Your Credit Score, Grocery and Coupon Questions Answered

Jan. 25, 2010 — -- This week I continue responding to your questions and comments about my book, "SAVE BIG", which is about finding savings on the big categories like houses, cars, credit, groceries and healthcare, instead of on the little stuff. I guarantee that every tip in my book has the potential to save you at least $1,000. Some readers were grateful, others skeptical. Both attitudes give me an opportunity to share more money-saving ideas with you.

~Elisabeth

CREDIT

Boost Your Credit ScoreQ: Improving a credit rating is a fine idea, but it takes a long time, so viewers/readers looking for immediate savings aren't going to find them there right away. Besides, if you already own your own home and have a good interest rate, then where are those "big" savings going to come from?~justsane

A: It's true that most steps needed to improve your credit score involve slow and steady progress. But that doesn't mean you shouldn't do it! Sheesh! People are obsessed with instant gratification these days. I know plenty of people who skip their daily lattes to save a few dollars but let their credit go to hell and miss out on tens of thousands in savings because they can't qualify for a decent interest rate when they take out a loan. Besides, in "SAVE BIG," I also offer several pages worth of "flashy moves" that will goose your score quickly. These superficial steps should only be undertaken along with the fundamentals, but they are great strategies when you need to pick up a few points in a hurry. Things like moving your money around among your credit cards to improve your ratio of credit balance to credit limit. And lobbying creditors to report positive information about you to all three credit bureaus. Or becoming an authorized user on a family member's healthy account. If you already own your home and have a good mortgage rate, then improving your credit score will save you thousands when you refinance, take out an auto loan, or apply for a credit card.

Q: I admit that I don't always pay off my credit card and that's a problem I already acknowledge, but it's hard when the car needs new tires before winter and I don't have enough saved for it. I sometimes wonder about the incomes of people who write these articles. The average family income in my area is about $50,000 and I'm willing to bet most of these financial advisors couldn't make a realistic budget on that!

~justsane

A: In "SAVE BIG" I share my own struggles with credit card debt. It is a cancer, eating away at our society. I dug myself out dollar by dollar, so I've got the chops to talk about this topic. Don't be so sure about people's incomes either. As an entry level television reporter, I only made $21,000 a year, and that was in California where the cost of living is high. And I was one of the lucky ones! Some of my fellow journalism grads at that time were only making $11,000 to $14,000 and were on food stamps.

GROCERIES

A: Absolutely, I talk about coupons and store rewards and stockpiling in "SAVE BIG" ! They are the ultimate form of guerrilla grocery shopping and I devote three chapters in the book to these strategies. You can cut your grocery bills by 80 percent if you aggressively pursue these strategies.

Q: I totally agree with jp4ga's earlier posting. I walk away from local stores every week with bags of free groceries and non-food items using coupons. As a small example, just Sunday I got 8 boxes of dishwasher detergent FREE, 4 dental floss FREE, 10 large packages of ladies personal hygiene care FREE, 4 boxes name-brand healthy cereal for $2.50.This morning I grabbed 8 FREE organic yogurts for my office. The list goes on and on-and it's so easy! Check out some of the great coupon blogs to learn how. Anyone can do this. And boy do the savings add up quickly too!

~bryarsmom

A: That's right, if you pursue what I call creative couponing, you will not only get groceries at deep discounts, but even for free! And you don't have to reinvent the wheel. Just check out blogs like those at www.becentsable.net where veteran coupon queens share the great deals they've gotten by combining coupons and sales and other incentives. All you have to do is copy them!

Q: All the grocery stores around here have stopped taking coupons printed from online sources due to so many fakes being passed. I still use the ones from the Sunday paper and do put them together with sales as much as possible.

~CR

A: As long as your Internet coupons have bar codes, stores should take them. That is the key. Click here for a list of sites that generate legitimate coupons with bar codes for verification.

The "Not Shopping" Method

Q: On the groceries, not shopping one trip out of 4 will eventually result in buying more food to put in the freezer for the fourth week. I have tried that trick myself and I end up staring at an empty freezer and ordering a pizza!

