SOUTHFIELD, Mich., Sept. 15, 2005 (PRIMEZONE) -- First it was spiraling gas prices that are stabilizing, but still high. Now consumers are told to expect post-Hurricane Katrina increases in coffee, sugar and other common consumer items. While consumers are often more concerned with longer-term savings issues, the prospect of paying more for numerous everyday products has them thinking in the short term about curbing daily and weekly expenses on even relatively inexpensive items.
According to Jim Baird of Midwest-based Plante Moran Financial Advisors, here are some quick tips that can put a little more jingle in one's pocket now without compromising the long-term financial horizon:
1. Set A Monthly Budget: If you haven't already established a monthly household spending and saving budget, do so now so there is knowledge of actual expenditures and savings for both short- and long-term needs.
2. Maintain Current Savings Schedule: Alter spending habits first before even considering a change in your savings schedule. Do not reduce automatic savings and 401k percentages just to meet short-term cash flow needs. Doing so will impact your longer-term financial position.
3. Re-think Charge Card Habits, Especially on Gas Purchases: Don't charge gas on a credit card if you cannot pay the balance in full at month's end -- this will lead to high interest payments on the balance and you'll end up paying much more, depending on the terms of your credit card. Assuming common terms such as a 4% minimum monthly payment and an 18% interest rate compounded monthly, a single purchase of $500 could ultimately cost as much as $716, if only the minimum payment is consistently made until the balance is paid off in five years. Other cards with more lenient 2% minimum payments could increase the total cost to $931, with payments extended to almost eight years. This does not take into consideration additional purchases or previous balances. The best habit is to simply not use a credit card if you're unable to pay the balance in full each month. Also, beware of "teaser rates" which seem like good deals; eventually, a much higher rate will apply. At best, you're buying time. You will still have to pay off the balance quickly to avoid high interest charges.
4. Review Work and Errand Alternatives: Discuss with your employer the ability to telecommute to save on gas expenditures; consider forming a car pool with fellow employees living within a five-mile radius of each other and ask your employer to facilitate such car pool organizing efforts. Multitask on outings and errands versus taking multiple, single-purpose trips; in a two-vehicle household, use the vehicle that is most economical.
5. Temporarily Alter Discretionary High Spending Behaviors: Reduce discretionary spending such as restaurant visits, shopping, and personal pampering excursions temporarily until prices even out. A weekly restaurant outing of $40 totals $160 for the month; a bi-monthly visit to the nail salon can eat away another $50 a month. Use this money for necessities first before purchasing what may be personal luxuries.
Plante Moran Financial Advisors serves as a trusted advisor to high net worth individuals and family business owners, helping them build, manage and preserve their wealth. Our integrated affiliate services include investment consulting, financial planning, trust, insurance consulting, estate planning, business succession, and tax planning. Plante Moran Financial Advisors is the nation's seventh largest independent financial advisory firm based on assets under management according to Bloomberg Wealth Manager magazine. Plante Moran Financial Advisors is an affiliate of Plante & Moran, PLLC, the nation's 11th largest accounting and business advisory firm. Our Internet address is www.pmfa.com