10 Money Saving Tips for Seniors

Life as a senior brings all sorts of new challenges – good and bad.  It can be a wonderful time, if you stay positive and healthy, enjoying new and old friends and doing the things you’ve always wanted to do.  The key challenges one faces at this age are staying healthy and not blowing retirement resources carefully accumulated for this period.  As studies show that Americans and living longer and more fruitful lives in retirement, you want to be sure that you have the maximum resources to take advantage of it.

Below, are my top ten tips for staying smart and financially comfortable as you age.

1. Move to savings and CDs

The stock market has been appreciating for a long time.  We know for a fact – based on our experiences from 2000 to 2002 and through in 2008 and 2009 – that markets do not only go up.  They also go down.   If you participated in the market and made money, count yourself lucky.  If you didn’t, the last thing you should do is get in heavily now.  As an absolute rule, retirement is not a time to play the market; we seniors do not have the time to recover from the serious falls in the market that inevitably come and come frequently.  The smart and only thing you should do is keep most of your assets out of the market and to invest in savings and CDs, up to the federally insured limit of $250,000 per bank.  Succumbing to market temptation is the kiss of death for seniors.

2. Downsize.

As you organize your financial life going forward, you should consider downsizing your home and property.  There is a weight taken off when you no longer pay a mortgage, large property tax bills, and outsized utility bills.  And, I promise, you will feel light footed knowing you are no longer, nor will your heirs be, shackled with the heavy burdens of large homes and related property.  And, you will also pocket the difference and that will almost certainly will put an extra step in your stride.

3. Consider moving to a lower tax state.

While you are getting rid of your old homestead, be extra smart and relocated to a warm climate and a tax-free state. There are some really good ones now where climate and costs will both be welcomed changes in your years ahead.

4. Question your purchases.

It is always easy to buy new things and to give in to the temptation of the moment.  But, as we get older, we also get wiser.  Giving in to temptations of the moment are things we do less and less as we age.  We have been there too many times – buying something expensive that catches the eye only to get it home and wonder why we bought it in the first place.  So, my recommendation is to get even more serious about momentary urges to buy and to establish a program whereby you wait at least a couple of days before making any purchase, especially large purchases.  Use those days to ask yourself several times whether that particular purchase makes sense. 

5. Budget.

I personally hate the idea and have never been good at it, but friends tell me that making and sticking to a monthly budget saves a whole lot of money.  What they do, and I seem unable to do, is set a hard line on how much they are both able and willing to spend for each month (obviously based on their projections of expected income and desired savings).  They then literally stop spending money when they reach their limits – actually slowing down and holding expenditures to a necessary minimum as they get to the end of the month.  While, as I said, I cannot do it, the logic makes all the sense in the world and holding to a budget you have set for yourself will undoubtedly serve you well.

6.  Be Careful with your gifting.

One thing we are always tempted to do, and it’s a good thing in moderation, is to offer financial assistance to our children and grandchildren. It’s great for them, sometimes even necessary for them, but it is also a slippery slope.  Many friends of mine have found themselves dangerously short of resources in their later years because they were too generous to their children.  Often those very same children are so mired in their own expenses that they cannot return the generosity and help their parents later down the road.  The obvious lesson here is to gift what you can while living, especially if your kids really need it, but to be always tough with and for yourself by making certain that you don’t leave yourself in jeopardy in your last years.

7.  Travel, but do it wisely.

Travel is often a defining set of experiences in retirement that contribute to making life at this stage so rich.  It can be done near home or as far around the globe as you desire.  But doing it is great for your mind and body and allows you to grow and learn while feasting on rich and new experiences.  All that said, however, the travel industry is just waiting for you, and usually not in a good sense.  Cruise and travel packages abound designed to capture your imagination and to separate you from your money.  It makes all the sense in the world to take advantage of the time you have and travel, but it is equally true that you can travel much more frugally by making your own plans and reservations and staying clear of the slick and far too expensive offerings of those who prey on older folks.

8.  Hang up on con artists.

Among the best pieces of advice I can offer those of us who are retired is not to answer your phone.  Nine out of ten times, there is someone on the other end who has bought a list of retired people from a third party and who is trying to sell you one or another useless, expensive and, most often, fake product or service.  You know better; just hang up.

