Are you being nickled-and-dimed to death? With investment returns down, watching expenses is as important as investing for income and capital gains. My forecast is that we are entering an era when 6% to 12% stock market returns are more likely than the 18% annual returns of the bull market.
To meet your wealth accumulation goals these days, pay as much attention to expenses as to investing. Here’s a collection of ideas for lowering expenses without reducing your standard of living.
Air travel. The Internet does offer better deals. Become your own travel agent. Expedia, Travelocity, and Orbitz each covers most airlines. I almost always find the best deal on Travelocity. Others claim Expedia is better. Orbitz is too new to evaluate. Also, Southwest Air and other discounters don’t participate in these sites. After reviewing the big three sites, check the offerings at Southwest Air and other discounters who fly in your area.
If the best deal is on one of the big three sites, write down the details and go to the web site of the airline offering the best deal. Usually you save another $20 or so by booking through the airline’s own site.
The very best prices often are on priceline.com, hotwire.com, and cheaptickets.com. But these sites don’t always tell you the airline, times you are flying, and even the destination airport until after the purchase. If you are flexible, though, you’ll find some great deals, especially for last minute travel.
Flexible, last-minute travelers should sign up for e-mail alerts from the airlines. Usually on Wednesday you’ll learn about greatly discounted deals for that weekend. Or get all the last-minute deals bundled together by becoming a subscriber to bestfares.com (800-880-1234).
Hotel reservations. The slowing economy means businesses are cutting back on travel. That is opening up hotel deals, even in New York.
I’ve found that the best way to get a good deal depends on the hotel. So I use all three methods of finding the best price: the Internet, the chain’s 800-number, and calling the hotel directly. Some hotel chains now offer Internet-only discounts just like the airlines. But the individual hotel itself often knows its situation best. Always call the hotel and ask for its best price. Also, see if changing the dates of your visit helps. Business cities tend to have lower prices on weekends, while resort and vacation destinations have lower prices mid-week.
For travel to major destination cities, contact a discounter or consolidator. The biggest are Hotel Reservations Network (www.hoteldiscounts.com; 800-715-7666) and Accommodations Express (800-906-4685; accommodationsexpress.com).
A final suggestion: book a package. Many airlines, tour packagers, and travel web sites offer air and hotel deals that are so good you save money even if you use only the hotel and book your own separate air travel.
Prescription drugs. Increasing prescription drug use is the biggest factor in higher health insurance. But, according to The Wall Street Journal, many drugs cost the same per pill regardless of the dosage. For example, the cholesterol-lowering drug Zocor costs the same whether you get the 20 milligram or 40 milligram pill. Your drug prices can be reduced 50% if your doctor prescribes the higher dosage pill and you cut each pill in half.
It doesn’t work for all medications, because some are priced by the dosage. It also doesn’t work with gelcaps, capsules, and time-release drugs. But ask your doctor if this strategy will work for you.
Credit cards. The major card issuers like to sneak changes in fees, interest rates, and other charges. It’s a good idea to review the best deals at bankrate.com. The best card for you depends on your spending and paying habits. Pay in full every month and you don’t care about the interest rate. You want no annual fee. But if you stretch out payments, you want to shop around for rates.
One card I like is the Shell MasterCard. It charges a $20 annual fee, something I’m usually against. But you get a 5% rebate on gas purchased at Shell stations with the card and a 1% rebate on all other purchases with the card. That more than makes up for the annual fee very quickly.
International travel. Getting a good exchange rate on currency is the bane of international travelers. Good advice was to use an ATM card to get your cash and make all purchases by cash. ATMs used the best exchange rates and had low fees. But now most banks impose additional currency conversion fees of 1% to 2% of the transaction plus the regular ATM fee.
Most credit cards, but not all, charge similar conversion fees but not the regular ATM fees. So it is better to use a credit card than an ATM. Card issuers without conversion fees include MBNA America and Capital One. Another option is to get traveler’s checks in the currency you’ll be spending.
Long distance calls. Long distance costs dropped through the floor. That’s what the stock analysts are saying caused AT&T a lot of problems. But many phone companies made up for price drops by increasing monthly fees. If you haven’t reviewed your long distance service in the last year, do so now. I suggest checking with TRAC, an organization that follows the major long distance plans. Check their web site at trac.org or send $5 and a self-addressed envelope with 56 cents postage affixed to TRAC, P.O. Box 27279, Washington, D.C. 20005.
But don’t shop only for price. For example, IDT advertises heavily and has some of the lowest rates. But subscribers who tried it tell me the service they received was unsatisfactory.
Brokers. There’s been a lot of change in the discount brokers because of the bear market and Internet collapse. I’ll do another review of them in the coming months.