By Liliana Molina, CFP® 

http://www.spireip.com/adv_lmolina.htm

We have all been affected by the high price of gasoline and its effect on the cost of groceries, travel and entertainment. There are a number of ways to save money without depriving yourself of the necessities and even some of the discretionary activities you enjoy. The secret is careful shopping and, perhaps, a little adjusting to your budget.

Stick with your 401(k) plan:

First of all, I hope you have a budget and that it includes saving for retirement as one of your “must have” items. Your knee-jerk reaction might be to temporarily reduce your contributions to your 401(k) in order to increase your current discretionary income. Don’t do it!  Here’s why:

1. The whole point of a declining market is that prices – including the prices of stocks and mutual funds – have come down in value; in fact, they are probably undervalued right now. Continuing to invest in your 401(k) in a declining market is like buying things on sale.

2. Secondly, a 401(k) plan usually includes an employer match. You should continue to contribute to your 401(k) at least as much as your employer matches. In fact, as a financial planner, I would encourage people to contribute more to their 401(k) plans in a down economy because your dollar goes farther.

Take advantage of all the benefits your employer offers:

Take advantage of all the benefits your employers offers, especially the pre-tax benefits such as flexible spending plans and medical spending plans. Tuition assistance is another benefit that may help you out. Many people pass up the opportunity to take out disability coverage through their employer. If you become disabled, this could save you a great deal of money. Also, many employers are starting to offer long-term care insurance at group rates. Down the road, this coverage could be very important and create some tax savings. Consult your financial advisor on the tax implications.

If you and your family are in good health, increasing the deductible on our health insurance may save you some money in monthly premiums. Also, look at your withholding. If you have been getting big tax refunds, you may want to decrease your number of deductions. That can increase your take-home pay. Consult your financial advisor, however, before you make any rash decisions.

There are ways to stretch your paycheck:

One way to stretch your paycheck is to make more economical choices, do some comparison shopping. The cost of groceries is a big part of everyone’s budget. Consider making bulk purchases and switching to generic brands. For doing laundry, you can switch to concentrated liquid detergents and add water. Shopping at a local farmer’s market can cut out the cost of the middle man as well as the cost of transportation. Also, I would encourage you to buy energy-saving products, such as batteries that have a longer life and light bulbs that last 2000 hours.

Changing your entertainment and travel patterns:

Do you have to go far away from home to have fun? Consider traveling in the U.S. With the value of the dollar down, travel abroad is more costly. Also, consider traveling by train rather plane. It’s not only less expensive, but you can enjoy the scenery along the way.

If you live in a major urban area, you are probably within an hour’s ride of the beach or the mountains, where you can go swimming, hiking or biking. These are free activities. You can rent a kayak for a small fee. These activities are good for you: you exert energy, enjoy the outdoors and save your pocketbook.

Focus on fun family activities at home.  With cable, our family can go to the movies at home for only $4.99. Turn down the lights and make some popcorn.  Plan some simple cooking activities with your children. You can make marshmallow treats for $2.00. Your kids have fun and you save money.

These are just some of the ways to save money in tough financial times without sacrificing your quality of life. If fact, you might find yourself enjoying these new low-budget activities and the quality time you create with your family.

Liliana Molina is a Certified Financial Planner® with Spire Wealth Management LLC in McLean, Virginia. An MBA graduate of George Washington University, Ms. Molina has 18 years of experience in financial planning. She is a Latina. Contact Liliana at liliana.molina@SpireIP.com or visit http://www.spireip.com/adv_lmolina.htm