9.   Be creative.

Few people believe that older, retired people have much of anything to offer the larger population.  The truth couldn’t be further from reality.  Older people have been around and if they have done stuff of interest, there is no reason they couldn’t continue as consultants or new business owners.  My point here is that many older people have well honed skills and, even more important, insights and creativity that could allow them to continue, albeit not necessarily 9 to 5, to engage in new activities, even ones for handsome remuneration.  In other words, don’t count yourself out because others think you are old.  Instead, prove that you can be as good as if not better than others and that you can continue to make money from your own efforts and imagination.

10. Exercise often.

And, finally, the best thing you can do for yourself, and at very low cost, is the exercise often and regularly.  Keeping in good shape and good health will save you more money than anything else, especially as it will free you of ever more expensive medical and hospital bills.  And, equally, staying healthy keeps mind and body in shape to enjoy and take advantage of the rich array of experiences that only those of us in retirement can enjoy.

20 Simple Money Moves to Get on the Right Path to Saving for the Future

Anyone planning for their future – including you – is well served to try to set aside some of the resources that you earn today for tomorrow.  At BestCashCow, we don’t believe that there is anything to be gained by living an unnecessarily frugal lifestyle like many other websites advocate.  Life is short, and living a frugal lifestyle is silly!  But, we do believe that there are plenty of easy ways to save for the future, without going overboard.  Here are 20 of our favorites:

1. Put your savings in a high interest savings account.

The trillions of dollars that Americans lose every year by keeping their money in a low interest savings account is just startling.  The most amazing thing is that it can easily be avoided if everyone would just check the best online savings rates here.  If you have never opened an online savings account, you should read this article to get started.  If you are still not comfortable with online banking, you can still make more by carefully choosing between and among local banks or credit unions. This is the easiest and simplest thing you can do to put more money in your pocket if you have any savings. Bookmark these pages and be sure to check back often as rates are going up!

2. Set a plan to pay off all of your high interest debt.

You cannot even begin to save if you are one of the millions of Americans who carries high interest debt.  Make a list of your high interest debts and then develop a strategy for paying them off.   If you don’t have the resources available immediately to lower your debt right away, consider consolidating it in a home equity line of credit or a home equity loan.

3. Challenge every recurring expense.

Challenge every recurring expense you have. Consider whether you really need all of your cable channels and other services you may be paying for monthly.  Many people have been paying for a service so long that it becomes second nature, but that doesn’t mean that you shouldn’t cut it out.  Challenge yourself by writing down every recurring expense you have, then look for expenses you can fully cut out, and then find ways to save money on the remaining expenses.

Could you spend less on your mortgage?  Check remortgage rates where you live.

4. Compare insurance rates.

Insurance rates – for health insurance, home and auto insurance and life insurance - are always changing.  New competitors enter markets and others change their offerings (becoming more competitive or less competitive).   Review all of your policies annually and make sure that they are the best for you.  The cheapest isn’t always the best, but you may find the same or better coverage for less money when you shop around.

5. Make a practice of delaying large purchases.

When you’re considering making a large purchase, refrain from buying it right away.  Rather, spend some time researching the product, and commit not to buying it until some time – such as one month  - has passed.    When you are less spontaneous, you end up only with the things that you really need and really want. 

6. Wait until the end of the month or quarter to make your largest purchases.

All sales reps have quotas to meet per month or quarter, so if you wait until the end of the month to make a big purchase, you can potentially save a lot. Car salespeople especially work with quarterly quotas and buyers can score the best deals if they can wait until the end of the quarter.

7. Use electronic coupons where possible for things you need.

In general, physical coupons aren’t worth the time you spend accumulating and managing them.  However, you should be on the lookout for electronic coupons that save you a lot of money on things you need anyway.

8. Take advantage of loyalty programs offered by the travel industry.

My loyalty programs for Delta, United and American Airlines over the years have subsidized all of my personal travel for decades (including many trips to Hawaii, Europe and Asia).  My loyalty to Starwood and Hyatt has been equally rewarded.  Take advantage of these programs.  You can boost your balance in these programs with the right credit cards.

