Money Tricks for Stretching your Dollars

I like having money. There, I said it. I know that’s not very popular to say in some crowds, because life isn’t supposed to be about the pursuit of wealth.

And I agree. But I also lived with debt for years, and when I finally got myself out, it’s been my number one goal in life not to slide back into it.

Having money gives you options when life throws the unexpected at you, giving you a sense of security. It’s allowed me to change jobs without concern, explore other career opportunities in my life, and even move across the country when life threw a change my way.

Last week I focused on ways you might be burning money in some wasteful spending traps. And while reigning in your spending is an excellent way to save money, wouldn’t it be great if you could make the money you have generate more value?

Believe it or not, even without being an investor, there are ways to make your money work for you. Today I’m going to share a few methods I developed for stretching my dollars’ worth.

If you have debt, it costs you interest every month, so the sooner you get rid of your debt, the better. The best way to tackle it is to pay as much as you can afford each month, chipping away at the balance quickly.

A lower balance reduces the amount of interest that charged every month. Think of it this way; every few dollars you spend now is one less extra dollar you have to pay in interest later.

Most people’s debt is on credit cards, which right now how an average interest rate (APR) of around 19%. What does that mean exactly? Across a year, every dollar of debt will generate 19% interest — or $0.19 — to be paid in addition to the balance.

So, if you have $1000 in debt, it’ll generate $190 for the interest over the year (if no payments are made) — or roughly $15.83 a month.

But, if you paid just $100 a month on that debt, you’d end up paying $97.28 in interest.

But what if you paid $150 each month instead? You would only pay $65.26 in total interest. A savings of $32.02 compared to the payments of just $100 month, and it would only take seven months to pay off that debt.

The more you spend on reducing your balance, the more value each of those dollars brings you in terms of interest savings.

Almost half of American’s can’t afford a surprise $400 expense. It’s one of the big reasons people rack up debt. And we all know debt can be costly, as I just showed.

If you take on $400 in debt but can only pay $50 off a month at 19% interest, that’s going to cost you $31 extra dollars in total interest — wouldn’t it be better to have the $400 at the start and save yourself some money?

Building up a savings safety net is one of the best ways to give you peace of mind that you can weather a rough patch of life. We don’t always have control over the timing of things like health or car issues, which usually need to be paid for quickly.

If you don’t have a savings account, open one, and commit to putting a little money into it every month. Your ultimate goal is to have enough savings to cover a few months of living expenses (I shoot for 6).

It can take some time to get there but start building those savings up when you can, and you’ll have a nice cushion for any huge surprises or life changes.

I’ll never forget how great it felt the first time I received an interest payment on my savings. It wasn’t much at the start, but it didn’t take any effort to make that money — other than having some money in the bank.

Savings rates aren’t what they used to be, since the 2008 crash, but they are slowly making their way back up. Many of the traditional banks, though, offer meager interest rates on savings.

Bank of America offers 0.03% — $1000 would earn just $0.30 over a year.

But online banks, which have minimal overhead, offer much better rates, as high as 2.2%.

That same $1000 in one of these accounts could earn up to $22 over a year — that’s a much more fun number.

Keep in mind; there are limits on how many transactions you can make on a savings account per month. So, using one of these high-interest accounts is not for money you’re going to move a lot.

But as you build up your safety net, keeping a large portion of it in one of these accounts can add up to some great interest payments. My safety net earns me about $500 a year, just for existing.

Almost everyone uses credit cards. They make purchasing things so easy, and if you can avoid carrying debt on them, they’re a great way to build up your credit score.

I’m always surprised, though, when I find out people don’t use or care about the rewards programs their credit cards offer. I’ve used my rewards to put so much cash back in my pocket. I’ve even used them to cover overseas flights — for ‘free.’ Not really free; I had to spend on things to get the rewards, but I was going to buy those things anyway.

The key is to find the cards that work for you. If you like to travel, find a card that rewards traveling. If you drive a lot, find a card that rewards gas purchases. If you like shopping on Amazon … you guessed it, find a card that rewards shopping on Amazon.

It’s pretty easy to find a card that offers something like 1–2% cashback, but if you look around, you can usually find a better card for you. And most cards will give you bonus rewards just for signing up or spending a certain amount at the start.

I use two cards for most of my purchases.

• One for Amazon, earning 5% back on Amazon purchases.
• One that earns 2% back on any purchase, but gives 5% of the reward back when redeemed on travel expenses. This one is no longer available to new customers.

With the right cards, you can get some decent money back. I’ve managed to get a lot of value back for things I was already spending on with my cards — they fit my habits perfectly for me.

Bonus Tip: if you get the Amazon card, do not use the feature that lets you spend rewards points to purchase on Amazon. If you have 10,000 rewards points, you can redeem that for $100 credit or spend it as $100 directly to Amazon for purchases. For some reason, people think the second option saves them money, but you don’t get as much value as you can by doing this:

• If you were going to buy an item for $100, and you use points you break-even.
• If you buy that same item outright and redeem the $100 as cashback, you still end up at a break-even purchase, but you also got some more points in the process!

Lastly, loyal programs from places you shop at the most can add up to some modest savings.

Yes, it can be annoying to give your email or phone number out whenever your shop, but if you pay attention to the program deal, it can sometimes be worth it.

I was reminded of this recently when I made a large purchase at BestBuy. I ended up with a $5 credit balance against my next purchase within a year. It’s not a huge savings, but it’s still $5 I get to keep whenever I shop there again — and all I did to earn it was buy the thing I was already going to buy.

Next time you’re at a store you regularly shop at, take the time to see if you can earn any savings with your purchase. Most grocery stores, pharmacies, and department stores have some loyalty program you can take advantage of these days.

I love getting more value out of my dollars. Whether it’s earning cash or getting some back in my pocket for doing the things I was already doing anyway, it always feels good.

Individually, none of these tips is going to make you super-rich. But if you work the systems, you can earn a few bucks here and there. And they do add up.

What tricks do you use to stretch your dollars? Share your stories and questions below.