This is Tip #17 of of the Save $1,000 in 30 Days Challenge. (See past tips.)

Today’s tip is to buy generics for the stuff you don’t care about — while continuing to buy brand-name for the stuff you do care about.

When I was growing up, I was a pretty good kid, but I still remember one of the most annoying/bratty things I ever did. For some reason, I demanded that my mom buy me this expensive shirt (it was Ralph Lauren, I think). My mom tried to talk me out of it for HOURS, but I screamed and cried and she finally got it for me. The next day I wore it to school, where I was on lunch duty, and my dish that day was berry cobbler. Because I was a young and dumb, I thought it’d be fun to smack the cobbler with my spoon — which immediately turned my brand new shirt purple and ruined it forever.

The cost difference between generics and brand-name goods can be significant when you add it up, but the differences in quality have been steadily dropping for years. Yet we tend to buy what we know, which is always amusing because I have friends who insist advertising does not affect them. They say this while eating Cheez-Its, holding a Starbucks frappuccino, and paying for their new Nike shoes with money from their Kenneth Cole wallet.

When it comes to generics vs. brand-name goods, one of the most under-considered factors is prioritization. If you want to save $1,000 this month, you have to prioritize because you can’t have the best of everything. So buy brand-name for the stuff you care about, and cut costs mercilessly on commodities you don’t care about by buying generic.

My friend Jim Blomo does this better than almost anyone else I know:

I remember him calling me up a while ago, telling me he had just gotten another raise. 'Awesome!' I said. Ironically, that was the same week he moved into an even cheaper place to live. Maybe it's not actually that ironic. Whereas a lot of us take our new raises and spend it, really rich people take those raises, invest them, and continue living on the older wage that they've become accustomed to.

He makes conscious choices about what he spends his money on. Jim has told me over and over that he doesn't care much about living in a fancy place, so he saves money on that. He cooks at home when he can instead of eating out every day. But he loves outdoor stuff'biking, camping, travel. And so he splurges on those things. He has a top-of-the-line bike. He just got back from a week-long trip to New York, just for fun.

Read more about Jim’s conscious spending.

What could you de-prioritize'
If I were to ask which of your purchases you don’t care about, what would you say' Would you say you don’t really care about your hair products' Or that you could probably live in a cheaper place' Maybe you’d say that you don’t need to eat fancy cheese.

Most of us don’t think like this. We’re also hesitant to experiment with downgrading. “But Ramit,” you might say, “I need that shampoo. My hair goes crazy without it!”

Maybe it does. Maybe not. But you won’t know until you test it by buying a less-expensive comparison shampoo and try it out. Until then, you’ll slavishly continue buying the more expensive goods. Combine all the name-brand things you buy and you could be overspending by thousands each year.

(If you’re worried about the quality going down, think again: The world is full of people claiming they can tell the difference between things like wines, soft drinks, and shampoos, and when you run double-blind experiments, of course, they really can’t. More about them in my delicious/expertise bookmarks.)

To put it bluntly, we can’t afford to buy the best of everything. When you buy, what can you cut costs on by buying generic'

How I balance quality with generics
For me, I do two things: First, I experiment regularly with the stuff I buy to see if I can downgrade. Recently, I bought generic Safeway sandwich cheese (those little orange squares). They tasted horrible, so I went back to buying Kraft cheese. That’s right, I live large.

Second, when I buy something that I care about, I buy top-of-the-line products and hold them for a long time. But when I buy something I don’t care about, like shampoo or luggage, I cut costs mercilessly. Read more about in Conscious Spending: How My Friend Spends $21,000/year Going Out.

I asked my researcher to go to Safeway and dig up some cost comparisons. Here’s just a sample of what he found:

Ask yourself:

Of course it would. Even if it costs a little extra to duplicate what you’ve got in generic, it’s a spend-once-save-forever proposition: If you save 50% on Cheerios for the rest of your life, that’s a lot more than the $2.50 you spent on trying it out.

Some examples of areas you could save money: Toiletries, food, clothes (especially jeans, gloves, underwear, undershirts, slippers), stuff for your pet (I would rather feed my pet a box of napkins than buy Premium food….this may be why I don’t have a pet), and auto stuff.

Try it today: You can’t get the best of everything. What can you compromise on'

Total savings: $50 to $500 per month

Last thing to do
1. See other tips in the Save $1,000 in 30 Days Challenge
2. Leave a comment on this post describing how much you're saving with this tip and any unusual techniques you use to make this tip work.
3. Want to submit your own savings tip' Submit a money tip here. Most of the tips you guys submit are absolutely horrible, so if I use your tip, I’ll send you something cool.

This is Tip #16 of of the Save $1,000 in 30 Days Challenge. (See past tips.)

Today’s tip is to cancel/defer any large purchase you were planning for this month. You’re basically using time as a strategic barrier against yourself.

It’s very simple:

New lawn mower ' wait .

New TV ' wait.

New dishwasher — wait.

You can set a calendar reminder to check on it in 30 days.

