Worried about how you’re going to pay for the holidays? Here’s a plan: Find painless ways to save on things you pay for all year. There are plenty of opportunities, if you know where to look.
“If you treat a few big things as discretionary purchases and shop around, you can save hundreds of dollars,” said Steve Krenzer, president of Experian’s interactive media group, which operates LowerMyBills.com.
Here are five money-saving ideas. Few people will be able to take advantage of them all, but even one or two could help recoup the $431 Americans expect to spend for gifts on average this holiday season.
Refinance your home: Interest rates on home loans have remained naggingly high -- between 6% and 7% -- for most of the last two years. But in the last week rates dropped significantly, said Jeff Lazerson, president of MortgageGrader, a Web-based loan company. That spells opportunity for anyone who bought or refinanced a home in the last two years -- or anyone with an adjustable-rate mortgage.
Fixed-rate, 30-year mortgages with no upfront fees were going for 5.75% early this week, Lazerson said. For someone paying 6.25% now on a loan balance of $500,000, refinancing into this loan would save $161 a month, or about $1,930 a year.
Of course, if you have little or no equity in your property because of tumbling home prices, you won’t qualify for a new mortgage. You’ll also have to document your income.
It’s worth noting that you can get an even lower rate -- 5.25% -- if you are willing to pay upfront fees, called points, and closing costs. But those fees can easily run thousands of dollars. And it would take 18 months of reduced payments just to recover that cost, Lazerson said.
Unless you’re certain you won’t refinance again or sell your home in that time, the no-cost loan is the better deal.
Appeal your property tax: Although the slide in housing prices might prevent you from refinancing, the downturn can be a benefit when it comes to your tax bill.
Property taxes are usually tied to a home’s assessed value. If you bought your home when prices were in the stratosphere, then chances are your home’s assessed value is significantly higher than its current market value. This would also be the case if your assessment was raised during the housing boom -- if you live in a state where assessment increases are allowed. (They’re not in California.)
The difference can be huge: Real estate website Zillow.com, for example, estimates that one Southern California home that sold in late 2007 for $2.5 million is now worth $1.9 million. If this property owner can convince the county assessor’s office that Zillow’s new value is accurate, he can save more than $6,000 annually in property taxes.
Every county assessor’s office offers a process to appeal property assessments that homeowners believe are too high. To find your assessor’s office, go to the “links” page of the website of the Federation of Tax Administrators.
Shop for car insurance: Auto insurance rates can vary from insurer to insurer by hundreds of dollars a year. And shopping one year doesn’t preclude finding an even better deal the next, Experian’s Krenzer said.
State insurance regulators often help with the shopping by providing cost comparisons on their websites. California’s Insurance Department offers an easy-to-use online price comparison service for auto and other types of insurance. The examples are generic but can help you identify the lower-cost providers.
How much can you save? I shopped for myself, and as a result I’ll be switching insurers, saving $823 a year. (I have been paying $2,477 a year for high-limit coverage on two cars, one driven by my teenage daughter.)
A caveat: Be sure to select “standard” coverage, not “basic -- liability only,” in the first drop-down menu if your policy covers damage to your car in the event of an accident.
Review your cellphone plan: Most people secure their cellphone service and then forget about it unless they need more minutes or change plans, Krenzer said. But that’s a mistake in today’s market.
The reason: Cost per minute has been trending down. If you haven’t checked rates in a few years, you may be paying too much, he said. Better yet, you don’t necessarily need to switch carriers or plans to save money.
With a single phone call, Krenzer said, he was able to cut the cost of his own cellphone bill by $50 a month, without switching carriers, changing his phone number, losing minutes or giving up any bells and whistles. Your cellphone company won’t give you its best rate unless you call and ask for it.
Krenzer saved even more money -- an additional $100 a month -- when he realized that he was paying for unlimited international dialing even though he now has a BlackBerry and is more likely to e-mail when overseas than call.
Bottom line: He cut his monthly bill in half, to $150 from $300. Annual savings: $1,800.
“A lot of us make these choices when we first get a phone and then we put the decision in a box and never reevaluate it,” Krenzer said. “But the cost of these services has been coming down. If you do your comparison shopping and treat it like a discretionary purchase, you can save a lot of money.”
Troll for waste: Even the most financially savvy among us have some niggling expense that could be cut without much pain. For Krenzer it was his second gym membership. He sheepishly noted that, in better times, he joined two -- one close to work and one close to home. Upon further review, he figured one membership was enough, saving him about $20 a month, or $240 a year.
If you think about it, you may have unnecessary regular expenses, such as unused Netflix memberships, premium cable channels that are rarely watched or subscriptions to magazines that go unread.
Maybe you pay bank fees for services you could get for free. You may even want to review your land-line telephone service if you already make most of your calls by cell. If you want to keep a land-line phone in case of emergency, make sure you’re on a bare-bones plan.
The savings from any one of these cost-cutting measures may seem small, but they can quickly add up over time into a sum you’ll be happy to spend on something else.