Save More, Spend Less: A 3-Step Plan

I recently received an email from a thoughtful reader struggling to kick his credit card habit and save money. I thought it would be helpful to share his plight, which I think many can relate to, and my advice.
Dear Farnoosh,
I have a bit of a problem with credit cards. My partner uses a credit card to purchase everything and pays it in full each month. I do that, too, however I scrimp everything I have at the end of the month to make the full payment. Basically $0 goes into savings, as a result. Using credit cards is also primarily how we spend when we travel as we earn miles on every purchase and then redeem them for travel flights … I want to feel like I’m contributing to our trips … What can I do to change my mindset to stay out of debt and stay on track?

-Christopher

Here is my three-step plan for Christopher, as he tries to cope with his credit card dependency issues and find room to save.

Step 1: Pay Yourself First - and Automatically

Make sure your employer is automatically depositing your paycheck into your savings or checking account. Then schedule a regular transfer of either an account percentage or a fixed amount (say, $200) to a separate online account each time.  This way you save automatically, before you get caught up with everything during the month. It’s painless.
I like online accounts for two reasons. One, they typically offer a higher savings rate than traditional banks. And second, because they’re virtual, it’s a little harder to access your funds. It’s like having a built-in savings motivator.  Some examples: SmartyPig.com, INGDirect and HSBCDirect. You can also comparison shop for the best savings rates at BankRate.com.

Step 2: Challenge Yourself to an All-Cash Existence

Give your credit cards a breather. For the next couple of weeks, when you go out shopping or out to dinner, leave your credit card at home. Go to the ATM on Sunday night and take out just enough for the week, then spend that amount and only that amount. Do this for 14 days. You’ll be challenged, but you’ll find you will make better spending choices when you give yourself limitations.
To make it more fun, challenge your partner to join you for a week of living on cash. You can both take out an equal amount of money - say, $100 - and the person who ends up with more money at the end of the week gets a prize (you two pick the prize).
Remember: Cash not only limits how much we spend, it helps us save an average 20% compared with when we use credit cards, according to year-long trials conducted by the National Foundation for Credit Counseling. And McDonald’s has found that the average transaction rose from $4.50 to $7.00 when customers used plastic instead of cash.

Step 3: Have a Talk With Your Honey

Talk to  your partner about your savings dilemma.  When you’re in a relationship, especially one where you are sharing some expenses, communication is critical. Ask for his advice. Ask for his support. It’s in both of your best interests if you are able build up your savings. He may have no idea that you are losing sleep over this. And who knows? He may have similar concerns.

Wedding Planning: 3 Financial Deal Breakers

For years I’ve been preaching to brides and grooms-to-be on the importance of staying within a reasonable wedding budget. Now, newly engaged, I feel some pressure to stick to my own advice and prove that it can be done.
As I type, my fiance and I are headed to the City of Brotherly Love, Philadelphia, to check out five potential event spaces in which to hold both our ceremony and reception. I’ve done some homework in advance of our trip and have a checklist of questions to ask each event manager, so that we can compare apples to apples. I’ve already made some interesting discoveries, which may become financial deal breakers … unless, of course, there’s room for negotiation.
Here are three specific questions  you definitely want to ask as you research reception spaces.

1. Can We Choose Our Own Caterer?

Out of the 10 or so event spaces we’ve looked into - from museums to hotels and restaurants - all have told us that they work with an exclusive catering service. (The restaurants, I get - but the museums?) This isn’t the end of the world, since many of the caterers had exceptional reviews, but it also means you can’t comparison shop - or taste - for the best service, since not all of the caterers offer tastings before you sign your contract.  Also, if you have special dietary needs, not being able to pick your own caterer may pose a problem. For example, a Jewish friend of mine who’s getting married next winter, fell in love with one event space - but because the caterers didn’t have a kosher menu, she and her fiance had to continue searching.

2. Does the Catering Include a Wedding Cake?

We found many catering services include the cost of a wedding cake - that you must choose from their bakery, at $10 to $12 per slice. What if you have a relative or friend who wants to make you a cake for your reception? Or what if you want to select your own bakery? We’re not even sure we want a wedding cake, anyway - I would be happy with cupcakes. Why must we pay for something that, to us, is discretionary? Can it be deducted from the cost? We shall see.

3. What Are the Ceremony Fees?

Space fees tend to run the gamut, anywhere from $1,500 to $5,000 and up. But don’t stop your research there. Ask what other fees apply. I discovered one place charges a ceremony space fee plus $25 per chair and an additional fee for using their sound system or speakers to play your ceremony music. That just seemed a wee bit predatory to me. Like, what is my alternative here? A standing-room-only ceremony with music playing from my iPod speaker?

Meanwhile: This story is to be continued. I look forward to posting more of my wedding planning discoveries in this blog. Please share your wedding financial successes (or disasters). We could all benefit!