Found Money: How To Generate Quick Cash In An Emergency

Simpler Solutions for Managing your Money

Let’s face it, coming up with smart and simple ways of saving money takes thinking that is a bit more creative.

Use some of these shortcuts to managing your finances. They are guaranteed to save you time and money.

Trick your mind into saving

Can’t always come up with where your money goes? There is a simple solution: Trick your own mind into spending less and saving more.

If you are up for a challenge, allocate yourself a weekly allowance. Put a set amount of allowance into an envelope and determine that this will be all you will be allowed to spend for any given week. Next, divide your allowance to take care of your expenses. When you get down to the last $20, that’s the amount you put into your emergency fund. When the money is gone, there will be no more until next week.

Each payday, allocate a percentage to go into a secret fund used only for emergencies. When it’s crunch time, you will know it’s there.

Establish one dresser drawer just to toss single dollar bills. This way when the pizza man arrives, you will have the singles handy and won’t need to break the larger dollar amounts. This discipline forces your mind to think larger amounts and to save larger amounts. You get into the habit of spending only the singles. This works!

To control your credit card debt, carry just one card and pay it off each month. If you are tempted to over spend, the credit card goes into the safe where you only stash your emergency fund. When crunch day comes you have a credit card you can use that will always be in good standing.

Jot down expenses in a notebook and tally them at the end of each week to see if you are over or under your budget estimates. Build in more than you need so that you will always have a cushion in case of a cash emergency.

Tracking your spending takes some work but if you take careful notes, you will always be able to see one or two areas where you’re leaking cash. You can then come up with an extra $20 or more per week in savings. That’s $1,000 a year in real money for an emergency fund.

More tricks to add to your own savings routine:

Have your paycheck automatically deposited directly to savings rather than to your checking account. You will transfer money to pay your bills, but you’ll think twice about withdrawing additional cash.

Make ONLY one ATM withdrawal each week.

Subtract your credit card purchases immediately from your checking account so you’re not surprised once the bill arrives.

When you pay off a loan, add the amount to payments you’re already making to the next lender on your list. You can also send the money to a saving or investment account earmarked for a house, a vacation or a new car and this money will be made available in case of a money emergency.

PAY YOUR BILLS ONLINE AND SAVE

Nearly one-third of U.S. consumers pay their bills online, says Judy Wicks of CheckFree, the leading provider of electronic-billing and payment services.

Probably the easiest way to pay your bills online is to use a safe, encrypted service—offered by banks, credit unions, brokers and companies such as AOL, MSN, Quicken or Yahoo! Arrange for an e-mail reminder that a bill is due.

The service can handle payments entirely electronically or it can generate a paper check, if necessary—to pay the guy who mows your lawn, for example. If a payment is late, many bill-paying services will reimburse you for late fees up to a certain amount (sometimes as much as $50), as long as you have scheduled the payment within their guidelines.

To shed yet more paperwork, arrange to receive bills and statements electronically. Sign up with e-billers on many services or at MyCheckFree.com.

Online bill paying also helps you to keep your finances organized. You have your records right there—what you owe, past payments—and all on one site.

Wells Fargo goes a step further: Its online-banking customers have access to My Spending Report, which they can use as a de facto budget. My Spending Report tracks online bill payments and Wells Fargo debit- and credit-card charges, and plugs them into one of 20 categories so that you can see how much you’ve spent on, say, movies and restaurant meals.

In addition, of course, you can track your spending using Microsoft Money or Quicken. With Quicken 2006, once you pay a bill there’s no need to print and file it. Instead, you can attach the bill electronically to the account from which you made your payment, so it’s always at your fingertips.

REWARD YOURSELF

Are you trying to figure out which credit card offers the best rebate? Simple solution: Take the cash and run.

It couldn’t be easier than this. With a cash rebate, you get either a check in the mail or a credit on your statement, so you don’t have to weigh the relative benefits of airline miles versus a new set of luggage. To find the best deals, we simplified the process by assuming that you spend $33 on gas each week, $100 a week on groceries and $1,000 per month on other purchases.

Tops is the Citi Dividend Platinum Select card (at www.citibank.com). It charges 11.74% and offers rebates of 5% on purchases at supermarkets, drugstores and gas stations and 1% on everything else. However, Citi caps its annual rebate at $300, which you would reach in about eight months under our scenario (at that point you could switch to another card). Exempt from the cap are goods bought through Citi’s Dividend Merchant Network, which includes more than 200 retailers, catalogs and Internet sites. Those purchases earn rebates between 5% and 7%.

Next up is the National City Everyday Rewards Elite Visa card (at www.nationalcity.com), on which our yearlong spending spree would earn a rebate of $270. National City is unique in bundling restaurants with grocery stores in a single category, with rebates of 2%. With an interest rate of 10.49%, the card rebates 4% on gas, 3% on movies and up to 1% on everything else. There are spending caps in some categories.

The American Express Blue Cash card (at www.americanexpress.com) carries an interest rate of 11.24%. It gives you up to 5% on groceries, gas and drugstore purchases, and up to 1.5% on the rest of your charges, up to a maximum expenditure of $50,000. Total rebate in our example: $266.

