How can I invest with limited cash flow?

One of the biggest concerns potential investors have right now is “how can I save when my funds are limited?” Yes, times are tough right now and most of us have to boost our income, cut costs or both. To ensure that you have enough left over to save and invest in your future, try some of these cost-cutting measures.

1.  Reduce your grocery bill by shopping once a week, buying produce when its in season, drinking filtered water instead of bottled water, and buying in bulk at stores like Costco and Sam’s Club. And don’t forget to clip coupons. You can easily save $100 or more per month by following these tips.

2.  Instead of buying new clothes each season, have current items repaired, tailored and/or updated.

3.  Consider past big-ticket purchases. Do you really need that RV, third car or boat you only use a few times a year? If not, sell it to reduce your current expenses not only on loan payments but gas, insurance and storage or parking expenses. Take the amount you make on the sale of your luxury items and pay down debt with a portion and invest a portion in your future.

4.  Reduce your commuting expenses by downsizing that big SUV to a more energy efficient vehicle, switching to mass transit or carpooling, or consider walking or biking to work. You’ll realize savings in many areas of your life while also reducing your carbon footprint.

5.  Take advantage of your employer’s flexible spending account to set aside medical and child care expenses for 2010 with pre-tax dollars.

6.  Save money on prescriptions by using generic medications where available or buying through a discount mail-order program. Be sure to check with your doctor before making any changes to your medication in terms of dosage or manufacturer.

7.  Reconsider your utility expenses. For example, do you still use a landline telephone, or can you drop it in favor of a family cell phone plan with sufficient minutes and unlimited texting? Do you need all of the cable channels and fancy features of the latest cable box?

8.  Hire an accountant to review your tax deductions. Are you maximizing your tax deductions and taking every deduction for which you are eligible? You’ll be surprised at how much an accountant can save you by preparing your taxes for you, offsetting his or her fee.

9.  Take advantage of free entertainment options. Borrow movies and books from the library, exchange video games and movies with friends, visit parks and trails for outdoor recreation, or  trade babysitting favors with friends.

10.  Write down your financial goals and track your spending to see where all of your money is going. Consider whether you need to go to Starbucks every morning, or if you could make coffee at home a few days a week. Instead of unhealthy fast food for lunch, pack last night’s leftovers.

The goal is to review areas where you are potentially spending more than necessary and making small adjustments. Often times, small changes can add up to big savings. That savings can then be set aside for saving and investing for your long-term future. For more individualized advice, please call me. I’d be happy to explore your financial situation to see where you might find some available dollars for investing or saving.

Scott K. Warner
Life Design Financial

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