Interest: I know someone who's covered up with credit card debt, but who doesn't know how much interest she's paying on her unpaid balances. She's never applied for another credit card, which would charge a lower rate of interest. She could reduce her interest payments by using a lower cost card to pay off her current account. This could save her thousands of dollars, enabling her to pay her cards off faster. Few people realize that minimum ATM charges can add up to a lot more than it would cost to simply withdraw the money inside the bank.
Additional thousands of dollars in interest could be saved by mortgagors who take the time to either renegotiate or refinance their mortgages to obtain lower rates. A 2% lower rate on a $100,000 loan can amount to $166.67 per month reduction in payments. That difference could be used to retire the loan many years sooner, or to invest in higher yielding investments. I've repeatedly discussed the tremendous benefits of negotiating zero interest rate owner carry-back financing when buying investment houses. Buying for cash when you can afford it, or using lay-away rather than installment debt to make major purchases, or for gifts, can save a bundle.
Medical Expenses: Whether paid by Medicare, Medicaid, Medigap, commercial insurance plans, or out of private funds; the costs of medical care will continue to rise. The onslaught of HMOs and other group treatment plans will make establishing a long term relationship with a physician more difficult, so individuals are going to have to take on more of the responsibility for avoiding and treating ailments. Prevention works best. If you don't get sick, you don't have to pay for treatment.
The first line of defense against illness lies in nutrition. Reasonable exercise and a balanced diet, buttressed by vitamins can give your body the resources to fight off disease. Regular medical check-ups will help you treat problems before they become serious. Another step along this path is to cultivate a personal relationship with a good Pharmacist who can direct you to low cost ethical generic medicine rather than the expensive brands that might be prescribed.
Don't be afraid to shop the costs, and to try to keep treatment as much as possible on an 'out-patient' basis. There's no reason why you can't get 'estimates' from your Doctor or from the hospital. If you enter a hospital, see how much of your own equipment (TV, cellular phone, snacks, aspirins etc.) you can provide yourself to reduce costs. Get up and get out as quickly as possible, even if it entails temporarily hiring someone to assist you while you convalesce at home.
When you get your medical bills, check them carefully to assure that there aren't a lot of extra charges added. Hospitals are notorious for over-billing, but they're also susceptible accepting zero-interest installment payments over a long period, based upon a verbal agreement rather than on a legally enforceable promissory note. Don't let them talk you into signing a note or mortgaging your home. This will leave the door open to negotiate a discount on the tab for cash.
Buying a vehicle: With vehicles, retail value lies in the eyes of the beholder. I recently priced a new 1996 Ford. Its 'sticker price' was $27,000. After a lot of haggling, I got this down to $21,000. The same week, I could have bought a 1994 version of it with 43,000 miles on it for $11,500 or a 1993 with 28,000 miles on it for $9500. I wound up buying a 1992 for $5750. Take a quick look at the cost of depreciation between 1996 and 1992. It amounts to $317 per month extra for a new versus a low mileage used car. That's over $10 per day plus operating expenses.
Over the next couple of years, I expect depreciation will cost about two thousand dollars. That's about a quarter of the cost of buying a new model, even at the negotiated price of $21,000. But that's not the real savings? Suppose I could invest the net cost differential of about $250 per month at 10% for 20 years until I needed the income for retirement? It would amount to $189.842. That's a lot of money just to drive a shiny car. A family can save twice as much on two used cars.
Education: Soon, a University degree is going to cost over $100,000 in many parts of the country. Multiply that by the number of kids you have, and you can see that something's got to give. We've got to reevaluate the entire college experience to see what we get for what we pay. Did you know that some 20,000 scholarships go begging each year because people don't apply for them? If you've got a truly gifted kid, it's wasteful not to try to qualify for a full or partial scholarship so long as the needed education is obtained. Many communities offer 2-year degrees, plus, entree into State schools for the final 4-year degree. There may not be as many frat parties or football games, but, by using State schools and junior colleges, college education's for all the kids becomes possible without breaking the parents.
Of course, the tuition is only part of the cost of college. When college is in a different locale; expenses, food and lodging can become a significant cost factor. These can be offset if you lease/Option a house near the campus for your kids to use while away at college. Part of the weaning process might include their learning how to shop for and zap a microwave meal and becoming accustomed to paying their own utilities. The next part of the process is to let them learn how to rent up the premises to other kids for enough money to make the payments, and to pay expenses. When they graduate, they'll have learned and practiced a lot of economic principles that their professors may not have yet learned, including the folly of extending rent credit to friends. As a compensation to them for missing all those co-ed dorm frolics, let them close on the Option to help them get jump-started on the road to financial freedom. One 28 year old retiree I know started this way.
