from retailers to restaurants scramble to keep cash-strapped consumers coming back for more. Most of the coupons I use these days are for restaurants. Some of our locally-owned favorites have coupons in the Val-Pak and DollarStretcher packs that arrive at my door every week or so. And, since we now have a food budget, we generally only eat at restaurants that have coupons or a good special deal. 

Some of my friends have asked me what the point of all of this is. It's simple. I'd rather spend less on the things that aren't super-important to me so that I have the money to do the things that are super-important. Why spend 25 extra cents on each can of black beans when I could use that money to help pay for a backpack trip through Mexico? It's an extreme example, but drives to the heart of it. Little savings here and there add up to more money to do interesting, exciting things with our lives. And, to help us weather uncertain economic times.

Three simple ways to get more for your money

Let's face it, no one likes to budget. Not even me, and I've been a financial journalist for years.
A lot of folks, including some of my family members whom supposedly gave me my head for numbers, don't like to think about or manage their money.

It just seems to complicated. It doesn't have to be. You really only need to do two things to take control of your money.

1. Pay less for the things you already use

2. Get more bang for the bucks you already spend

3. Don't pay for things you don't want to pay for

I hope you aren't scratching your head just yet.

First, paying less for everything you already use. I want you to walk around your house with a pen and paper, and start looking in your cabinets and drawers. Write down the brand-name products, like shampoo, toilet paper, soup, etc. that you use regularly. Ignore all of the generics and store brands.

For us, it's Q-tips, Pert Plus for the hubby, Garnier Fructis for me (it conditions my hair like no other), and Tabasco hot sauce.

Now, the next few times you go shopping, take the list with you. Write down how much those items cost at each of the places where you regularly shop.

I did this exercise recently, and using my shampoo as an example, here are the results.

Garnier Fructis, 25 oz. shampoo, cost $5.99 at Target, $7.29 at Walgreens, and $4.96 at Wal-Mart.

Guess what. I now buy my shampoo only at Wal-Mart.I used to buy it at Target, just because I shop there more often. Why pay $1.03 more than I have to for every bottle?

In this case, a little bit of planning can free up a decent bit of money. You could save $10 or more a week just buying at the store where the prices are lowest. On caveat: Don't go driving across town to buy one bottle of shampoo. Stock up or wait until you need something else from that store, then go.

If I want to save even more on that shampoo, I track down a coupon. I'm not a coupon clipper by nature, but I sometimes use a clipping service like CouponClippers. They stockpile coupons and can send you stacks of them for the specific brands you buy.

Using the shampoo example again, I can usually get $2 off per bottle coupons for Garnier Fructis from the coupon clipping service. So my cost, if I buy at Walmart, goes down to $2.96 per bottle.

If you're on a tight budget, these two small changes can give you a little more wiggle room.

On to number two: Get more bang for the bucks you already spend.

This step can take many forms, but the basic principle is the same. It is a mode of thinking. View each dollar in your wallet as finite. Don't think about the fact that you can earn another one. Treat each of them as a precious, single entity. As such, try to get the most for each one of those dollars as you can.

For example, if you want to see a movie. You could pay full-price on a Friday night. Or, you could stretch that dollar just a little and go to a weekend matinee. Same movie, same theater, but $2 less a ticket. If you want to stretch that dollar even further, you could wait until it's out on DVD and either, buy the DVD (usually for the cost of two tickets or less), rent it on Netflix, or wait for it to show up at the library and get it for free.

If you are love to eat out- like me- you could just go out to eat whenever the mood strikes you. Or, you could stretch that dollar by going when you have a coupon from the local Valpak mailer. Or when they have a happy hour special, or you could go at lunch when the prices are lower. You still get to eat out but the dollar stretches just a little bit more.

See how this works? With a few minor changes to your way of thinking, the dollars go farther and last longer.

You can also apply this to your debt. If you have a mortgage, a student loan, and especially a credit card, consider paying half of your monthly minimum payment every two weeks instead of sending it all once a month. Paying every two weeks can lower the amount of interest you pay on your debts and can help you pay them off faster. Explore more of the pros and cons here.

And finally, don't pay for things you don't want to pay for.

I'm not advocating theft. I'm suggesting you look at your bank and credit card statements and see if there are any companies direct-debiting or automatically billing you. Do you want or use the service? If not, cancel the debit.

I recently did this and found that I was paying $7.95 a month for an Internet fax service I hadn't used in 6 months. My mistake cost me, but I soon canceled and haven't been paying the stupid tax since.

If your banks is charging excessive fees, it might be time to call customer service. a big culprit is courtesy overdraft protection. Hardly a courtesy if it costs you north of $30. If you run a slim balance, explore other options, like having the money moved from your saving account, or just not bouncing a check.

If you have a lot of bank fees-- ATMs, overdrafts, minimum balance, etc.-- it might just be high time to find another bank and another account that is more in line with your banking habits.

Do you have savings? How much if your bank paying in interest? Last time I checked, my bank was paying .05 percent. Yes, not even half of a percent. So, I moved my money into an online high-interest savings account paying 4 percent. It took 5 minutes, and netted me hundreds of dollars in interest. I would have gotten less than 2 dollars in interest if I hadn't moved the money.

All of these take a little bit of time at first. But the 20 to 30 minutes you spend on each task could reap significant long-term savings.