A couple things will probably happen when you do this: First, prices will probably drop. Second, chances are you’ll realize you didn’t really need it — especially as your savings start to grow. How much easier do you think it’ll be to save once you have $1,000, or $5,000, sitting in your savings account'

Let’s also take this tip from an iwillteachyoutoberich reader:

“We have a coffee can at home that we put all of our change into. Even our kids help with this. If I have cash, I don’t ever pay for anything with exact change. All change that I get back goes straight to the coffee can. The entire family is excited about this saving’s idea because they know that we are going to use the money to go on a family vacation. It’s amazing how much more excited they become when they know the end result. On average, we save $600 a year in change.”
Judy Schaffer, Mankato, MN

Look beyond the obvious tip of saving change (which is a good one). The deeper point is to get your family/friends involved. If you’re canceling getting a new BBQ, get your family involved to show them why you’re doing it and what payoff they can expect. Maybe you take $10 (of the $200 you would have spent) and put it towards a vacation fund. The point is to borrow from each of these tips and tailor them for yourself.

Total savings: $50 to $3,000

Last thing to do
1. See other tips in the Save $1,000 in 30 Days Challenge
2. Leave a comment on this post describing how much you're saving with this tip and any unusual techniques you use to make this tip work.
3. Want to submit your own savings tip' Submit a money tip here. Most of the tips you guys submit are absolutely horrible, so if I use your tip, I’ll send you something cool.

This is Tip #15 of of the Save $1,000 in 30 Days Challenge. (See past tips.)

Today’s tip is to have people over to your house instead of meeting at a bar or a restaurant.

I would enjoy this dinner party

When I thought of this tip, the first thing I thought was, “Oh god, my mom is going to lecture me about how she’s been doing this for years.” But most people in their 20s who I know don’t have dinner parties. There’s not enough space, not enough furniture, and not enough dishes — not to mention that I don’t know how to cook worth a damn. But that’s when the haunting echo of my mom came into my mind, as she wordlessly forced me to ask myself one question: WWAID'

What Would An Indian Do'

This is one of the most cost-effective things you can do this month — even if you only do it once or twice. Let’s assume you spent $50 each time you go out, including gas, drinks, food, tips, tax, misc (valet / lending money you’ll forget to get back / buying gum). Changing your spending pattern for just one of those can save you hundreds per year.

When you go out, the point is to hang out with your friends. Think back to just a few years ago, when you would drink out of a decomposing milk bottle and live in a 75-square-foot box with another human being. I’m sure you can suck it up and sit on a folding chair. But we have a bunch of excuses in our head as to why we can’t invite people over, so I thought I’d highlight something I read that opened my eyes.

Here’s an excerpt on hosting people at your house from Never Eat Alone (the best book on building relationships and staying in touch with friends and business contacts):

The author goes on to offer some great tips for having a few people over (check out the book).

It can be a potluck. It can be a dinner party. It can be ordering pizza. But by staying home, you’ll avoid the ravages of tips, taxes, cabs, and marked-up drinks.

One last thing to make your life easy: If you’re supplying the food, don’t try to be Mario Batali. Just buy some pre-packaged foods and take it one step at a time. On your fourth or fifth event, you can try cooking. Also, if you have a Trader Joe's near your house and want see what kind of stuff you can make with their ingredients, go here: http://www.traderjoesfan.com/Trader_Joes/recipes/

Reader tips on saving money on eating out with friends:

“Pre-eat. Before going to out to dinner with friends, I eat from what I already have at home. Then, when I go out with friends for dinner, I order soup or an appetizer. This way I’m still being social, and I get my fill, but I’m not blowing my budget. Or, instead of making dinner plans w/friends, make dessert plans. You’re still going out and being social, but again, not spending $14 + on dinner.”
–Natalie Bradley, Washington DC

“As an office, we decided that we were all spending too much on eating out, so we have been taking turns making things like casseroles and soups, and crock pot dishes to share. We have been doing this one to two times per week, which keeps us from eating out on those days, as well as this being an awesome opportunity to get new recipes and sample all different foods. There are 6 of us in the office, so we rotate, and it works out well. We even have recipes now that people look forward to because they are so delicious.”
–Ashley Witmyer, Toledo, OH

Total savings: $50 to $200 per month

Links of interest
Official USDA Food Plans: Cost of Food at Home at Four Levels

Last thing to do
1. See other tips in the Save $1,000 in 30 Days Challenge
2. Leave a comment on this post describing how much you're saving with this tip and any unusual techniques you use to make this tip work.
3. Want to submit your own savings tip' Submit a money tip here. Most of the tips you guys submit are absolutely horrible, so if I use your tip, I’ll send you something cool.

This is Tip #14 of of the Save $1,000 in 30 Days Challenge. (See past tips.)

Today’s tip is to write down how much you’ve saved so far, AND how you would motivate others to save money. (Skip to the survey here.) If this doesn’t seem like an obvious savings tip, let me share an experiment that social psychologist Kurt Lewin did to change behavior.

In World War II, the United States was facing a serious shortage of meat. The Committee on Food Habits was charged with figuring out how to keep Americans healthy without the same meat they’d been accustomed to — and instead eating intestine and kidneys — so they asked Lewin to help.

Lewin’s approach was brilliant. As Eliot Aronson writes in Age of Propaganda, Lewin convened groups of housewives, who at that time were the chief decisionmakers about food. He then split them into two groups:

Group 1 received a 45-minute lecture, which “emphasized the importance of eating these meats for the war effort; it stressed the meats’ health and economic advantages…the lecture concluded with a testimonial from the speaker about her success in serving intestinal meats to her own family.” 3% of the attendees ended up serving intestinal meats to their families.

