"Yes. Absolutely!" they answered.
The Crests purchased their first home, a sturdy brick row house in Baltimore, a little over a year ago. They've discovered that home ownership is wonderful -- but expensive. So saving money matters to them. I found five ways for them to SAVE BIG.
"One way that you could save $1,236," I told Warren Crest, "is by dropping the collision and comprehensive part of your car insurance."He was definitely skeptical, because he had always been taught that you should pay for full coverage for peace of mind. Collision and comprehensive are the parts of your car insurance that pay to repair your vehicle if it's damaged in an accident or if a tree falls on it or something. Many experts suggest that you should consider dropping this coverage when the collision and comprehensive premium equals more than ten percent of your vehicle's value. That was the case with the Crest's two older cars. It usually saves people about 40 percent on auto insurance. You are taking a calculated risk, because if your car is damaged, you will have to pay to repair or replace it yourself. But if you are paying $500 to insure a car that is only worth $1,000, in just two years you could save enough to buy another inexpensive car. "I'll talk it over with the missus and we will consider giving that a try," Warren said.
My second idea for the Crests is one I call Creative Couponing. Rather than randomly clipping coupons in the hope that you can use them, you turn to Web sites that flip the process over and do all the work for you. The Web site www.couponmom.com has a searchable database into which you can input grocery items you need and the site tells you where you will find coupons for them. That way you can just keep the Sunday circulars and cut the coupons out right before you shop. The Coupon Mom site also matches up coupons with sales, so that you can double your discount -- the true key to creative couponing. You should never use a coupon by itself. Coupon Queens who really master this can save as much as 80 percent on their groceries. In the Crests' case, the dollar savings would be $4,160!
The Crests are planning to replace their drafty old windows and it turns out right now the government will give you $1,500 toward new, energy-efficient ones. You pay for the windows yourself and then claim your tax credit -- not a deduction but a credit, which is better -- by filing a one-page form at tax time. I also found a couple of hundred dollars in state and power company rebates to help the Crests replace some appliances. To search for energy efficiency giveaways that might benefit you, try these two sites: www.energystar.gov/taxcredits and www.dsireusa.org. And now the biggest and best savings I found for the Crests. "Have you ever heard of prepaying your mortgage?" I asked them. " Nooo..." they replied, with puzzled looks.
Here's how it works. If you send in just a little extra money when you pay your mortgage, then there's less principal for the bank to charge you interest on. In this case, an extra hundred dollars a month will save the Crests $36,837 over the life of their loan and it will be paid off six years early! Keep in mind, the Crests have a very modest mortgage -- much smaller than the average, so many people could save even more money by prepaying their mortgage. I did the math and even if they sent just $25 extra per month, the Crests would save more than $11,000! That's the awesome power of reverse compounding. Just make sure your mortgage doesn't come with a prepayment penalty that would cut into your savings if you pay it off early.
"You think you could swing a hundred dollars?" I asked Warren and Jackie.
My thinking was that part of the savings achieved by canceling their collision and comprehensive coverage and pursuing creative couponing could be put toward prepaying their mortgage.
"I say we try," Warren replied.
"If we could buy these savings, yeah. Definitely yeah," Jackie chimed in. To calculate how much you could save by prepaying your mortgage by even the smallest amount, click HERE.
The final savings I found for the Crests are related. Right now, they pay private mortgage insurance or PMI. PMI is insurance that protects the bank if you default on your mortgage. It doesn't do much of anything for you. It's one of those hidden costs. So you want to get rid of that payment as soon as possible. By prepaying their mortgage that extra hundred dollars a month, the Crests can cancel PMI four years early, saving another $3,060.
You should also monitor your property value carefully. As soon as you have 22 percent equity -- either by paying your mortgage or because values rise -- you are allowed to cancel PMI. Don't expect your lender to alert you. Stay on top of this to SAVE BIG.
When I tallied up their BIG savings, the Crests got a BIG surprise. $46,993!
"Oh my gosh! $46,993!" Warren exclaimed.
Jackie whooped, "$46,993! Are you kidding me? That is amazing!" By contrast, the Crests used to take small steps to save, like packing their own lunches. Do you know how many times they would have to pack their lunch to match the savings I found for them? 6,713 times! That's every work day for the next 27 years…and the reason I prefer to SAVE BIG.
There are other SAVE BIG strategies the Crests might be able to use someday that I wasn't aware of until I researched my book. I'm always thrilled when I discover a new one, since I've been at this for so long. Some samples: