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08/13/2008

Beat the Inflation Heat

With the real estate slump, crude oil trading at over $120 a barrel, and sky high global food prices, it's no wonder many average families in the U.S. are feeling inflation's pinch. By historical standards, the increase in prices American's have been experiencing is still very manageable price, but that doesn't mean it hurts the wallet any less. Take heart: There are some ways to stem the outward flow of cash. Cutting out wasteful spending and taking advantage of some money-saving techniques can help to loosen up a stretched budget.

1. Conserve fuel in any car. It's a little extreme to think that everyone can simply switch to a more fuel-efficient vehicle. New cars are expensive and existing fuel-sipping automobiles are such hot commodities right now, they are hard to find. You can save up to $800 per year on gas by making a few small changes, though: Keep your tires inflated to the appropriate pressure, use credit cards which offer cash back on gas purchases (paying off your balance in full each month, of cours!), and most importantly, lose the lead foot. Maintaining your vehicle properly and traveling at slower, steadier speeds have been proven cost-cutting techniques for years.

2. Save on groceries. There are many ways to save up to $1,200 per year at the grocery store these days. One of the most obvious one is buying store brands, many of which are very high-quality and nearly exactly like "the real thing." Then of course there are Sunday circulars and manufacturers coupons. It's dangerous to your wallet to shop when you're hungry or tired. Search both high and low, as this tends to be where the cheapest items are. But most importantly, use a list! Supermarkets, like other stores, use all sorts of marketing ploys to entice you into buying more than you intended.

3. Make food at home. At first it may seem daunting to whip up a homemade meal five to seven nights out of the week like your mother did. It may seem even more overwhelming when you think about also packing a lunch for work and making breakfast (and coffee!) each the morning. In the long-run it's a true money-saver. Think about this for a moment: $5 coffee in the morning, $7 lunch in the afternoon, and $12 dinner in the evening ads up to $24 per day, $120 per week, and over $6000 per year. If you spend $75 per week on groceries ($62.20 is average for a single person), you'd spend only $3,900 on feeding yourself. That's a savings of $2,100!

4. Seal up your house. A few one-time investments and some occasional maintenance can reduce your heating bill in the winter and your electricity expenditures for cooling in the summer. Conduct a home-energy audit searching for air leaks, the instructions for which can be found on-line. You can also hire a pro to do it for about $200. Then its time to add insulation and seal leaks around windows and doors, as well as in attics and basements. The cost of the materials will be paid for in energy savings before you know it!

5. Use home energy efficiently. After the house has been properly sealed, invest about $50 to install an Energy Star programmable thermostat to automatically make adjustments. You can program it to turn down the heat when you sleep or are at work and raise it in the morning or when you come home. It's also important to change the air filter in your heating and cooling system at least every three months.

6. Unplug unused appliances and electronics. Appliances and electronics, even when they appear to be doing nothing, are sucking electricity as long as they're plugged in. Though the amount of voltage running through the wire is small, it adds up over time and multiplies with each device. Unplug any items which are not being used and remember to unplug after each use. To further cut your electric bill, replace regular bulbs with compact fluorescents.

7. Reassess your monthly services. A good way to trim needless costs out of your budget is to reevaluate accounts which you already have. If you're paying a high interest rate on a credit card, request if you can get a lower rate. Don't use all the minute you have on your cell phone? Check into downgrading your plan. Are you paying too much for insurance? The only way to find out is to get some quotes from other companies. Reassessing your needs can also be applied to expenses which can be cut out entirely, like the membership to the gym you never go to or the subscriptions to magazines you never read.

8. Cut down on medical costs. With more companies raising deductibles or reducing coverage, perhaps you've been feeling pressure when it comes to health costs. Keeping your costs down without cutting back on care won't be easy, but it can be done. If you have an option, choose your deductible wisely. High-deductible plans are generally best for younger people without health problems; others should stick with traditional plans.

9. Contribute to a 529 plan early and often. You're feeling the pinch now, but if you or your children have plans to attend college, it's going to feel more like a punch later on. Every year, tuition rates all over the country are climbing higher and higher. State-sponsored 529 plans allow you to exclude college-savings earnings from federal and state taxes. It could save thousands over the years.

10. Don't be afraid to haggle. Believe it or not, negotiating a price is not relegated to just yard sales, car dealerships, and small businesses. Whether it's a "big box" store or a healthcare provider, haggling for a better price is not as rare as you might think. You can ask for a discount on specific items or services alike, like delivery and installation. Sometimes opportunities present themselves, like the store is sold out of what you came to purchase - you could end up with a better model for the same price! The main point is it never hurts to ask. If your offer is reasonable enough, odds are it will be accepted.

Fluctuations in prices are never going to cease. Though inflation is tame compared to times in the past, it can still sneak up on you over time if you aren't paying attention. Learning how to be frugal in all spending matters is a good way to keep ahead of the rising costs of living.





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