Beating the Budget Crunch

For the average American family, pretty much every regular expense -- from gas and groceries to utilities -- is significantly pricier than it was a year ago.

The price of regular unleaded gasoline is up 30% at an average price of $3.60 a gallon, according to AAA. Meanwhile, the price of another gallon-portioned product -- milk -- is 10% higher at $3.87, according to the USDA.

The end result: Consumer spending remains at its weakest level in six months (this, of course, is also a result of rising unemployment, the housing meltdown and the credit crunch). Nearly 60% of Americans are worried about running out of money, according to a recent survey by market researcher The Harrison Group. And forecasters expect consumer spending to actually fall by 1% to 2% during the third quarter -- the first decline in 17 years.

Much of that pullback will occur as families opt to forgo nonessential purchases such as vacations and clothing. However, some of monthly expenses -- like utility bills and prescriptions -- can't be so easily cut. Here are ways to reduce spending in five essential categories -- without feeling short-changed.

1. Internet, Cable and Phone Services

Odds are good that your cellphone, cable, Internet and telephone plans offer you more services than you actually need, says David Carnoy, executive editor for CNET, an electronics review site. Check each service agreement to ensure you're not paying for unused extras. A common culprit: the speed of your high-speed Internet. Providers offer several tiers. Unless you're an online gamer or frequently download large files, choosing the slowest speed will do, he says. For a New Jersey family, the difference between Comcast's basic and faster high-speed Internet packages is $10 a month.

Also, to save on your cable bill, try calling your provider and threatening to cut back on your plan or to take your business elsewhere. Carnoy was immediately offered a $10-per-month discount when he called to cancel a premium-channel subscription.

2. Groceries

For a long time, buying store-brand items meant sacrificing quality, says Mandy Walker, senior projects editor at Consumer Reports' ShopSmart magazine. Now, the same manufacturers that produce your favorite brands also churn out store-label goods. "They'll literally stop the conveyor belt and slap on a different label," says Teri Gault, founder of shopping site The Grocery Game. "Most are nearly identical."

That improved quality -- along with the 20% to 50% discounts over big-name brands -- is good news for shoppers. Here are a few nearly foolproof swaps that Walker and Gault like:

• Paper and plastic goods. Even store-brand paper towels are just as absorbent as the big-name brands, says Walker.
• Frozen fruits and vegetables. There's no noticeable difference.
• Organics. They must pass the same USDA standards that brand names do, says Gault.
• Spices. They impart the same flavor.

3. Gas

Unless your ride is a Ferrari or other luxury, high-performance car, stick to regular gasoline. Premium fuel does boost engine performance -- but only in vehicles designed for it, says Phil Reed, consumer advice editor for auto pricing information site Edmunds.com. Even models that recommend (but do not require) high-end fuel usually run fine on regular. "In most cases, it would be completely unnoticeable," he says.

Where you will see a big difference is your wallet: The national average for a gallon of regular unleaded is $3.60, according to AAA. Premium is 27 cents higher. Someone filling the 18.5-gallon tank of a Honda Accord once a week would save $20 a month.

4. Prescription Drugs

The FDA must certify all generic medications (including over-the-counter products) as having the same quantity of active ingredient, and no significant difference in performance, says Gabriel Levitt, vice president of research for pharmacy-rating site PharmacyChecker.com. Going generic could cost you as much as 50% less. Just ask your doctor to note on prescriptions when the generic equivalent is OK.

Even if you're insured, tiered co-pays can offer substantial savings for switching to generics, says Tod Marks, senior editor for Consumer Reports. Blue Cross Blue Shield New England, for example, charges $5 for most generic medications, compared with $10 to $25 for brand names. Fill a prescription through Target or Wal-Mart's $4 generic prescription program, and save even more.

5. Utilities

Dialing back your thermostat a single degree cooler for an eight-hour period each day during the winter heating season can slash your bill by up to 5%, depending on the climate, according to the Alliance to Save Energy. Use a programmable thermostat to control your inside temp that way and save an average of $180 a year.