6 Smart Money Moves for Right Now
4. Find Creative Ways to Trim
Chart how much you've been spending on nonessential expenses -- restaurants, movies, and gifts, for example -- then compare the cost of paying for a cable movie channel, say, to joining a DVD rental service or just buying on demand. It may be far cheaper to buy only what you really need. Also, look at last year's tax return. "If you got a big refund, then you're having too much deducted," says Dolce. "It's nice to get money back after you've filed, but you're better off getting it in your paycheck." To adjust how much tax gets withheld, increase the withholding allowance (by changing the number of dependents) that you claim on your W-4. Another way to save? Raise the deductibles on your car, homeowner's, even healthcare insurance. "Since savings vary depending on the situation and policy, talk to your broker," says Gibson. And reconsider your life insurance. Too many people take out an expensive "permanent life" policy that remains in effect until they die. Term life, which lasts for a fixed period, is far more affordable.5. Consider Refinancing Your Mortgage
It's not easy to refinance right now. But even if you can -- because you have great credit and home equity -- proceed with caution: Refinancing fees can negate the benefits of a lower monthly payment for quite a while. That means if you're likely to be moving soon this may not be the time to refinance, especially if your payments are affordable, says Gibson. On the other hand, if you're planning to stay put long enough for your monthly savings to add up to more than the cost of refinancing, you can probably reduce the rate you pay by a percentage point or more. "Refinancing to a low fixed rate is even more important if your current loan is adjustable or has a balloon payment in the future," says Gibson. Shop around and ask your bank if it offers a refinancing program with reduced fees.
If you do decide to refinance, resist the urge to roll credit-card debt into the new loan, says Debbie Frazier, a financial planner in Chapel Hill, North Carolina. "You'll be turning short- into long-term debt and will eventually pay more on it."