Group 2, by contrast, spent the same amount of time discussing the problem of a meat shortage, but in this experimental condition, Lewin did something extraordinarily clever: He asked them, “Do you think that housewives like yourselves could be persuaded to participate in the intestinal meat program'” The women then discussed how that might happen. In this group, “32% of the housewives who had engaged in self-persuasion served their families intestinal meats.”

That’s an astonishing difference, and I want to apply it here. Tell me how much you’ve saved, and how, together, we can persuade other people to save money. Please fill out the 3-minute survey here:

Click here: How much have you saved so far in the 30 Day Challenge'

As a thank-you, 10 random people who will out the survey will get to pick any book from the Giveaways section of my book site. I’ll ship it to you for free.

This is Tip #13 of of the Save $1,000 in 30 Days Challenge. (See past tips.)

Today’s tips is to negotiate your car insurance. Most of us pick a rate once, then never go back again. But if you do, you can save hundreds of dollars each year.

First, check to see if you have the right amount of coverage. Nobody teaches us about this stuff, so when you bought car insurance, you may not have known which coverage options to choose.

Second, figure out what kind of coverage you currently have and how much you’re paying. Don’t be lazy — do this. If you don’t have your current info in front of you, how can you hope to save' Either call your car insurance company or use their website.

Third, it’s time to start shopping around. I prefer the phone because I can usually sweet-talk the rep into telling me about other deals that the websites don’t offer. Computers, however, seem to be immune to my charm.

I made it easy for you. Here are the phone numbers of the big insurers:

Geico: 1-800-861-8380

AAA: (866) 539-8033

Allstate: 866 704 9900

Progressive: 1-800-776-4737

State Farm: Sorry, despite getting good ratings in the comments below, THEY OFFER NO PHONE NUMBER. Anyway, you can get to their auto insurance site here.

21st Century Insurance: Don't use this worthless insurance company. I used to use them, but they sent me multiple envelopes in the mail EVERY SINGLE WEEK until I finally canceled them. The rates were great, but the hassle wasn't worth it.

Fourth, be an expert caller by asking these questions.

With each call, you should say, “AAA (or whoever) is offering to insure me for $XXX less' (silence). See what they do. (Note: Getting lower rates using this technique is much harder to do with car insurance companies than banks, so don’t expect very much from this.)

How much would I save if I insure my car and house with you'

What about renewal discounts' How long have I been a member with you' What can you offer me as a discount for long-term membership'

Can I save money by pre-paying my entire year up front'

Let's check my car. I know other firms offer discounts for features like anti-lock breaks. What about you'

What kind of low-mileage discounts do you offer'

If I enrolled in a defensive-driving course, what kind of discount would you offer' Oh, really' Which courses qualify'

What about discounts for my employer' (Tell them the specific name of your employer')

Some insurance companies offer discounts for low-risk occupations (engineers). What kind of competitive rates do you offer'

Am I paying for roadside assistance' What other additional 'benefits' am I paying for' (If you already pay for AAA, you don't need roadside assistance through your car insurance. Also, check your credit card: They may offer roadside assistance (but call them and ask how much it really costs if you have to use it ' some of their offers for 'roadside assistance' really mean 'we will assist you by calling someone for you and then charging you out the ass').

Can you walk me through the deductible changes I could make to save money' (Deductibles are what you pay before your insurance policy kicks in. By requesting higher deductibles, you can lower your costs substantially. For example, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage cost by 15 to 30 percent. Going to a $1,000 deductible can save you more than 40%. Before choosing a higher deductible, be sure you have enough money set aside to pay it if you have a claim. More details here.

AAA, Costco, credit cards, large employers, associations (AARP, teachers' union): Many of these offer discounts on car insurance. Log onto their website and browse to 'perks.'

Read more ways to save on car insurance.

It seems like a lot of work, but the savings are substantial. I took screenshots of the different rates that different insurance companies were offering me:

Well, as you can tell, that slideshow is completely worthless since you can’t see anything — but the difference between the lowest quote (Geico, which I use) and the highest (Progressive) is $734 per year. That’s a lot for a few phone calls.

Don’t forget: Insurance is not a commodity. If you pick the cheapest provider to save $50/year and they end up not fulfilling your claim — which you could have reasonably known by searching out reviews for the company — it’s your fault. Pick a good company because it can be worth thousands of dollars.

As you’ve seen, “negotiating” your car insurance is mostly about keeping up with the changing rates and making sure you’re wringing every last benefit from your policy, so set a calendar reminder to do this once per year.

Try it out and let me know what you find in the comments.

Total savings: $25 to $100 per month

Last thing to do
1. Check out the other tips in the Save $1,000 in 30 Days Challenge
2. Leave a comment on this post describing how much you're saving with this tip and any unusual techniques you use to make this tip work.
3. Want to submit your own savings tip' Submit a money tip here. Most of the tips you guys submit are absolutely horrible, so if I use your tip, I’ll send you something cool.

This is Tip #12 of the Save $1,000 in 30 Days Challenge.

Today’s tip is to save money on eating out using services that offer incredibly steep discounts. I eat out a lot, so this one is saving me tons of money.

You can get big discounts on eating out if you plan ahead and are willing to use coupons at a restaurant. If you live in a city and restaurants tend to be more expensive, saving 10% or 25% or 50% per meal — even once a week — can add up quickly. Here are the tips I’ve started using for a huge drop in my monthly spending on eating out.

1. Restaurant.com is offering 80% (!!) off its gift certificates. Note: This expires on 11/20/08 11/24/08.

Remember, those deals expire on 11/24. Use code “SURPRISE” to get the discounts.

