Money Management for Tough Economic Times

"Good Morning America" financial contributor Mellody Hobson gives you the skinny on what the Federal Reserve's rate cut means to you and your wallet. Get tips on how to get your finances in order in these difficult economic times and find out what you can do in your daily life to save big bucks annually.

First, is the Fed rate cut going to help?

It will definitely not hurt, but it is not going to be a major lifesaver for consumers either. The Fed has been cutting rates at an aggressive clip — the most significant in 25 years and the seventh cut since September. While the extra ¼ point drop will result in a dip that may translate into lower interest rates on mortgages, credit cards and automobiles, it will not be significant enough to help already strapped consumers pay off their piling bills. I also am hearing that the Fed may now take a breather and leave rates where they are and wait to see how consumers respond.

So, if yesterday's Fed movement is not the answer, what is? What can people do to save money right now?

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First and foremost, now is the time to trade in your credit cards for cash. I know I have said this in the past, but paying cash or using a debt card will force you to keep track of everything you are buying to the dollar. Not only do I want you to use cash, but I want you to write down everything you are spending money on — every day. Some of my hotbed expenses are:

Smoking. No butts about it. At about $5 a pack, a smoker who smokes a pack a day is spending about $35 a week which adds up to about $1,820 a year. Over ten years, that is $33,762 — not including the extra health costs. If you ever needed a reason to quit, blame it on today's economy.

Drink from the tap. A bottle of water runs about $2, so if you drink just one bottle a day every week it will set you back $56 a month or about $2,900 a year.

While I am an advocate of cash over credit, it pains me to hear that the average American withdraws $60 from an ATM four times a month. Not only is that too many trips to the ATM, but many of those visits are to ATMs that charge between $1.50 to $3.00 if the ATM does not belong to your bank. That can add up to $144 a year in wasted money.