The Capital One No Hassle Cash card (at www.capitalone.com) offers a rebate of up to 3% on gas and groceries and 1% on everything else you buy, with no dollar limit and a relatively modest 9.9% interest rate. You would earn an annual reward of $237 in our scenario.

The Chase Free Cash Rewards Platinum Visa card (at www.bankone.com), which carries an interest rate of 11.99%, gives you one point for every dollar spent on purchases (with a $60,000 spending cap). In addition, it has an interesting twist: a one-point bonus for every dollar you pay in interest. Each time you accrue 2,500 points, you receive a check for $25. Without the interest bonus, you’d be eligible for a rebate of $189, so the card is more attractive for card users who often carry a balance.

When saving for an emergency fund – you just can’t go wrong with cash!

Multiple Ways to make the most of a Year-end Bonus

If you have a nice chunk of extra cash to look forward to each year, think now about the best ways to put it to work for you.

Maybe this year you’ll get lucky. You’ve applied for that great, higher-paying promotion and this will boost your monthly pay by $500. You want to make sure the money goes toward building a better future rather than being squandered on items, you just don’t need.

That’s the beauty of getting a year-end raise or bonus—it’s one of the rare opportunities to make a big difference in your finances without having to make sacrifices. You’ve been living without the money previously, so you can take any financial medicine you need even without altering your present lifestyle.

Financial triage

Consider first that all extra cash should first be used to solidify your base.

Next, pay off all credit-card debt.

This can have a gigantic ripple effect on the rest of your finances. As soon as you stop paying higher interest charges each month, you’ll have more money to devote to any other goals.

Pad your emergency fund, if you don’t already have three to six months’ worth of living expenses in a safe and liquid account. That way you won’t have to go into debt or raid long-term savings for unexpected bills when the bigger emergencies do arrive.

Add contributions to your 401(k), if you haven’t hit the limit. You’ll avoid paying more taxes on the extra cash, and you may earn free money if you get an employer match. You can also invest part of your bonus in your IRA if you haven’t contributed $3,000 for 2004 ($3,500 if you’re 50 or older). If you’ve already reached that limit, use your bonus to make your 2005 IRA contribution in January (the limit rises to $4,000 next year, $4,500 if you’re 50 or older) or earmark a bigger chunk of your raise each month.

Take a look at that long-term debt

Now that you have boosted your financial foundation, you have more flexibility. Watson is already in great shape—she’s maxing out her 401(k) and Roth IRA contributions—but she still has about $17,000 in student loans hanging over her head. The loans carry a low, 3.5% rate, so she’s trying to choose between adding the $500 a month to her loan payments or investing the extra money.

With interest rates that low, paying off the loan doesn’t need to be a priority. “If you can earn at least 3.5% in the marketplace, and I believe that you can, then investing is the better way to go,” says Brian Jones, a certified financial planner in Fairfax, Va. Investing becomes even more important if you need to save for a short-term goal, such as buying a house.

However, it’s okay if you’d rather pay off a student loan to get it out of the way. “Psychologically, it’s important to get these debts behind you before you start to move ahead,” says Mari Adam, a certified financial planner in Boca Raton, Fla. “I know people in their 30’s who still have big loans, and that debt becomes like a ball and chain around their leg.”

The same is true if you’re thinking of devoting part of your raise to making extra mortgage payments. Chris Crocket, a doctor in Tupelo, Miss., is getting a big bonus this year that could be enough to pay off his mortgage that has 10 years remaining at 4.75%. As long as he’s covered his other bases, paying off the loan could give him the equivalent of a guaranteed 4.75% return.

Eliminating your mortgage payment can also help if you’ll be retiring soon or worry that you may lose your job, says Evelyn D’Amico, a financial planner in Paoli, Pa. However, you don’t want to tie up too much money in a single investment. For better diversification, you could devote part of your raise or bonus to your mortgage and then invest the rest.

Don’t forget to treat yourself

It is time to have some fun and you deserve it! You worked hard for your bonus or raise, so, go out there and have some fun.

You can set up a vacation fund.

Use part of your extra cash today to pay for the trip you have always wanted. You only need to set aside $310 per month in a savings account paying 2% to end up with $5,000 for springtime in Italy in 2006. Imagine spending the spring in Italy! Now that would be some kind of vacation.

Spend some money on your home.

Many home improvements can save you big money over the long haul. For example, think about the value of storm-resistant windows and shutters. Spending an extra few thousand dollars now, not only helps protects your home, but also can increase its value and lower the premiums on your homeowner’s policy. This is smart planning!

One final idea is to start up a charitable fund. With $10,000, you can set up a donor-advised fund at many mutual fund companies and brokerage firms. You can then deduct the contributions on your tax return straight away and decide later which charities that you wish to support.

A Few Useful Savings Strategies

1. Don’t pay a dime for anything that you can make or fix for yourself.

2. Prolong the life of whatever you own.

3. Use less of what you need.

4. Think creatively. The answer doesn’t have to be “buy a new one.”

5. Don’t toss anything if it can be reused or recycled somehow.

You could do these tried-and-true, pioneer values now.

If you really want to save money, you can’t just look at ways to save now. You have to look at your life, today.

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