2. The 2009 Entertainment Book
Remember these from elementary school' They used to cost $40 and seemed unreasonably expensive…until I started having to buy my own food. I bought a copy of this a couple days ago after checking out the site to make sure their coupons were good for my area. I’m forcing myself to use at least two coupons per month — so if I’m planning to grab dinner with someone, I’ll consciously grab a coupon from this book (which I’m going to keep on my desk) and try to pick a restaurant that applies. Note: This works if you already eat out, but if you buy the book and then force yourself to use it — spending more than you normally would have — that’s probably not the best way to save money. Duh. These are $25, so check the coupons to see what it will take for you to save money.

I ordered mine a couple days ago.

Check out the Entertainment book site.
3. Along the lines of involving your friends in the 30 Day Challenge, here’s a tip I’m using to save money on eating out. The other day, one of my friends was talking about she loves to cook, but hates cleaning up. My eyes lit up because I don’t mind washing dishes, but I’m horrible at cooking. Could there be a win-win situation here'

Everybody wins: We all get to hang out, eat food instead of letting it go rotten, and my friend doesn’t have to worry about cleaning up. If each meal saves a $20 dinner out and you do that three times/month, that’s $60/month.

There are also a bunch of other coupon / eating services out there, so if you have suggestions, leave them in the comments. It depends how much you eat out, but to share my friends’ biggest expense, it’s eating out by far, so this tip alone will save most of them over $1,000 over the next year. If you eat out a lot, it’s even more.

Total saved: $50 to $3,000

Note: If you were subscribed to this list, you just got a special bonus tip from me about saving more money on eating out.

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Last thing to do
1. Check out the other tips in the Save $1,000 in 30 Days Challenge
2. Leave a comment on this post describing how much you're saving with this tip and any unusual techniques you use to make this tip work.
3. Want to submit your own savings tip' Submit a money tip here. If I use your tip, I’ll send you something cool.

This is tip #11 of the Save $1,000 in 30 Days Challenge.

Today’s tip is to never pay retail prices for clothes again using some sites you’ve heard of, and a bunch of sites I bet you haven’t.

How much do you spend per year on clothes' Think carefully about that question — if you buy a $300 coat, for example, you’re spending a minimum of $25/month on clothes. I don’t even buy clothes that often and I easily spent over $1,000 on clothes last year.

Now, if you’re a mom or on a strict budget, saving money on clothes is nothing new: You’ve already been checking price tags carefully. But many of my friends buy what they want, when they want it. While these tips are applicable to everyone, they get the most mileage if you’re buying expensive clothes. What you’ll see below is that you can actually get same clothes you buy at Macy’s — or better clothes — for a lower price.

Let’s watch Paul Singh from Results Junkies talk about how he gets custom-made shirts (which would normally cost $200+) for $30:

(He referred to CTshirts.com in the video. Sign up for their free newsletter, then wait a couple weeks until they email you about their monthly clearance specials.)

There are also lots of other places where you can save money on clothes.

Retail stores: Because I’m Indian, I love Ross and TJ Maxx. I just bought a Ralph Lauren coat at 50% off the other day. Even Target can have cool clothes. The funny thing is, as young people, we think shopping there is “weird” because, let’s face it, it’s mostly moms who shop there, and who wants to be caught buying a pair of pants at Target' This actually mirrors personal finance: Spend money on the things you love, but cut costs mercilessly on the things you don’t care about. For example, if you love a blazer at Macy’s, save up for it and buy it guilt-free…but cut costs mercilessly on pants if you don’t really care what they look like. You have to prioritize. Plus, for people who think it’s “weird” to shop at TJ Maxx: I can get over that weirdness when I’m saving $200 on clothes each time I go in there.

Buying abroad: Recently, I detailed how I saved $700 buy buying a suit and eyeglasses in India. Good news: Instead of walking the streets of Rajouri Garden in Delhi, you can do all of those things from your computer. Zenni Optical offers eyeglasses at $25 (and they’re not the only one — search for “cheap eyeglasses“). You can get custom suits made for $200, and a local tailor in your neighborhood will make the final adjustments (search “cheap custom suits“).

Buy clothes online: I know, I know, people have been telling me to buy clothes online for years, but I always have this nagging feeling that things will never fit. But when I saw the prices, I was saving 75% off buying it at stores — making it worth the experimentation. Plus, every retailer understands your hesitation to buy clothes online, so they make it insanely easy to return clothes. I like eBay and Overstock.com. Also try Shop It To Me, which lets you enter your size/style and you’ll get targeted emails about exactly the clothes you’re looking for. Frankly, I’d recommend trying buying clothes online once. Pick a brand whose size you know, and since returns are free, it’s literally no money out of your pocket if you don’t like it. Note: I have invites available for the invite-only site Gilt.com, which gives you access to high-end retailers (John Varvatos, Ted Baker, Chip & Pepper, etc) for steep discounts (i.e., hundreds of dollars off). If you want in, click here for an invite.

