Dallas Mom: How We Live on 40K a Year Without Coupons
I'm really not all that different from other moms. I take care of my home, my husband, my young son, as well as all the shopping and the family budget, too. What might make our family a little different from others is that we manage to live very comfortably without going into debt, and do so with only my husband's income of approximately $40,000 per year. Here's how we do it:
We've learned that budgeting is easier than it seems. We make automatic deductions for our basic expenses, such as mortgage, utilities, car payment, and insurance — we even set a small amount aside for charity — and what's left over gets split into two savings accounts: our emergency fund, and an account for our son (college, Christmas presents). My husband and I use a basic budgeting template from Excel and have adjusted it to our own needs — in fact, we adjust it every month depending on priorities. By acting responsibly before disaster strikes, we feel safeguarded against the unexpected.
We Don't Deny Ourselves
We also leave room for fun stuff by delegating a small amount for discretionary spending each month — this can go for household items, clothes, vacations, etc. It's stuff we don't need, but want. If there's something we have our eye on, we simply save up for it. It might take us a little longer to get it, but we try not to deny ourselves of life's simple pleasures. By managing our "wants" like this, we avoid impulse purchases and overspending.
Eating Well, For Less
When we first got married, I couldn't cook at all, but now I cook all the time! Cooking allows us to meet our food budget each month, a total of only about $20 per person, per week. We can't afford to buy everything organic, but since I make my own organic baby food, I jump on those deals when I see them! I also shop wholesale at Costco for bulk items (flour, sugar, cheese), and then get my basics (milk, eggs, bread) at whichever local store has the best deals that week. Surprisingly, I don't use coupons. Instead, I'm diligent about planning out our meals each week so we don't waste a morsel. Another way we save (and have fun!) is to invite friends over — if I cook an entree and they bring the sides, we've just cut our dinner costs in half!
DIY Designer Deals
Back when we had two incomes, I enjoyed decorating my home and wearing designer labels. Now, neither would be possible if I didn't think outside the box. My interior-designer mother has taught me how to choose high-quality fabrics to sew my own curtains, pillows and to re-upholster cushions. I even attempted a quilted headboard for the bed (for about $100 — a savings of nearly $300). We also saved about $1,000 on a 10x12 area rug for our bedroom by purchasing a large remnant at a rug store and having it bound. When I shop, I seek out consignment shops where gently worn couture costs about 60% less. I still have to watch my pennies, but I believe that a few high quality pieces are a better investment. Finally, I do all my own hemming and mending for my family. It saves me about $5 to $10 per sewing job. A small task like this add up!
Working it Out
As a trainer, fitness is important to me. Yet, we got rid of our gym memberships, which saved us $50 a month. We found that we were only going about twice a week anyway — now, I'll take my son out in his jogging stroller or complete workout tapes at home. Guess what? I don't miss it at all!
By budgeting and spending wisely, I've been able to stay home with my young son and provide the loving, personal attention we believe he needs. Secondly, we continue to invest in our futures. My husband is planning to start law school next fall and, thanks to our diligent savings practices, we know our family can handle this financial challenge. Thankfully, Matt and I were raised by financially savvy parents that taught us the value of money and how to practice financial self-control. We plan to pass these same lessons on to our son — and to continue to inspire others to do the same!
Things Debit Card Issuers Won't Tell You
As fees continue to rise and rewards slide, are there incentives left for using debit cards?
1. "Debit-card fees are far from gone."
The past few months have been a big win for consumers in the fight against debit-card fees as Bank of America, Wells Fargo and SunTrust Bank abandoned plans to charge debit-card usage fees. But other debit card fees remain in effect and they're rising. ATM fees are higher than ever, according to Bankrate.com. Each time debit-card holders use an ATM outside of their network, they're charged $2.40 on average (up 3% from a year ago and up 76% from 2001) by the host bank plus an average of $1.41 by their own bank.
Separately, overdraft fees -- which are charged for nonsufficient funds -- are increasing, too. A Federal Reserve rule that went into effect in August 2010 requires banks to get customer consent before approving debit-card and ATM transactions that are larger than the balance in their checking account. But a 2011 study by the Center for Responsible Lending says many banks conducted aggressive campaigns to get customers to opt in to so-called overdraft protection. Roughly 30% of consumers signed up for this "protection," which approves transactions larger than their checking account balance for a fee. The median overdraft fee is now $29, up 5.4% from last year, according to economic research firm Moebs Services Inc.
The banking industry says consumers can avoid these fees. Customers who signed up for overdraft protection can opt out any time they'd like, says Nessa Feddis, vice president and senior counsel for regulatory compliance at the American Bankers Association. And by sticking to their own bank's ATM network consumers can avoid ATM fees when they take out cash, she says.
2. 'We're to blame for rising checking account fees."
Free checking is becoming a thing of the past and the culprit, in part, is debit cards. To make up for revenues lost from new debit-card regulation, banks are raising checking account fees, says Odysseas Papadimitriou, chief executive at CardHub.com, a credit card comparison web site. "Checking account fees and debit card fees are one in the same," he says.
