March 15, 2010 -- Greetings, Big Savers! Last week I presented my second Savings Makeover on "Good Morning America," in which I found $188,852 in savings for a Virginia family using some of the easy savings strategies in my new book, SAVE BIG. (Click here to view the video and here to read the in-depth Web article.)
The response has been overwhelming. Thank you! The vast majority of you wrote in to say "pick me, pick me!" for the next "GMA" Savings Makeover. I am in the process of preparing my next one, and, as promised, it will feature a family with credit card debt, to show that there are savvy strategies even for folks in that tough position. As always, a few naysayers wrote in too. I love that! Seriously. I welcome the vibrant, vigorous debate -- and the chance to nip inaccurate perceptions in the bud. Here goes!
Saving at Any Income Level
Comment: I was pretty disappointed in your coverage. This family is way beyond the "national means." Maybe it would be helpful if you did a story on the "average" family. We just rolled on the floor laughing at anyone who would even consider a $600.00 cell phone bill and wonder why they might be in financial distress. This is not real life for most of us. That is half a monthly mortgage. Get real people with real concerns that we can relate with please.
Comment: I'm sorry but -- yawn -- is this really reality?? A successful veterinarian with a nice house and no debt? My husband and I have 4 children and are $40,000 dollars in debt from just trying to get by in this economy. Our debt has been accumulated through just needing to buy groceries, gas for the cars and helping our kids get through school and clothing them. Hopefully, the next family you pick is a little more real to life to what is actually happening in the world today. Thanks!!!!
Answer: I know it seems counterintuitive, but most savings strategies can work for anybody, regardless of their income level. In fact, the questionnaire I use to determine savings possibilities for people doesn't even ask about income!
For the Virginia family in my second makeover, I recommended switching to a cash back credit card ($1,599 savings), getting a cell phone plan that better fit their calling patterns ($829 savings), price matching at the grocery store ($6,240 savings), switching health insurance plans ($6,756 savings), refinancing both their mortgage and home equity line ($24,808 savings) and paying extra principal toward their mortgage (148,620 savings). The total savings from these six strategies was a whopping $188,852 and I think that giant number is what overwhelms people.
Bear in mind, these same strategies work for people with lower expenses, it's just that the resulting savings will be proportional. The Virginia family has the same concerns as everybody else. It's just that those expenses are amplified because they're a family of nine! C'mon people. A $578 monthly cell phone bill is not extreme because they're paying for six phones! At $96 per cell phone, that's pretty typical. Of course, I'm happy that we reduced that bill by running it through www.FixMyCellBill.com.
I sympathize with folks struggling with credit card debt. I used to have a bad credit card habit myself and dug out of debt dollar by dollar. That's why a couple weeks ago I devoted this column to better-smarter-faster ways to pay off credit card debt. (Click here to read it.)
Finally, remember, the Strickland family of Virginia was my second savings makeover. The first one I did featured a Baltimore, Md., couple -- a truck driver and hairdresser -- with a modest $150,000 mortgage. If that sounds more relatable to you, click here and you can see it and here to read the online article. The really jaw-dropping savings in both of my makeovers comes from paying just a little extra money in advance toward your mortgage principal.
The Baltimore couple could save $37,000 by paying $100 extra toward their mortgage each month, which is great. But get this: They could save about $11,000 over the life of the mortgage by paying just $25 extra per month! Once your credit card debt is eliminated, I believe people of any income can find $25 to send in to achieve that kind of BIG savings!
Group Versus Individual Health Insurance
Comment: I disagree with the private health insurance idea. We switched to an individual plan and when I got pregnant, maternity and sterilization were not covered. We had to pay full price for all our hospital services. My low risk pregnancy and uncomplicated regular delivery with only one night in the hospital cost us $25,000. The $9,000 a year we were paying for our group plan before would have been cheap by comparison.
Answer: Not all health insurance plans -- group or individual -- are created equal. It's not the fact that your plan is private that caused you to have to pay for your own labor and delivery costs. It's because you chose a bad plan for somebody planning to have a child. This is why I recommend working with an independent insurance broker who can shop around for plans for you. They know the ropes and can advise you on whether the plan includes the coverage you need. A good source of independent brokers is Trusted Choice.
Saving on Groceries in a Small Town
Question: I would very much like to know how to save money on groceries when you live in a small town, where the only real grocery store won't double or triple coupons or accept internet coupons.
Answer: Lucky for you, there are all sorts of ways to save on groceries without ever clipping a coupon. (For those who do want to master couponing, click here for a free sample chapter from my book SAVE BIG, that shows you how you can save up to 80 percent on your groceries through Creative Couponing.) The main non-coupon strategies are price matching and stockpiling. I described both in detail a few weeks ago. Read the column here. Price matching is where you shop at a store that honors its competitors' sale prices and scoop up all the best deals of the week in one place. Stockpiling is where you buy groceries when they are at their lowest price rather than when you need them and buy enough to last you until the next big sale. And finally, one wild card idea: bid for groceries instead of buying them. Here's a story I did about grocery auctions.