Buying something expensive' Use the Savings Goal strategy. Finally, there’s one bonus tip for buying something nice: If I see an expensive coat or jacket I want, I can either drop the cash right then, or go home, decide if I really want it, and set up a savings plan. You can probably guess what I do most of the time. Here’s how:

Remember how I wrote about my sub-savings accounts'

Let’s say I want to buy a blazer that costs $200. I set up a “Clothing” sub-savings account and set up an automatic transfer of $100 each month into it and set up a calendar reminder to let me know when I’ve saved $200. This does two things: First, it forces me to save for any large purchase. Second, by the time the second month comes around, I sometimes realize I didn’t really need that thing anyway. You can use the Savings Goal strategy for any large purchase. Here’s the ING account I use.

Be careful about buying clothes. People love to rationalize that they’re “investing” in their clothes for the long term, which is a complete lie because they keep buying stuff every year. Only buy something new when you get rid of something old. Pay for quality, but hold it (and wear it) for a long time. Cut costs on stuff that nobody sees, like your headbands or socks. And ask yourself if dressing in the newest Kenneth Cole shirt or Prada bag really gets you to your goals.

Total saved: $50 to $500

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Last thing to do
1. Leave a comment on this post describing how much you're saving with this tip and any unusual techniques you use to make this tip work.
2. Want to submit your own savings tip' Submit a money tip here. If I use your tip, I’ll send you something cool.

I’ve been quietly hosting a private I Will Teach You To Be Rich discussion forum for a few months, and I figured I might as well release it publicly. If you’re looking for help with your specific money question, or want to see what money/entrepreneurship questions others are chatting about, check out the free experts at http://www.iwillteachyoutoberich.com/forums.

This is tip #10 of the Save $1,000 in 30 Days Challenge.

Today’s tip is to use the perks offered by your car insurance, credit card, and even your job — the ones most people ignore.

Think about the places you belong to as a member: your credit card, auto insurance, Costco, or your job. Each of these offers perks that most people ignore. But by simply being a member, you get perks that can add up to thousands of dollars each year. In fact, every time you make a major purchase, you should be checking these perks first. Here are some examples from my own memberships:

#1: My car insurance offers discounts on most major retailers. I was already planning to buy flowers and get movie tickets next month, so I’m adding a calendar reminder to use these coupon codes then.

* * *

#2: My Costco membership gives discounts on pharmacy drugs, buying cars, mortgages, roadside assistance, travel, car tires, and many business services.

* * *

#3: My credit card offers discounts on most major retailers, plus discounts on concert tickets and a “Make a Wish” service, which recently got me orchestra tickets I couldn’t get anywhere else.

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#4: There’s more on your credit card, which is the BEST source of perks. All credit card include automatic extended warranties, travel insurance, car-rental discounts, and a bunch of other perks. Check out my appearance on CNBC, where I cover credit card perks in more detail.

#5: Your workplace probably offers a bunch of perks that nobody takes advantage of. At PBwiki, we offer weekly massages, free food, free headphones, and if you want to take a co-worker out to lunch, we’ll cover it. At bigger companies, you may find perks like public-transit reimbursement and discounts on entertainment tickets/attractions. Most people don’t use the perks, so ask the HR person for a list of benefits you have available and use them!

* * *

Here’s how to use this tip effectively: First, log in to see what your memberships offer you. If anything catches your eye, set a calendar reminder for when to log back in and use it (e.g., “Booking vacation in February — check Geico for discount”). Try to defer all major purchases until later (otherwise, how are you going to save $1,000'), but if you know how much you’ll save, feel free to count it towards the $1,000 Challenge.

One final thing: This is a powerful tip because you can get discounts on places you already shop — especially for large purchases, which can save thousands per year. The first time I used my credit card’s travel rewards, I saved $600. Using my discounts, I’ve saved thousands on travel, auto purchases, computers, clothes, and home decorations. The key is that nobody is going to spoonfeed you the places to look. If your workplace doesn’t offer discounts, check your car insurance. If that doesn’t offer perks, check your credit card (it definitely will). Check your library. And your homeowner’s association. The more you check, the more you can save.

Total Saved: $100 to $2,000.

* * *

Last thing to do
1. Leave a comment on this post describing how much you're saving with this tip and any unusual techniques you use to make this tip work.
2. Want to submit your own savings tip' Submit a money tip here. If I use your tip, I’ll send you something cool.

This is tip #9 of the Save $1,000 in 30 Days Challenge.

Today’s tip is to keep an “Item Budget” in your house — and before you buy something new, you must get rid of something old.

This tip was submitted by Evert from London, UK, who writes:

When buying things like clothes, set a rule for yourself that you can only buy something new, to replace something you already have. For example, from a practical point of view, let’s say you need to have 15 business shirts. Set a ‘budget’ of having 15 shirts, and then when you want to buy one, first throw away (or give to charity) the worst of the other. Can’t make a choice which one to throw out' Guess what: you won’t need a new shirt.

Before buying anything, think ‘how many of those do I need'’and ‘how many do I already have'’, then think again if you really need a new one. The same applies to electronics and all sorts of other stuff (want a Playstation 3' Sell the Wii / blueray player / old laptop / etc. )

Applying the rule will have two benefits: less drawers and closets of stuff you still want to keep but never use, and spending less money because you’re more conscious about what you already have.

Ok, there are 2 things to note about this tip:

First, this is the kind of tip that’s easy to gloss over (”yeah, yeah”) and not do anything about. But I think about this as an active barrier (learn more about barriers) — something you consciously add as a roadblock before you can buy something new. The psychology of having to open up your closet, decide what to give away, and get it to the nearest charity (or garbage can) is enough to stop many of us from buying something new. Plus, it just keeps things neater around the house.

