Main Street: Living better and spending less
The original “a penny saved is a penny earned” quip is attributed to Ben Franklin. In the late 18th century a penny was real money.
Matter of fact, if you are my age, you’ll remember when a penny would buy a piece of Bazooka Joe bubblegum, a nickel a Hersey bar, or a dime one of those cool 12-ounce bottles of Coke.
Well, times have changed, we’ve had a lot of inflation. So what do I mean when I say a $100 saved is like earning a $144? It has to do with your true take-home pay and how much we have to actually earn to buy a $100 worth of goods.
For many earners in Kankakee County when you add our Federal tax rate — 12 percent (even after it was lowered this year); pay Social Security and Medicare taxes; Illinois income taxes; and sales taxes, our combined marginal tax rate is over 30 percent.
But if you are a two-income household and fall in the 22-percent Federal marginal income tax rate, then you have to earn a whopping $169 to buy a $100 worth of goods (total marginal tax rate of 42 percent.) Money saved of course is not taxable, so when you save it for investment or other purposes you don’t pay taxes until later, if at all.
Let me suggest just three sample strategies for saving money based on my personal experience in the past couple of years.
Strategy No. 1. Examine your electric and gas bills. About three years ago I selected a new supplier for electricity. Of course ComEd still delivers my electricity in a safe and reliable matter. At the time I was paying about 10 cents a kilowatt hour. My new supplier dropped the rate down to less than 7 cents. Savings were dramatic.
In addition, I got 15,000 points with Southwest Airlines which was worth approximately $250 in travel. I didn’t pay too much attention for a couple of years, and then all of sudden without warning, my bills increased dramatically.
My winter time bills were higher than previous summer bills. Looking a little more carefully at my bill, I discovered the kilowatt rate had been raised to 13.9 cents. (Not by ComEd but by the “bargain” supplier — an increase of more than 100 percent.
I’m sure in the fine print of the original deal, I was “notified.” So I went out and started investigating and found out I could choose another electric supplier (with a year-long contract) for an incredibly low rate.
I’m now saving anywhere between $50-$80 a month now. A year from now I’ll check and if need be switch yet again. So strategy Number No. 1. is: Check the rates on your ComEd bill (for the actual electric price, not the delivery charges.) Then Google Illinois electric rates.
You may find your “default” current rates are the cheapest but at least compare. Switching electric and gas suppliers is very easy. No actual changes are made to your home, it is just a matter of how much ComEd purchases from different suppliers. If you have switched in the past like me, be vigilant for large changes after your initial contract period.
Strategy No. 2. Get GasBuddy or equivalent on your mobile phone. You can download the free application from Apple or Google Play. As we have all experienced this summer we have been on a gasoline price roller coaster. I have seen as much as a 35-40 cent local price disparity on a given day.
When filling a 25-gallon tank, that’s a $10 savings. So how do you find the cheapest gas without spending $10 driving around and looking? Here is where the GasBuddy application will help.
Based on current reports from consumers themselves, it will give the range of prices and where you have to go to get a given price. One other trick here. GasBuddy tries to predict whether the prices will go up or down in the next few days.
I tend to run my vehicles down to a quarter or an eighth and then when the lower prices arrive, buy a lot of gas quick. Depending on how much you drive, you might be able to save a few hundred dollars a year by the strategic timing of your purchases.
Strategy No. 3. Buy an Amazon Echo (Alexa) or equivalent. Although there has been some controversy over these devices regarding privacy, it has been one of the best investments I’ve ever made.
Today you can buy them for $99 or less. (You do need to have wireless Internet in your home to make it work.) There are so many things you can do with this artificial intelligence (AI) smart speaker through simple voice commands.
The model I have is about 3 inches in diameter and 7 inches tall. It sounds as good as or better than a mid-size stereo. While you can purchase unlimited music from Amazon for about $5 a month, thousands and thousands of song are available for free by simply asking. For example “Alexa play music by Dean Martin.” Choices range from classical to rock and roll, to the great standards.
I save money because I no longer purchase CDs, nor new stereos or radios. With a simple voice command I can get an extended weather forecast for anywhere in America.
Perhaps the most useful feature for me is being able to access radio stations from all across the U.S. I frequently play WHO AM out of Des Moines, Iowa, or WJNO out of Palm Beach, Fla., by a simple voice request. Without touching the device I can tell it to turn the volume up or down, pause, and turn on or off at a specified time.
In addition with some auxiliary equipment, you can control your lights and other household functions. The Echo has dozens of things that you can do, including asking it to tell you a “lawyer” joke.
A fascinating article I recently read was about how these devices are increasingly being used for aging people living alone or in care facilities. Not only do they keep people company, but they can also provide education, entertainment and read books (such as Audible) by using simple voice commands.
Being a smart consumer can save you hundreds, if not thousands of dollars. And when put in terms of taxable dollars, you can save a lot more than you think. In future columns, from time to time, I will feature more money-saving ideas, but I would love to hear some ideas from you which I can share in the Main Street column. Please e-mail me soon.
Dr. Don Daake has an MBA from the University of Iowa and a Ph.D. from Florida State University. He is a professor emeritus at ONU and principal in Daake and Associates. He can be contacted at email@example.com