Suze Orman Money Matters

Every time I stress the importance of setting aside money in savings, I'm met with a collective moan. Well, I'm confident that you can save at least $5,000 or more a year -- without any massive sacrifice on your part -- if you follow the tips I list below. The trick is to not search for one big way to save a bundle, but focus on the small changes that can add up to major savings.

1. Change Is Good.

Save all your change. Every time you pay cash, put any change you get in a separate part of your wallet or purse. At the end of the day, put all that money into a special savings jar.

Every time I've had people commit to this for a month, they tell me they were able to save $30 to $60. That works out to $360 to $720 a year.

Painless savings: About $500 a year.

2. Reduce Your Credit-Card Interest Rate.

The average credit-card interest rate is 15 percent, and the average consumer has a $9,000 balance. By paying the monthly minimum due and getting the rate down to 10 percent, you can save about $150 a year during the shorter payback period.

For tackling your credit-card debt, you can transfer your balance to a card such as the Discover Platinum Card, which gives you a zero percent interest rate for one year and 9.9 percent after that.

Instead of paying more than $1,400 in interest payments a year for the card with the 15 percent rate, all your payments go toward paying down the principal for that first year. Each month, paying 4 percent on your $9,000 balance -- i.e. $360 -- would reduce it to just $4,680 at the end of one year. At that point, transfer your balance again to another zero-percent-rate card and keep paying the $360 a month -- you'll be debt free in two years.

(Almost) painless savings: $1,163 (interest you won't pay on the 15 percent card in the first year).

3. Go for the Higher Insurance Deductible.

It's not smart to go for a low deductible on your car and home insurance. The odds are that you won't be making a claim. Moreover, you want to save insurance for big-ticket losses.

With a higher deductible -- say, at least $1,000 on both car and auto -- you will be less likely to make those small claims. And the higher deductible can shave $100 to $200 or more off $1,000 in insurance premiums. Bundle your auto and homeowner's insurance with the same insurer, and you can qualify for another 15 percent reduction in your overall cost.

Painless annual savings: $300 or more each year.

4. Stretch the Calendar.

If you have a recurring expense -- say, a haircut, massage, or pedicure -- add one or two weeks to your schedule. Get a haircut every eight weeks, instead of six. At an average of $50 per cut, that can save you $150 a year. Skip a massage, and you could save another $50 to $100 or so.

Painless savings: About $250 a year, or more annually.

5. Go Wireless.

Do you really need to shell out the $35 or so a month for your home phone line? You can spend an extra $10 or so to get an extended-minutes plan for your cell phone and ditch the home line.

Painless savings: About $300 a year.

6. Flex Your Benefits Muscle.

If your employer offers a Flexible Savings Account, you can easily shave a few hundred dollars off your tax bill each year. Money for the FSA is deducted from your paycheck pretax, which cuts your taxable income. You can pay for certain health-care and dependent-care services (e.g. medical premiums, co-pays, and uncovered dental or vision costs) from your FSA account. The resulting net tax savings from $2,000 in your FSA will be more than $600 if you're in the 25 percent bracket.

But you must use all the money in the year you set it aside -- any unused FSA money is forfeited. The good news is that a recent IRS ruling extends the time till March 15 of the following year (check if your employer has amended its FSA plan to add this extended period).

Painless tax savings: $500 or more annually.

7. Potluck, Anyone?

It's so easy to blow $50 or more every time you and your partner go out for a meal. And if you left the kids home with a baby sitter, you probably need to double that bill. Instead, have friends over to your place -- for potluck or something low key -- once a month, and that saves you a minimum of $50 a month.

Painless savings: $600 a year.

8. It's Not What You Drink, But Who You Drink With.

Also, let's talk about those $12 martinis. Try the $7 glass of wine or a less expensive brand of liquor, and you can easily shave $15 a week off your bar tab.

Painless savings: About $780 a year.

9. Downgrade from Premium Gas.

Tests show that the vast majority of cars -- even the high-end ones where the manufacturer says premium gas is "recommended" -- will do just fine with regular. Read the manual, and check with the dealer. But if you at least downgrade from premium to mid-grade (typically 89 octane), you will save about 10 cents a gallon. If you drive through 20 gallons a week, that's $2 in savings.

While you're at it, keep the pedal off the metal -- you get about 15 percent better mileage driving 55 mph rather than 65. That can easily shave another $100 to $150 off of your gas bill.

Painless savings: $95 to $250 a year.

10. Buy a Used Car, Rather than New.

It's easy these days to find a car that's one or two years old, with minimal wear and tear and a manufacturer's warranty, that also has a price tag at least 20 percent to 30 percent lower than if you bought the car brand new. That's at least $10,000 off for a car that's $40,000 when new.

Painless savings: $2,000 a year over five years of driving the car.

11. Look the Gift Horse in the Mirror.

The average outlay for gifts this holiday season was more than $1,000. Add all the birthday and anniversary presents over the course of the year, and your gift-giving probably costs you more than $1,500 a year.

Have your family set a set dollar limit on gifts, or scale back the presents altogether. Would the kids really be worse off if they received one wonderful gift from the entire family, rather than separate gifts from everyone? Put your effort instead into truly connecting with your family and friends.

Painless savings: $750 or more.

That's a lot more than $5,000 in savings without too much effort.

A smart move is to take $4,000 of these savings ($5,000 if you're over 50) and invest it in a Roth IRA, assuming you meet the eligibility requirements (modified adjusted gross income below $95,000 for single tax filers and less than $150,000 for married couples filing jointly). If you never add another penny to that $4,000 and it grows at an average 8 percent return for the next 30 years, that will grow to more than $40,000.

And if you follow the above tips each year, you can invest $4,000 annually. Over 30 years, at an average annual return of 8 percent, you will have saved $490,000. That's some serious savings -- without serious sacrifice.