Second, this tip is starting to focus us more on being goal-driven: If you have a goal (”Save $1,000″ or “Only have 15 business shirts at any given time”), your decisions become a lot easier. ‘Should I get that shirt' Hmm…let me check my goals. Nope, if I buy that, I can’t save $1,000 this month, so forget about it.’ When you’re not goal oriented, it’s like a neanderthal walking into a crystal shop. Everything is shiny and you’ll buy anything indiscriminately. When you have a simple overarching goal, you have a rubric to measure your decisions against. (You should share this with anyone else in your family so they’re on board, too.)

Personally, I had to buy a new coat last week to go to Chicago. As a result of this tip, I’ve taken out three old shirts from my closet to give away to charity.

Total Saved: From $10 to god knows how much you would have bought otherwise.

* * *

Last thing to do
1. Leave a comment on this post describing how much you're saving with this tip and any unusual techniques you use to make this tip work.
2. Want to submit your own savings tip' Submit a money tip here. If I use your tip, I’ll send you something cool.

Original Post on The Sun's Financial Diary

Citi Closed My Dividend Platinum Select Card

A couple of days ago, I received a letter from Citi, informing me that my Dividend Platinum Select card will be closed soon due to inactivity after a routine account review.

It’s true that I haven’t used that card for a long time. In fact, I didn’t even active that card since they decided to upgrade it to Dividend World MasterCard one and half years ago because I don’t like the rewards program that comes along with the new card and I don’t plan to use it again. So I don’t really care whether they close that card or keep it open. However, there are a couple of things I’d like to do before the account is officially shut down.

Impact on Credit Limit

From the credit report I obtained last weekend when I took advantage of the Equifax free credit watch offer, the card is shown with a $13,000 credit limit. When I closed some other cards before, I always asked if it’s possible to move the credit limit of the card being closed to other cards with the same issuer. The reason is, while I don’t need the card any more, I don’t want see a drop of my total credit limits which will cause an increase of the debt-to-credit ratio. If I can move the credit limit to other cards, the ratio will be the same even when one card is closed. From my experience, the card issuer usually has no problem reassign the credit limit to other cards for me.

Impact on Credit History

Whenever a card is closed, the length of the credit history will always affected, and the older the account, the bigger the impact. The original Citi Dividend card was opened in August 2004. That’s a little more than 4 years old, not that long. The Equifax credit report says my average account age is nearly seven years old. So closing the Dividend card won’t have any significant negative impact on my credit, especially given that I have a total of 18 revolving accounts.

The bad thing about credit cards being closed because of inactivities is that the cards are likely to be old cards. I have several cards that I opened a long time ago, but abandanded because I got cards with better rewards later. If the Dividend card is older than the average account age, I will definitely keep it open.

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Original Post on The Sun's Financial Diary

The Growing List of Failed Banks

I am not really worried about Citi right now, despite that investors who question the bank’s ability to sustain mounting losses from toxic loans and bad investments have pushed Citi stock to below $4 a share on Friday, the lowest in 16 years (hope you didn’t buy Citi stock). Citi has raised some $70 billion since the sub-prime led crisis began last summer. A few weeks ago, it received another $25 billion bailout money from the government. But now the once-largest bank in the world only has a market value of $20.5 billion. I guess the government should wait till now to buy the entire bank, so nobody worries about their cash position. BTW, the bank is reportedly talking to the government to get another round of capital injection (Reuters).

While Citi is still hanging in there, there are smaller banks that are not so lucky, falling victim to the financial crisis. FDIC today announced that three more bank and thrifts have failed:

Downey is the 23rd largest bank in the nation and PFF ranks 38th.

So far this year, a total of 22 banks and thrifts have been taken over by the government. And the pace of bank failures has accelerated in recent months: 4 in October and 5 in November. With one more month to go, expect more to be added to the growing list.

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Original Post on The Sun's Financial Diary

iShares 529 Plan: Save for College with ETFs

I have heard some time ago that exchange-traded funds (ETFs) will be available in 401(k) retirement accounts. Not sure whether plan participants can trade ETFs in their accounts already, but in general I think it’s a good news not only because it will gives investors more choices to save for their retirement, but also ETFs are usually cheaper than their mutual fund counterparts (most ETFs are passive, index-based funds, so the cost for managing the fund is low) that are the only choice for most plans. The down side of having ETFs available in retirement accounts is that, since you can trade ETFs at any time during market hours, it may encourage excessive trading in the accounts. In the long term that will hurt investors because trading ETFs involves commissions that are added to the overall cost. If I take payroll deductions and invest the money in ETFs every two weeks, then the costs would be too high. In that case, using ETFs to save for retirement doesn’t seem to be a good idea. If I can control the investment frequency, then I may consider trying it.

Then how about using ETFs in college savings plans such as 529 plans'

Since I can control how often and how much to make a contribution in a 529 plan, the total trading cost can be reduced (trade less with a larger amount each time). So maybe it won’t be a bad choice.

I recently noticed that Barclays Capital, the creator of iShares ETFs, has teamed up with UPromise to offer iShares 529 Plan, a college savings plan that invests in nothing but iShares ETFs. Currently, the plan uses the following iShares ETFs to build its 20 investment portfolios (PDF file):

Some of the portfolios are age based, with target year from 2009 to 2024, some are investment style based, such as aggressive, moderate, and conservative.