Merchants that accept debit card purchases pay banks a fee every time a customer swipes a debit card. This so-called interchange fee used to average about 44 cents per transaction. But new regulations that went into effect in October cut the fee to an average of around 24 cents. That's in part why checking account fees continue to rise. Only 45% of non-interest bearing checking accounts are free, down from 76% in 2009, according to Bankrate.com. On those accounts, monthly account maintenance fees average $4.37, up 85% from a year ago. Banks have also hiked the minimum balance required to avoid checking fees, to an average of $585, up from $249 last year and $185 in 2009.
The ABA's Feddis says that checking account fees have risen because the interchange fee has dropped. That revenue helped subsidize the costs of providing checking account services, she says, which can run $250 to $300 per account per year, she adds.
3. "Debit-card rewards are dwindling."
Debit-card reward programs, such as cash back and airline miles, are becoming less common, decreasing by 30% in 2011, according to Bankrate.com. Many of those programs that signed off this year were at the large banks, including Wells Fargo, Chase and SunTrust. The banks say they're responding to the new swipe fee rule (see previous section). "There is no question that there's a direct link," says Feddis. The ABA says the rule will result in a 45% loss in bank revenue on debit cards.
While debit-card rewards programs still remain, in most cases getting those rewards requires using debit cards for purchases very often, says Richard Barrington, an analyst at MoneyRates.com http://www.money-rates.com/, which tracks banking products. Or they require a significant dollar amount of purchases. At TD Bank, for example, debit-card holders have to swipe at least $2,000 worth of purchases before they can start redeeming points. TD Bank says it has no plans to change this rewards program. Some debit cards offer rewards on a rotating group of retailers that experts say may not add up to much. In July, Ally Bank rolled out a new debit-rewards program that automatically gives money back on purchases made at participating merchants that have included iTunes, 1-800-FLOWERS and Barnes & Noble Online. Ally Bank says the amount of cash back varies by merchant and ranges from 10% to 50% back.
4. "Credit cards can be a better deal than debit cards."
For years, consumers have been told that debit cards have more benefits than credit cards. Debit card users don't run the risk of going into debt and damaging their credit score like they do with credit cards. But some experts are questioning that logic. For consumers who diligently pay off their credit-card balance each month there's little reason to use debit cards, says John Ulzheimer, president of consumer education at SmartCredit.com, a credit-monitoring site. They won't incur interest rate charges, or late fees, and they can avoid annual fees by using credit cards that don't charge them.
The reason boils down to rewards. During the recession, credit-card rewards programs were cut back significantly but they started to make a comeback about a year and a half ago. This year, competition has intensified, and credit-card rewards are becoming more generous while debit-card rewards are fading. Credit-card rewards have become attractive in part because they're not subject to the new lower interchange fee that debit cards have, says Feddis. Chase, for instance, offers 1% cash back on all purchases made with its credit cards -- twice what its now-defunct debit rewards program paid. (Two Chase cards offer up to 5% cash back on certain purchases.)
Meanwhile, Capital One's Venture credit card lets users rack up airline miles quickly. A cardholder who charges $20 will get 40 airline mile points. Compare that to the Capital One Rewards debit card that awards between 5 and 20 airline mile points for a $20 purchase. A Capital One spokeswoman says changes in the debit landscape have had no effect on its credit-card marketing activities and that both cards launched prior to regulatory changes that impacted debit cards. She adds that debit-card rewards also accumulate when consumers arrange for direct deposits to their checking account and use the account to pay bills online.
5. "Still want to hold onto debit? Prepare to be pushed out."
At least one bank seems to be encouraging its customers to make the switch from debit to credit. In September, Bank of America announced that it was discontinuing the rewards program on its Merrill Lynch debit card, which is used by its brokerage clients. Those cardholders have until May to redeem their rewards -- or they can transfer their rewards to the Merrill Visa Signature credit card.
It's part of an overall push by banks to get more consumers to sign up for credit cards in lieu of debit cards, says Bill Hardekopf, chief executive at LowCards.com, which tracks credit-card offers. A Bank of America spokeswoman says the bank isn't steering clients to credit cards but only offering them the alternative.
That may be, but plenty of banks are hoping the current massive marketing push for credit cards will help consumers forget about using debit. During the third quarter of 2011, credit-card mail solicitations reached an all-time peak: 80% of credit-card mail featured 0% introductory rate offers on purchases -- the highest ever, according to Synovate Mail Monitor, which tracks credit-card mail. This year, around 78% of credit-card mail featured this offer, up from 70% during all of 2010 and 53% in 2009. The ABA's Feddis says banks are rolling out more credit-card offers because they're not losing money to lower interchange fees like debit cards are. What's more, fewer people are missing payments on credit cards these days, making credit cards a less risky business compared to a few years ago, she says.
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