Download Make your dollars stretch farther in tighter times

Make your dollars stretch farther in tighter times - The Boston Globe
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http://www.boston.com/business/articles/2008/01/20/wealthy_maybe_no...
THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING
Wealthy? Maybe not. But a bit wiser.
Does the whirlwind of bad economic news have your head spinning? Here are some tips
and tricks to weather a storm.
By Elaine Appleton Grant, Globe Correspondent | January 20, 2008
Lynn Tostado is passionate about spending her money wisely.
One strategy: She and her husband use credit cards that will help them reach their financial goals. They earned $3,500
toward a $10,000 Chevy Cavalier by using a GM rewards credit card. By shopping with an L.L. Bean credit card, they got all
of their camping and skiing gear free. And they use a Chase BP Visa Rewards card that offers a 5 percent instant rebate on
gas, saving them $10 a month on their $200 bill.
"I've always kept my eye out for creative ways to stretch a dollar," says the 53-year old accounting manager from Dover, N.H.
These days, the Tostados aren't the only ones trying to pinch pennies. Soaring fuel prices and a weak dollar have made
everything more expensive, from filling up your gas tank and heating your home to traveling overseas and buying products
from TVs to tomatoes. Further, many Americans are struggling with record amounts of debt, and falling housing prices mean
they are no longer able to easily tap the equity in their home to fund spending habits and pay off loans and credit cards.
Those factors, coupled with growing concerns that the US economy will spin into a recession this year, have people
calculating their costs carefully.
Financial planners and everyday frugal consumers have myriad strategies on how to spend more prudently when buying
everything from real estate and stocks to groceries, jewelry, and travel in this economic downturn.
Investing
If a financial planner could tell the average investor one thing about managing investments in a volatile economy, it is: Don't
react emotionally.
It's easy to get emotional when the stock market is falling hard on fears of a possible recession. The Dow Jones industrial
average has fallen about 14 percent since October. The Nasdaq Composite index is down nearly 11 percent just this month.
Broad indexes have fallen sharply, but investors' jitters have affected individual stocks and industries differently. Financial
stocks have been hard hit, as have many technology shares that were hot a few months ago. Industries considered more
defensive by investors, particularly healthcare and consumer products, have held up better.
The best strategy is to stick to your long-term plan. And start or continue contributing to your 401(k) and flexible spending
accounts. "It's better to put a few grand in the bank than have the IRS take it," says Steve Doucette, the Wellesley financial
planner.
Doucette also said people should not just park their savings in bank accounts that earn only 1 or 2 percent in interest. Money
market funds earn 3 to 5 percent, and online banks such as ING earn close to 3 percent.
Some investors have been spooked by headlines showing the risks some money market funds faced because of
investments in mortgage-backed securities, which have been buffeted by the subprime mortgage crisis.
Most planners, however, say these issues are mainly risks for the companies that operate the funds, creating pressure for
them to make good on any losses. And relative to other investments, the risks appear minor: Even in the worst money-fund
disaster a decade ago, investors still kept 94 cents of every dollar they'd invested.
Other investors are worried that a drop in interest rates will shrink their savings. There's no need to rush to invest in a CD
before the Fed cuts interest rates again (most likely later this month), says Westwood-based financial planner Mark
Passacantando. "Chasing small anticipated moves in CDs is not a good strategy."
Real estate
It's a good time to buy your first home, thanks to a combination of low interest rates and property values and an increase in
personal income in the last year, says Peter Milewski, of MassHousing, an affordable housing bank. "If you lock into a
30-year fixed rate now," he says, "your payment might never be lower."
Interest on a 30-year, zero-point fixed-rate mortgage has hovered around 5.75 percent, says Richard Olson, president of
Aura Mortgage, a nonprofit brokerage associated with Boston Community Capital.
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Make your dollars stretch farther in tighter times - The Boston Globe
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http://www.boston.com/business/articles/2008/01/20/wealthy_maybe_no...
If you buy, Milewski advises, ask mortgage lenders whether they offer unemployment mortgage insurance, which cover
payments for a period of time if borrowers lose their jobs.
But not everyone should buy now. Although it might seem like a great time to buy investment properties, for instance, Olson
warns against it. "Real estate investment is a profession," he cautions. "The laws around being a landlord are very complex."
And people buying higher-end homes might be better off waiting until prices fall further. After all, Gus Faucher, a
macroeconomist with Moody's Economy.com, predicts that the metro Boston market won't hit bottom until the first quarter of
2009.
Energy bills
The best way to save on home heating costs is to get an energy audit, says Larry Chretien, executive director of Mass
Energy Consumers Alliance, a nonprofit home heating company. Electric and gas companies in Massachusetts offer free
energy audits; most will help homeowners pay for recommended changes. For information on audits, visit masssave.com.
Consumers feeling pain at the gas pump can also find relief. Scaling back is one way. For instance, Exeter, N.H., couple
Alex and Melissa Ragan sold Melissa's 2006 Toyota Camry in January and became a one-car couple. They're saving $725 a
month - a $400 car payment, $75 in insurance, and $250 in gas and tolls.
Don't want to make any big changes but still wish you could save money on gas? Use credit cards that offer gasoline rebates
or discounts. For example, the Discover Open Road Card, the Chase PerfectCard Mastercard, and the Chase BP Visa
Rewards card offer rebates or discounts worth at least 5 percent on gas and introductory zero percent rates, according to
Bankrate.com, a site that allows you to comparison-shop for credit cards. Others, including the Chase Flexible Rewards
card, offer points for gas when consumers make other purchases.
The dollar
Over the last year or so, the US dollar has become the 97-pound weakling of the western world, making everything from
groceries to travel and jewelry more expensive.
Prices for such imported foods as olive oil, cheese, and wine are rising. Also, shifts in farm production, along with higher
shipping costs, have boosted prices of domestically produced food. To save money, buy foods from New England farms
when you can.
Gold prices have shot up as investors worried about the dollar have been buying the precious metal. Kirim Kaya, who owns
Kaya jewelry stores in Newburyport and Portsmouth, N.H., advises buying silver instead.
Travel has also been affected by the weak dollar. Lately, even having lunch in destinations in Europe can be costly. "There
are great prices on flights," says Rick Seaney, chief executive of airline travel site FareCompare.com. "But you'll buy a $50
hamburger when you get there." Seaney suggests traveling to Mexico or the Caribbean instead.
Globe reporters Ross Kerber and Steven Syre contributed to this story.
© Copyright 2008 The New York Times Company
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