Of course, when choosing a 529 plan, the number one thing comes to my mind is the cost. How much do the investments cost' Is there any administrative fee' Any sale load' As far as the cost is concerned, the iShares 529 Plan seems to be quite competitive. For all of its 20 portfolios, the annual asset based fees range from 0.50% to 1.1%, with most of them in the middle of 0.60% (still higher than the Ohio CollegeAdvantage plan that I am using). In addition, the plan also charges $10 annual account maintenance fee.

While the plan seems to be nice, there’s one catch: the plan is only available through a financial advisor, even though the advisor doesn’t earn any commission.

From what I was told when I called them, the reason for having to go through an advisor is that since the plan invests in ETFs, which may be new to some people, the advisor is to help plan participants understand the product. And the advisor only signs the forms. That’s all they do, they don’t earn any commission or collect any fee. In addition, the CSR on the phone also said the $10 fee will be waived if the account has more than $20,000 in assets.

Will you be interested in this plan if you already have an advisor' Or you’d rather stay will traditional low-cost investment such as mutual funds'

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Original Post on The Sun's Financial Diary

Dow, The Near 6-Year Low

The Dow Jones Industrial Average closed below the 8,000 point mark for the first time since nearly 6 years on Wednesday, November 19, 2008 after dropping 427.47 points to close at 7,997.28 points. The last time the index closed blow 8,000 points was March 31, 2003.

It took the index four and half years to reach the peak of 14,164 on October 9, 2007, but only a little over one year to give all the gains up.

So, with a little over one month to go for 2008, what’s your prediction of the Dow at the end of the year' 7000, 7500, 8000, 9000 or 10000' On Intrade, traders don’t seem to be very optimistic about the prospective of 10,000 or higher close of the Dow when 2008 ends. Based on what happened in the past month, my guess is the Dow could close above 9,000 but below 9,500. My reason is that there won’t be any new policy before the year end to address the crisis, but stocks could rebound a little bit from the current level due to bargain hunting (now over 100 so-called blue-chips stocks are traded under $10). If that’s case, it still means the Dow will lose some 30% in 2008

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Original Post on The Sun's Financial Diary

Transfer A Brokerage Account: How Much Does It Cost'

I have in the past transferred my brokerage account from one broker to another twice. Once from ShareBuilder to Zecco, and once from Firstrade to TradeKing. I also did an IRA transfer from Scottrade to Vanguard a while ago and had a very bad experience that I don’t even want to mention. The main reason for the switch was to save on commission, even though I don’t trade a lot so the saving from switching to a cheaper broker isn’t significant.

Usually, transferring account from one broker to another is quite simple. All you need to do is

While the opening an account part can be done online and takes only a few minutes to complete, in most cases you do have to submit the ACAT form by fax or mail, which takes some additional time. The most time consuming part of the whole account transfer process is the waiting, which can go as long as several weeks. When I was transferring my IRA account from Scottrade to Vanguard, I was told that the paper form that I submitted had to be mailed from one firm to the other so the process can start. Can’t believe nowadays they still use snail mail, but that’s usually what it takes.

On one hand you probably think that the broker you are leaving isn’t happy about losing you, so they may impose fees if you want to get out. That’s indeed usually the case. A $50 account transfer-out fee is pretty standard. On the other hand, the broker on the receiving end may not show their appreciation of having you as a new customer because a lot of brokers still want you, their new customer, to pay for the account transfer fee. This somehow doesn’t sound right to me, but that’s what happens. Fortunately, there are a few brokers do encourage account transfer-in by reimbursing the transfer fee.

Following are some information on how to transfer your brokerage account from one firm to another. I only list some discount brokers here because I feel that most of the time the reason for switching is commission. To me, it doesn’t make too much sense to transfer from a $4 commission broker to a $10 commission broker, unless there’s some serious mess up

Scottrade

TradeKing

Firstrade

ShareBuilder

Zecco

E*Trade

SogoTrade

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Original Post on The Sun's Financial Diary

ShareBuilder Educational Account Promotion: 3 Free Trades

Just a quick note.

If you want to use ShareBuilder (my ShareBuilder review) to open a custodial or educational savings account, you can get 3 free real time trades when using promotion code 3FREETRADES. This offer is only good for educational savings account and can’t be used in regular brokerage account as well. Currently, ShareBuilder charges $9.95 per real-time trade, so the promotion doesn’t seem to be a big deal (for example, you can get $60 if you are a Costco Executive member or $55 for Goldstar member). Furthermore, since I’d like to put a college savings account, like a 529 account, in the “set and forget” mode instead of trading actively, I will be more comfortable using low-cost, diversified mutual funds in such an account. That’s why I chose Ohio ColledgeAdvantage plan to reduce costs. Sure, ShareBuilder doesn’t charge commission for mutual fund trades, but you are limited to only ING funds. Therefore, you may not find the fund you need.

Anyway, I don’t think ShareBuilder is a good choice for college savings accounts. But if you think differently, then use the promo code to get three free real-time trades. This offer expires April 2009.

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Original Post on The Sun's Financial Diary

China Life Insurance: 5 Years on NYSE

So it has been five years since China Life Insurance (LFC) IPOed on NYSE, which means I have own this stock for exactly five years, the longest time I have ever owned a stock. That sounds unbelievable to me. Time did pass very quickly

It wasn’t a smooth ride however. When I bought the stock on its IPO day (I planed the purchase for quite a long time, getting the fund ready), I had very high hope because, as the dominate player in the insurance market in China, LFC’s potential could be huge because China has 1.3 billion population and Chinese started to realize the importance of having coverage for their health and their properties.

