Saving Money: 5 Tips for Surviving a Recession

By Kristy Welsh

Everyone seems to be worried about rising prices in today's economy, but did you realize that saving money — in good times and bad — could be good for your credit report? If you don't have the money to pay your bills, you're going to fall behind on your bills and be less likely to reduce debt, and as a result, your credit history may be in jeopardy. It's crucial to have a little cushion for emergencies. Here are some money-saving tips for surviving a recession:

  1. Automatic Debits: Start automatically debiting a small amount of money from your checking account each month into an investment plan or savings account. For no upfront cost, you can have as little as $50/month automatically withdrawn from your checking account into a mutual fund. Don't have $50/month? Keep reading to find some ways to stretch your budget. Remember, the first step in reducing debt is saving money, and the first step in staying out of debt is to have emergency funds set aside. Your debt load is inversely proportional to the health of your credit report.
  2. Tired of higher gas costs, but upside down on your SUV or truck loan? Don't panic — as crazy as it sounds, you may be better off keeping that gas guzzler for the time being. Taking on a new loan while upside down on your own old one will add the unpaid loan principal to your new loan. If you can make your existing payments and buy gas, it may be cheaper than losing the money on your trade-in and getting a new loan. Higher payments on a new loan could negatively affect your credit report and credit history.

    According to the Wall Street Journal:
    About 36% of the people who tried to trade in a large SUV and 40% of large truck owners in May 2008 owed more on the truck than it was worth, according to data from the Power Information Network. A Toyota Sequoia costs about $1,700 more to drive for a year than a Ford Focus, based on the government's mileage calculations and average gasoline prices of $4 per gallon. You'd likely lose less in a year by keeping the big rig.1
  3. Gas savings: While we're on the subject of gas guzzling, here are a few gas-money-saving tips for help in surviving a recession:
    • Don't speed! Gas mileage decreases significantly over 60 mph.
    • Try to accelerate and decelerate more gradually.
    • Reduce the use of your air conditioning.
    • Keep your tires inflated to the manufacturer's recommended pressure.
    • Keep your engine tuned; this can affect your mpg up to 4%. It will also save on the overall wear and tear on your engine and allow you to put off buying another car longer.
  4. Clothing: Everyone needs to clothes-shop. But is your shopping really driven by need or just because you happened to see the "Sex and the City" movie? Surviving a recession and maintaining your credit report means making some slight modifications in your shopping habits. Even Carrie Bradshaw would agree.
    • Try the thrift shops or consignment stores! Find ones close to affluent areas. In these places, the wealthy may have dropped off their cast-offs: designer, unique, cheaply priced and sometimes unworn.
    • Always consider the cost per wearing. Some questions to ask yourself: Are you buying it just because it fits? Is it really something you will wear? Don't forget to factor in dry-cleaning costs.
  5. Food: Don't groan, but coupons are a good thing. You can save $5 to $10 off of your weekly grocery bill without expending a lot of time or effort clipping coupons. If you take that money and reduce your debt, you are helping your credit. You don't even need to search for valuable coupons; you come into contact with them in your everyday life:
    • Your grocery store receipts usually contain coupons that are targeted to what you just bought. If it's a frequently purchased item, bring it back to the store next time and cash in.
    • Spend a few minutes while watching TV going through that coupon booklet you always get in the mail. You might find a coupon you can use.
    • If you get a Sunday paper, spend a couple of minutes while you're drinking your coffee or juice in the morning, and pull out the coupons you might use.

Footnotes
1 "Eyes On The Road," Wall Street Journal, June 2, 2008