Sound Mind Investing

Published since 1990, Sound Mind Investing is America's premier Christian financial newsletter.  Learn more about Christian investing and finances at the SMI Web site.

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Spending

Spending Strategies to Help You Live Within Your Budget

Scott Houser for Sound Mind Investing

Some people are considered "cheap" because they pursue bargains or seek out the most economical sources in town for products or services. Yet, when others need advice on where to shop because of an unexpected major purchase or financial emergency, they run to the "cheapskates" for advice.

Why? Because they suddenly see the wisdom of saving every possible dollar in order to use their money in more productive ways.

The following list of money-saving tips isn’t meant to be exhaustive. It simply represents a few ideas our family has used to allocate our resources efficiently and accomplish our financial priorities.

• Buy used, especially for major purchases. Contrary to popular belief, buying used is not "risky," and typically it doesn’t take a lot of expertise. It does, however, take planning and a little bit of elbow grease.

A few years ago, we needed to buy a refrigerator. New refrigerators at that time cost about $750, way more than we had in cash after purchasing our first home. We decided that buying "used" was our best option.

First, I studied refrigerators in Consumer Reports. Second, I began scanning the classified ads (this was before craigslist.org) and made a lot of telephone calls. After you become adept at classified shopping, you soon learn how to screen people who are overselling or "hyping" their merchandise and those who sincerely have a genuine reason for wanting to sell.

The result: I bought an almost new frost-free refrigerator for $250. There was nothing wrong with the refrigerator except that it was the wrong color for the seller's new home!

One of the main points in buying used is that, if at all possible, you should anticipate your need. If you know you are going to need a new appliance or a car, begin shopping three to four months before replacement becomes necessary.

The following are items we have bought used: automobiles, television, audio equipment, refrigerator, furniture (all types), children's clothing, and tools. One of the most obvious items to buy used is a car. Studies indicate that new cars depreciate as much as 20%-40% in the first year of ownership. Let someone else pay for that depreciation!

• Rent. Some things you just don't need to own: timesharing arrangements, boats, major tools, the list goes on. It amazes me how easy and cheap it is to rent state-of-the-art equipment, return it when you want to, and not have to worry about maintenance, depreciation, obsolescence, property taxes, etc.

• Comparison shop. If you need to make a major purchase or have major repairs done on your car, get more than one estimate. Often the prices will vary by hundreds of dollars. The same holds true for your annual auto insurance and homeowner's insurance.

• Pay cash. This offers two advantages. First, you may be able to buy an item for less by offering cash instead of charging. Second, it forces you to "count the cost" of each purchase more carefully. You won't make as many impulse purchases.

• Generic food brands. Major grocery stores offer generic or house brands. Don't be afraid of them! They are often made by the same manufacturer who makes the name brand but simply puts a different label on it. It doesn't hurt to try the product once; if you don't like it you can go back to the name brand.

• Anticipate needs. We raised five children so we often bought in quantity when going to the grocery store or membership warehouse to take advantage of quantity discounts. If a store in our particular area was having a year-end clearance on items such as tennis shoes, shirts, or pants, we would buy half a dozen or a dozen of each. They may not fit our children at first, but it wasn't long before they grew into them.

• Baby sitting co-op. Get together with other couples you know in your area to develop a baby sitting co-op or club, trading time on a child-per-child basis. This will provide quality care without the expense. I estimate that in one year we saved over $300 by using our baby sitting co-op, and we've developed stronger friendships as well.

• Dental schools. If your county or state has a dental college or hygienist school, you may be able to get your teeth or your children's cleaned at a considerable savings. These hygienists in training are supervised by a dentist, and treat your children's teeth methodically. In the many years we have visited our community college clinic, we have never had a bad experience. For an average cost of $8 per child, they get their teeth cleaned, plus fluoride treatment, sealant, and X-rays if necessary. On top of that they also get a new toothbrush!

• Medicine/generic drugs. With a large family (though some of our children are now grown), we have many miscellaneous medical needs. Whether it is the local drugstore's house brand or buying our antihistamines via mail order, we rarely pay top dollar for a brand-name drug. For the one antihistamine/decongestant we use for the kids' colds, we pay less than 10% of the price of a popular brand name, and the formula is exactly the same.

Scott Houser is a vice president, principal, and chief compliance officer for Ronald Blue & Co. in Atlanta. He and his wife have five adult children and several grandchildren.

Scott Houser contributes to Sound Mind Investing. Published since 1990, Sound Mind Investing is America's best-selling financial newsletter written from a biblical perspective.

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