However, despite the potential, the stock barely move for nearly two years since its IPO, hovering around $22 most of the time. The performance of the stock bothered me so much that I sold a big chunk of my holdings. Then the stock took off at the end of 2005, as China stock market started its two-year rally. When LFC reached its all-time high in October last year, I was joking with my wife that we could sell the stock and buy a bigger house (well, at least the downpayment) right away. At that time, LFC was the world’s largest insurer by market value. But I didn’t sell and saw the stock’s downward spiral since then, as the plot below shows.

Of course, the general market condition didn’t cooperate since last summer. Despite the poor performance of the stock recently, I have no plan to sell my holding. I am going it ride it out and see what happens

On its 5-year anniversary as a listing company on NYSE, I collected some major events (including my events) of China Life Insurance since its IPO if you care.

*Photo from NYSE

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Original Post on The Sun's Financial Diary

Get Your Free ZoneAlarm Pro Firewall Today

24 hours only.

ZoneAlarm is giving away a free copy of ZoneAlarm Pro Firewall on the firewall’s birthday. Use this link to download the software. All you need is a name and valid email address. Once you provide the information, the download link will be sent to you by email together with the license key that’s good for one year.

The free download will be available for 24 hours from 11/18/2008 9:00 am EST to 11/19/2008 9:00 am EST. Get your copy before it’s gone

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Original Post on The Sun's Financial Diary

IGoChecking Has The Best Interest Checking Account Rate

I am IGoBanking Savings Account customer. Though the bank is no longer my everyday bank as it used to be, I still access my account there quite often. Somehow I still missed their big rate increase of the IGoChecking Checking Account that I mentioned before (I use only their Savings account, not Checking account).

If you are looking for a interest checking account that pays generous return, then IGoChecking could be the one because right now you can earn an very competitive 3.80% APY from IGoChecking! As far as I know that’s the highest rate for an interest checking account, much higher than what you can get from ING Direct’s Electric Orange, another popular interest checking account that pays 1.00% to 3.25% APY, depending on the account balance.

In addition to the checking account, their savings account also has a quite attractive rate at 3.28% APY (better than FNBO Diret, which was recently named the best online savings account by Kiplinger), though I don’t really understand the reason for offering a checking rate that’s better than the savings rate (I will be very happy if they swap the two rates). So if you have both savings and checking with IGoBanking, you end up have a very good package of banking products (their 9-month CD rate 4.15% with $1,000 minimum looks nice too), as long as they can keep their rates.

So are you interested' I probably won’t be using it any time soon because I just got a new account at Dollar Savings Direct (I am a rate chaser and I want to go after the highest rate, whether it’s a checking or savings account). But I am glad I didn’t close the IGoBanking Savings account, so I leave the door open for switching back if the bank has a better offer later.

BTW, if you open a new IGoChecking account now, you can get a $50 gas card. This promotion started in Auguest and it was supposed to last month. But it looks like it’s still ongoing. Not bad if you decide to give it a try.

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Original Post on The Sun's Financial Diary

NCUA Insurance Is As Good As FDIC Insurance

I have never used a credit union before, therefore, I never paid any attention to how money is insured in a credit union. I just assume that there some some kind of measures to protect credit union customers again losses if a CU fails, like the way my deposits at banks are protected by the FDIC insurance.

Actually, that IS how things work at credit unions, federal and most state-chartered alike. Though not backed the same agency, deposits at credit unions are insured by the U.S. government to the same amount that deposits are guaranteed at banks.

Insured By National Credit Union Administration

The government agency that guarantees the safety of your deposits at a credit union is National Credit Union Administration (NCUA). NCUA was created by 1970 to oversee more than 10,000 federal credit unions across the country at that time. Currently, “there were 8,101 federally insured credit unions with nearly 87 million members and total assets of $753.5 billion and loans of $526.9 billion” (Wikipedia). NCUA is backed by the full faith and credit of the government of the United States.

Maximum Amount Insured by NCUA

NCUA operates the National Credit Union Share Insurance Fund (NCUSIF). Like the FDIC Deposit Insurance Fund, NCUSIF provides insurance for savings at its member credit unions (98% of credit unions across the country, including all federal credit unions, are members of NCUA) against failure of a member union (so far in 2008, 8 NCUA insured credit unions have failed). Like bank accounts, accounts at NCUA member credit union is insured to a maximum of $250,000 as of October 3, 2008. The insurance coverage will good till December 31, 2009. The standard insurance amount is $100,000 per individual account.

NCUA Insurance Estimator

NCUA provides a free insurance estimator, The Electronic Share Insurance Calculator (E-SIC) to let you estimate the amount you are insured, depending on the types of accounts you have at a credit union. This is more like the EDIE estimator from the FDIC. Both are good tools if you have multiple accounts at a credit union or a bank and are confused by the combined insurance limit of all your accounts.

Make Sure It’s NCUA Insured

Before you decide to use a credit union (some credit unions offer better products than banks do, such as better rates and services), make sure it is NCUA insured for your own safety. You can use NCUA’s credit union locator to find the member unions in your area. Also be sure to check whether the credit union displays the official NCUA insurance sign (above). If not, then just don’t use it even if it promises 20% return of your money. It’s just not worth it :)official NCUA insurance sign

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