See how we value airline miles and hotel points.  

9. Give up expensive habits and addictions.

Your habits  - good and bad – always work against you when you are trying to save money.   Alcohol and smoking are obviously bad habits that are very costly (the cost of these habits should not be your main reason to quit).   Vitamins, supplements and other so-called nutritional aides may seem like good habits, but they are, in fact, expensive habits designed to separate you from your money.  Try eating well instead.   

10. Reduce costs of your other habits (Brew your own coffee)

My most expensive habit is coffee and I can’t kick it, so I brew my own. Instead of spending $4 per cup at Starbucks or a real coffee shop, brewing my own coffee keeps the expense below 15 cents a cup. 

11. Drink more tap water.

Water is better for your health and saves you a lot of money.  Tap water is not only basically free, but it helps save the environment. Invest in a water filter for your home. The savings are especially great when you drink tap water instead of soda or beer when dining out (at least this works in New York City where the tap water is safe to drink even when it hasn’t been filtered). 

12.  Eat at home.

Eating at home is easier and healthier than eating out. It is also much cheaper.  I routinely throw together a quick salad with all sorts of great and exotic fruits and vegetables from my local Whole Foods that I won’t find on any restaurant menu.   If salads aren’t for you, try stir-frying or make homemade pizza with a ready-made bobboli crust.

13. Get paid to spend.

Maximize your credit card rewards by using the right card for your purchase.  It is BestCashCow’s view that the most value can be extracted from travel rewards credit cards.  Find the best travel rewards sign-up bonuses here and the best cards for your spend here.  Those who don’t travel may prefer cash-back cards.   Whichever you prefer, always be on the lookout for cards that might have multiples of the regular reward rate in certain categories.

14. Build your credit.

Whether you have good credit, fair credit, or bad credit, work on building it up.  Your credit determines your eligibility for mortgages and home equity loans.   It determines whether you can get the best credit cards.  Potential employers will also routinely run credit checks on job applicants.

15. Save energy.

This one sounds so simple, yet is so often ignored by so many.  Turn off the lights and the air conditioner when you aren’t around!   Stop wasting energy.  Preserve your resources as well as the earth’s.  Maybe even adjust downward the brightness on your TV and computer screen.

16. Buy in bulk and buy generic when possible.

Costco can save you a ton.  But, also think about name brand household products that carry the same ingredients as generic brands.  Generics can often taste better or be healthier too.  You can save thousands of dollars by simply buying the generic store brand instead of the well-known brand.  Kirkland is Costco’s own generic brand.

17. Cancel catalogs and unsubscribe from email announcements from companies trying to sell you stuff.

Announcements of sales or cool new products make it very tempting to buy something you don’t need. Instead, stop the catalogs and emails from ever getting to you in the first place, and you will save time, money and the environment.

18.  Exercise.

This is, in many ways, the most important piece of advice we can possibly give.  Staying healthy is the best way to avoid costly medical bills later.  Biking is also often the cheapest and fastest way to get around.  Ask a Dutch person.

19.  Clean Out Your Closets.

By getting rid of all the excess stuff in your home, you will make your life simpler and more peaceful.  Let others benefit from stuff you don’t need any longer or that your kids have outgrown by giving it away. 

20.  Find happiness in life, not spending.

Psychologists have proven that people buy stuff because they subconsciously believe that it will bring them happiness.  While you may really need an Iphone X, do you really need the iWatch and the latest Audi with Apple Carplay? This stuff will only make you happy for a day or two and then you will have buyer’s remorse.  Try to find joy in nature, in exercise and in each other, instead of trying to get a kick from unnecessary purchases.

Now you’ve got 20 ways to save money.  We hope you’ve read something here that will help with your finances and help you live a happier life.  

Wire Transfers versus Automated Clearing House (ACH) Transfers

In the many years since BestCashCow was founded, we have received a fair number of emails from readers asking various technical questions about how their online savings accounts operate.  Perhaps the most common question relates to the difference between a wire transfer and an Automated Clearing House (ACH) transfer.

