As a special treat for Coupon Mom members, Jean Chatzky (regular money expert on The Today Show, The Oprah Winfrey Show, in Money Magazine and The New York Daily News) shared her best tips for how we can best use our grocery savings! Keep reading for her strategic advice. You can get lots of great money advice from Jean and watch her segments at her site: www.jeanchatzky.com .
She has also generously offered to give away a free copy of her new book, “Money 911” to three lucky winners. Just enter here and watch your Coupon Mom newsletter next week to see if you won!
How to Get the Most Out of Your Strategic Shopping Savings
by Jean Chatzky
Two hundred dollars. That, on average, is how much you’re saving following the Coupon Mom’s money-saving methodology. But what are you doing with that money?
I ask because If you’re not consciously using it to accomplish one goal or another, then this year $2400 is going to fly through your fingertips without you knowing what happened to it. And that would be a shame. Because if you, say, decided to invest that money in some sort of tax-deferred account where you earned an 8 percent return, then in 10 years that money would have more than doubled.
And it gets better: If you continued to deposit your $200 in savings every single month for 10 years into that account earning 8%, at the end of the decade you’d have $36,600. And in two decades, you’d have $117,800. You could put a child through college. Build the kitchen you’ve always wanted. Or maybe retire your mortgage altogether. That’s the power of saving money month in and month out.
So how should you be using the money you’re saving with the Coupon Mom? You should be doing these three things — in precisely this order.
- Build an emergency cushion. If you do not have savings in the bank, you need them – because unemployment is not only as high as we’ve seen in quite some time, if you lose one job it’s taking months to get the next. Your goal should be to amass six months worth of living expenses in a money market account at a local bank. Open a month market and automatically have $200 transferred out of your checking account into this account right after you receive your paycheck. And note: Living expenses are not the same as the money you spend every month. Living expenses – your rent or mortgage, utilities, groceries, gas – include just the money that you need to spend every month to live basically.
- Pay down high rate credit card debt. If you are paying off a balance on, say, a credit card charging you 19 percent interest, then you are putting a 19 percent return in your pocket – guaranteed. You may wonder, why would I suggest funding an emergency cushion (money on which you’re going to earn a 2 percent return at best) before paying down debt that could yield you 10 times that? Because the days of knowing that your credit cards will bail you out in an emergency are gone. In advance of the CARD Act, a pro-consumer credit card law that takes effect February 22, card issuers have been slashing lines of credit and closing cards altogether. You need that emergency cushion – in cash – just in case.
- Invest tax-deferred. First, turn to any company matched retirement plan you’re being offered. If your employer is offering to match your contributions into your 401(k) for example – by putting in 50 cents for every dollar you put in, or even 25 cents for every dollar you put in – that’s the next step to take with your $200 a month savings. Some companies have cut back on the matching dollars they’re able to give you in this economy. If yours is still offering to match – take it. It’s just about the last free lunch going. If your company is not matching, investing tax-deferred is still the way to go because you’ll get a tax-deduction on your contribution in many cases and you won’t have to pay taxes until you retire. Once you max out your retirement opportunities, move on to college for your kids, or even a health savings account. All offer tax-advantaged ways to help your money grow.
Get more great advice and watch Today Show segments with Jean at www.JeanChatzky.com . Thanks, Jean!