Some people will tell you that saving money is just a waste of time, and that you’d be better off just earning more cash. But the truth for many is that pennies saved are worth far more than pennies earned.
For instance, in New York City, figure on your earned dollar being worth as little as 60 cents once you’ve paid city, state and federal taxes.
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With that in mind here are some ways to put money back in your pocket, gathered from some of the world’s top financial markets experts.
Review your utility providers ($95 a month). TV, internet and phone service often just get paid month after month without being closely looked at.
“If you’ve never switched your utility suppliers then the potential savings could be hundreds per supplier,” says Frances Hudson, global thematic strategist at Standard Life Investments in Edinburgh, Scotland.
Hudson recommends comparing what you are paying with what other utilities are offering.
A quick look on myrateplan.com for TV, web, and phone service bundles in a neighborhood of New York City revealed a huge range of prices. At the top $130 per month, and at the bottom $35. The bundles in question didn’t all offer the same items, with the cheapest providing only internet service. Still, not everyone needs every service.
Shop more carefully (varies). “Consume what you purchase,” Hudson says. It comes down to what she dubs, “reduce, reuse, and recycle.”
You may think that you already do that, but you probably don’t. If you ever discard spoiled food from your refrigerator, then you are wasting money. How might that work? If you find the milk spoiling before you use it, then buy it in smaller containers. If there is food left from dinner, then save it to eat later.
You get the idea.
[See: 10 Ways to Shop Smarter at the Grocery Store.]
Donate used clothes (varies, but worth doing anyway). Recycling doesn’t have to mean putting stuff in a designated trash can. You can donate used clothing and other items to charity.
Depending on your situation you may be able to reduce your tax burden. Even if it doesn’t help you financially there will be someone who’ll benefit.
Use energy-efficient light bulbs (at least $61 per year). This might sound ridiculous in its simplicity, but newer bulbs really are less costly to operate.
The U.S. Department of Energy says the average home can save $75 per year by replacing your five most-frequently used light fixtures or bulbs with Energy Star products.
A quick search found a packet of eight 60-watt equivalent bulbs for around $14. That makes the net savings in the first year $61, followed by $75 each year thereafter. This newer style light bulb tends to last far longer than the old incandescent lights, which often break.
Lower your investing tax rate (varies, but could be substantial). Make sure your stock market gains are taxed at lower rates.
“It’s about getting the gains into the long-term category versus short term,” says Dave Ellison, a portfolio manager with Hennessy Funds in Boston.
Short-term capital gains are those made from investments that lasted one year or less and they are typically taxed at normal income tax rates. Anything longer can be a long-term gain benefiting from substantially lower tax rates.
Thanks to Congress the matter is complicated by the fact that the tax savings vary with income level. But here’s an example:
For a couple earning up to $75,300 the top marginal federal tax rate on normal earnings (or short-term gains) is 15 percent.
Long-term capital gains have a zero rate.
With that theoretical couple, stock market gains of $10,000 would have no capital gains taxes due versus $1,500 if taxed at normal income rates. That’s a $1,500 incentive to make sure the investment is held for at least one year and one day.
Start a college fund (hundreds of dollars a year). There may be ways to both save for your children’s college and gain some tax advantages, says Terry Gardner, a portfolio strategist at C.J. Lawrence in New York.
In 1996 the government created 529 college savings plans. The money grows without being taxed at the federal level, and can then be used for approved education-related expenses.
What you put into the plan isn’t deductible at the federal level, but it may be by your state.
Contributions to a New York 529 plan of up to $5,000 per year by an individual, and up to $10,000 per year by a married couple filing jointly, are deductible in computing New York taxable income.
In this instance, that’s meaningful, because unlike some states, New York has not insignificant income taxes.
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For example, a couple earning between $42,300 and $425,000 will be taxed in New York at a top rate of 6.45 percent. The $10,000 contribution mentioned above should theoretically reduce the taxes owed to the state by more than $600.
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6 Ways Anyone Can Save Money originally appeared on usnews.com