I have hesitated to write an article on this topic because the issue has become less and less important to those using online banks for their savings and CD products, and ACHs have generally become more transparent and faster.  The largest online banks (Goldman Sachs Bank, Purepoint Bank, Ally Bank and others) now process all inbound and outbound transfers instantaneously (and free).  As a result, transfer speeds and times have become less burdensome for those banking online and occasionally transferring cash to a separate savings or checking account at a branch where they do most of their daily financial transactions. But, we nonetheless seek to clarify this matter further here.

Wire transfers are a direct bank-to-bank process that technically moves money instantaneously between two financial institutions and can only be initiated by the institution holding the account from which cash is being transferred.  Since the process may not be completely automated and a bank employee at the receiving institution may review all transactions before an account is credited for an inbound transfer, it may take several hours to a day for the money to move from one account to another.   Otherwise, however, a wire transfer is basically an electronic cashiers’ check - payment received in an account is treated as cleared money and may be withdrawn immediately (and for this reason there is obviously also risk in this process).  Likewise, the funds must be available in the outbound account before the payment is issued, and will be immediately debited from the sender’s account as the request is processed.  Banks may charge to send or to receive wire transfers, but the fee on either side is ordinarily not greater than $35 for a domestic wire transfer (international transfers may be a little higher).

ACH transfers are similar to a wire transfer, except that they use a clearinghouse and a batch process and may be initiated by the outbound or the inbound account.  Since a clearinghouse and a batch process are used, transactions are stored and reviewed and the money may not actually be transferred for a day or even several days (as pointed out above, the largest online banks process these transactions through the clearinghouse immediately, but the smaller ones may take several days – look to the comments in BestCashCow’s tables to see what types of speeds users experience).  Even if the money is received immediately, the recipient bank may not allow the account holder to withdraw the money right away, especially when the transfer is initiated through that bank’s interface, as they need to protect themselves from fraud liability laws that ordinarily apply to ACH transfers.  When initiating an ACH transfer from an incoming account at an online bank, there is a risk of overdrawing from the account from which you are pulling cash (and being charged an overdraft fee). 

BestCashCow believes that smaller banks that offer slower outbound or inbound ACH transfers can still make sense for the consumer.  Assuming that you can prepare for transactions where there may be a day or two delay in moving your cash, the extra yield in a higher savings or CD rate may more than offset your loss of interest over that day or two.  Often, this delay can be avoided by initiating the transfer at the recipient bank (although you will ordinarily be subject to a hold there too).

In the 21st Century, the ACH process is ordinarily completely free to the user for both outbound and incoming transfers.  We strong encourage all consumers to avoid the few financial institutions, such as Salem Five Direct, that still charge for ACH transfers initiated through their websites.  

ATM Fees Go Through The Roof - How To Avoid Them

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ATM fees hit a record high for the 11th year in a row, according to a recent Bankrate.com study.  According to the study, the average total cost of an out-of-network ATM withdrawal is now $4.69, up 2.6 percent from $4.57 last year.  In New York City the average ATM fee stands at $5.14, and in Pittsburgh it is still 5 cents higher.  ATM fees have now risen over 55% over the past decade.  It seems like an extraordinary burden to have placed against you for the convenience of accessing your own money.

The obvious first line of defense for avoiding ATM fees is to maintain an account with a bank or credit union that has a branch and/or ATM network that is convenient to you.  You can see a map showing all banks near you here, and all nearby credit unions here.  BestCashCow recommends keeping only the minimum amount in these accounts necessary to access the bank or credit union’s ATM and transactional network, and to put your remaining cash balances in the highest yielding accounts you can find so that your money works for you.  Often, but not always, the highest yielding accounts will be online savings accounts, and you can find a list of the highest yielding accounts here.

The obvious second line of defense for avoiding ATM fees is to use credit cards whenever possible.  Having the right card enables you to be earn reward points or cash back for your spend.

However, sometimes, it simply is impossible to find an ATM network easily when you need cash.  That’s when a strategy like going into a grocery or drug store and making a small purchase on your bank’s debit card can enable you to get cash back.  For those times when that strategy doesn’t work, you should also check out the Venmo app which enables you to quickly transfer cash to anyone.  Finally, if you really find yourself paying out-of-network ATM fees too often, you might want to consider the tried and true strategy of carrying a checkbook.