~lovebugs720

A: In my "Good Morning America" story and online I talked about one very simple method of cutting your grocery costs: challenging yourself to cut out some of your shopping trips and actually use up everything in your frig, freezer and pantry. I call it the "Not Shopping" method and it is not as deep a savings as creative couponing, but I suggested it for those who just…can't…get..up..the…energy… to save in a more aggressive way. As far as how often you skip a shopping trip, you have to find the sweet spot where you still have enough groceries in the house to get by. Some people skip a trip a quarter. I try to skip one out of four.

Q: "If you cut out one shopping trip out of four, you are cutting your grocery costs by 25 percent. " What kind of logic is that? By extension, if I cut three out of four, then I'm cutting my costs by 75 percent? Of course not! My food costs are the costs of what I purchase for consumption and storage. If, at the end of the year, I've eaten all the food that I purchased, then the only savings I would incur by dropping the number of trips is the price of the fuel to drive the car to the market!

~LoveDori

A: I thought it was obvious, but perhaps I should have explicitly stated that the Not Shopping method is based on having a set grocery budget and schedule. If you shop once a week and budget $100 for the trip, then cutting out every fourth trip will save you 25 percent. Yes, you must have a budget and stick to it, so you don't end up buying more supplies the week after the trip you skipped.

HEALTHCARE

Save on Health Insurance by Paying As You Go

Q: I don't agree with [Leamy's] advice on health care. You should not think that your health care coverage is for the basics. It is for a car accident or other major medical situation. If you have a plan similar to the one that she recommends, you are gambling. But then again, isn't that what insurance is? Legalized gambling?

~bamkmartin

A: Ahem, bamkmartin must not have done very well on the reading comprehension part of the SAT test. He or she has gotten my point exactly backward. The advice I gave, and continue to give, is that you can save big by paying for the small things like routine doctor visits yourself and then buying a top notch insurance plan to cover catastrophes like an accident or a major disease diagnosis. There are two ways to do this. One way is to choose a health plan with a somewhat higher deductible, which has the effect of causing you to pay for entry level care yourself. The other way is to pay lower premiums up front but a higher percentage of your bill when you actually go to the doctor. That way , more of your money is going directly to your care instead of an insurance company.

Q: Your advice that people purchase a plan that saves in premiums and gives them more costs at the doctor's office is plain foolishness. This only works until someone has an unexpected illness or accident. Note the word "unexpected" in that sentence. You will regret that choice for years if you do that.

A: There are thousands of different health plans, all with different variables and I can't be there to analyze each one. So what I was trying to do here was share the principal that you may be able to save big by paying less up front and more as you go. The details depend on the individual plan. For example, I analyzed my own health plan options and if I choose the plan where I pay just 20 percent of the cost of my doctor visits, the annual premium is $3,952. But if I choose the plan where I pay 30 percent of my doctor visits the annual premium is just $1,872. Here's the key: the 80/20 plan I was offered does not begin to pay for itself until you have racked up $15,000 in medical costs. That can buy a lot of care. By paying more as we go on the 70/30 plan, we save money all the way up until the $15,000 mark. There's another factor here that you should take into account as well, so I'm glad a reader brought it up. My plan is through my employer, so if I do have a medical disaster that costs a lot of money, I can switch to the more elaborate health plan during the next reenrollment period. I will not have to go more than a year paying the higher percentage as I go. Those who buy insurance individually need to be more careful to choose a plan that fits them now but also hedges for the future.

For people uncomfortable paying a higher percentage of their care as they go because something could go wrong with their health and then they'd have to cover more of it themselves, the other option is to go with a higher deductible. That strategy also buys you a substantial discount, but you are containing your possible risk to just the amount of the higher deductible. It can really work in your favor. For example, I analyzed two identical health plans, one with a $500 deductible, another $1,500. By choosing the higher deductible, participants saved $1,428 a year. That's enough to cover the higher deductible! And if you have a good health year and don't spend that much, it's money in your pocket. BIG money!