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How to save $5,000 a year

Marketplace Staff Jan 1, 2010

How to save $5,000 a year

Marketplace Staff Jan 1, 2010


Tess Vigeland: Maybe you’re not in a position to give away half your income, but still plan on scaling back, plugging the holes in your spending so you can save more every year. Well, one good place to start is by making little changes to the things you spend money on everyday. And there’s an article in this month’s issue of Real Simple magazine that wants to help you do just that. It claims some families can save up to $5,000 a year.

Kristin van Ogtrop is the managing editor. Kristin, how did you arrive at that amount?

Kristin van Ogtrop: We looked at this Bureau of Labor Statistics figure that said that the average American household spends more than $50,000 a year. And it’s really concentrated for the most part across these six categories: food, health care, entertainment, home, transportation and apparel. And so we looked at all the six categories and found ways where you can save.

Vigeland: All right. Well let’s go through a few of these. By the way, I love the piggy bank on the cover of the magazine. It’s so cute!

van Ogtrop: Thank you. I love that piggy bank too. You know why? ‘Cause he makes you happy, that piggy bank.

Vigeland: He does!

van Ogtrop: He makes you think you can do it.

Vigeland: He makes you want to put money in him, that’s for sure. So we won’t do all of these, but folks can buy the magazine for all the details. Let’s start right where you start, which is with food.

van Ogtrop: Which is a big one, obviously.

Vigeland: This is an expense that always surprises me how much it adds up when I go to the grocery store. And you mentioned that the average household spends almost $4,000 a year on groceries. What are a couple of the best ways to cut down on that grocery bill.

van Ogtrop: Well, I would say the easiest way is to start with a list, which sounds so obvious. But there is research that shows that people who avoid impulse shopping spend 23 percent less on their grocery bills, which can reap a savings of close $1,000, again depending on the size of your family and where you’re shopping. That’s a no brainer, and it’s almost like a psychological ploy, more than anything.

Vigeland: Well, let’s talk briefly about all those home expenses. You have that as a category as well, property taxes to phone calls. What are a couple of the best tips you have there?

van Ogtrop: A great tip for the times we’re living in now is to take a hard look at your tax bill and think about appealing it. Recent market declines in housing prices means that for a number of people, they might be paying too much in property taxes. So what you should do, it’s a fairly easy process: Just get a copy of your house’s assessment from your local assessor’s office and compare it with assessments on similar houses in your town or in your area and about 75 percent of appeals actually do result in a reduction of taxes.

For a person, regardless of whether you own or rent, if you take — like you’re doing with your tax bill — if you take a hard look at your bills, according to the Citizens Utility Board, the average cellphone user could save over $300 a year, just by shopping around for a better plan. Two great sites to go to are BillShrink.com and LowerMyBills.com.

Vigeland: All right. Well, as I said, folks can get all these tips from the magazine. You know, Kristin, frugality was really sexy in 2009. But I wonder, if things get better, this year, do you think that’s going to linger, is it going to become kind of old news?

van Ogtrop: You know, I think it’s really going to linger. I think if you look at… the economic necessities for a lot of people have certainly driven a change in behavior. I think for many people — even people — who didn’t lose their jobs, it’s been kind of an interesting and valuable, sort of, reset moment. You know, where they look at their spending and they look at the way they live and they’ve been kind of given this cultural permission to cut back, and it’s been sort of liberating in a way. So regardless of how and when our economy recovers, I definitely think that people are going to have used this to re-evaluate the way they’re spending.

Vigeland: Kristin van Ogtrop is the managing editor of Real Simple, and we’ve been talking about an article in the January issue that gives all kinds of money saving suggestions that could add up to $5,000 worth of savings this year, 2010. Kristin, thank you so much and happy new year.

van Ogtrop: Happy new year to you. Thanks for having me.

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