You Are About to Get Killed in Bonds

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Many investors, commentators and financial managers have perpetuated and subscribed to the fiction that those who want to protect themselves from an overvalued stock market should be moving to bonds.  In fact, a recent New York Times piece, described here, even mistakenly assumed described investors’ choices as being binary – stocks versus bonds.

The idea that bonds are somehow a safe investment comes from the fact that long-term bonds have appreciated dramatically over the last several years as interest rates have come down and expectations of their rising have diminished.  

With the 10-year Treasury yielding 2.10% and with the Federal Reserve guiding towards a Fed Funds rate of 3% in 2019, I would argue that the only way long-term interest rates do not rise, and rise dramatically, is if we fall into an economic depression and the yield curve becomes inverted.   Also, oil and commodity prices are currently tremendously suppressed because the monarchy’s policy of opening up reserves is causing too much supply to reach markets.  An impeachment trial will change this, causing commodity prices and inflationary pressure to rise, and driving 10-year Treasury rates to levels that those in their 20s and 30s have never seen.

The impact of a turn in interest rates on bond prices will be dramatic.   You can ask anyone who tried to sell a long-term bond in 1970’s how many pennies on the dollar they received for it.  Alternatively, you can speak to anyone who bought a long-term bond in July 2012 when the 10-year Treasury was at 1.52% how much their brokerage account valued it in August 2013 when the 10-year Treasury was at 2.90%.  Bond investors can quickly lose 30% to 50% of their principal should they need liquidity during a period of rising interest rates.

My view that another dramatic move up in 10-year Treasury yields – and dramatic fall in bond prices – is likely upon us is not unique.   It is shared by Leon Cooperman and Alan Greenspan.

Your safety is found in savings accounts and short-term CDs.

Portfolio Drift

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While Donald Trump has certainly caused concern to some over his style and actions as President, few have been anything but jubilant over the impressive rise in the stock market since January.   Actually, if one looks back to late 2008 when the market dropped 37%, we have all since enjoyed a spectacular ride up between then and now of around 300%. 

There was a very interesting, recent article in the Business Section of the New York Times on one very important aspect of the huge rise since 2008 – portfolio drift - and the related implications for everyone in the market at this time. Obviously, one of the implications is that those of us in the market during some or all of that time have enjoyed handsome appreciation of stock assets and, by implication, feel ever more comfortable financially.  But the Times’ article points to a related and worrisome impact of the steep rise in the markets to which most of us probably have not paid as much heed as we should have.  And that is the relationship or portfolio mix between safe assets, like cash and CDs, and far more volatile stocks.   (Actually, the Times articles speaks of bonds as a safe investment which is a serious error – bonds are especially likely to decline in value as much if not more than stocks as interest rates rise.)  Most of us who own stocks balance our risk by also owning CDs and cash and, by so doing, ensuring that our investments are at least somewhat protected by the lower volatility of these reserves in the event of another large drop in the stock market.

But by now, given the huge increase in the stock market over the last eight years, the balance between stocks and cash and CDs in our portfolios, if we have not been paying attention, has shifted considerably.  As the Times points out, an allocation of 60% stocks in 2008 would be far more likely – if no cash reserves were added – to be around 75% stocks.  And this kind of allocation is risky for all but the most daring among us.  Yet, this is also likely where most of us are at this moment.

And, that is not a good place to be under the best of circumstances.  And, we are not anywhere near the best of circumstances at this moment in the nation’s history.  In fact, it is hard to imagine a more vulnerable time for the market than right now – given all that is happening in the U.S. polity.  The Times’ article is a clarion call to action, but one, I bet, few will act on.  The market has just been too good for too long, and most of us, present company included, can’t wrap our minds around how volatile things are now and how likely it is that we will have a serious decline in the market in the weeks if not days ahead. 

It is time to get our heads around the dangers ahead.  Those who do, and who at least rebalance assets in favor of cash and CDs in light of portfolio drift, will be in a far better position to weather the storm we are absolutely going to have in the very near future.

See the best 1-year CD rates here.