Q: I always check the per/unit price on my groceries, but do you have any other tips for saving money there? (I am NOT going to become one of those coupon ladies!) – Suzy (via Twitter)
A: Suzy, you crack me up! I always hear about the coupon ladies, but I have yet to meet one. You have to kind of admire their dedication though.
First, it’s great to check per unit prices, but be careful with that. On perishable items, you can end up throwing so much away from spoilage that you’re not really saving. Also, if you have a family, there is a risk that someone in your household will be so used to a certain brand that they’ll eschew your bargain purchases.
Next, stock up on nonperishable items when you find them on sale or at a good price, if you have the space to store the extra. Though the jury is still out on the real savings that you get at a wholesale club, look for sales at your neighborhood grocery store that don’t impose limits on the number of items purchased. If you do this, bear in mind that things like flour, corn chips, vegetable oil, etc., can and will go rancid If you wait too long to use them.
Also, make sure you only go shopping when you don’t need to. And I don’t just mean avoid shopping when you’re hungry. I’m talking about avoiding shopping when you’re out of something. If you go get milk only after you realize that your daughter finished it last night so you need to make a special trip, you’re not only wasting gasoline but you’re also likely to buy more than just milk. And because you’re frustrated or in a hurry, you’re less likely to look for the best value.
Finally, consider shopping at what I will call “nontraditional” stores. Ethnic markets often have great prices, as do “thrift” grocery stores. These stores often snatch up dented cans, expired or nearly expired items, produce that isn’t quite up to par and branded products that just never quite took off. Jalapeno-flavored marshmallow fluff and what-not. It’s not worth driving all over town to fulfill your list at too many stores, but plan your trip home from work to hit one of them, and your Saturday shopping to hit a couple more. Thanks for writing!
Q: We’re buying our first home, and the lenders are mentioning “points.” It sounds like a good idea because it makes the payment lower. Why doesn’t everyone do this? – Carolyn (via email)
A: Carolyn, at face value, points do seem like a good option. And they can be. We all know that on a 30-year mortgage, we pay more on interest than the purchase price of the home. So anything that lowers the interest amount of the loan sounds appealing. But you’re still paying the interest. You’re just paying it up front.
There are really two variables to determine if points make sense. The first is how long you expect to stay in your home. If you’re buying your first home, I’m making an assumption that you’re fairly young. And statistically, younger people tend to be more mobile than your parent’s generation. This matters because you need to own your home for a certain amount of time in order to recoup the up-front cost you paid in points to your mortgage lender. Just as an example, on a $100k, 30-year mortgage, you’ll probably lower your payments by around $10/month at today’s rates. So to recoup the cost of that point, you need to own the home for 100 months – 8 years and 4 months – just to break even. Only AFTER that 100-month period do you finally start to realize any true savings.
The second issue is whether you have the money. In the example above, the point costs you $1,000 up-front. This is in addition to your down-payment, homeowner’s insurance, title insurance, appraisal fees, escrow fees, document preparation fees, possibly a realtor’s commission, and maybe private mortgage insurance.
In general, I’m not a fan of points on a mortgage, but the key is to go into the situation fully informed so that you can make a smart decision. Good luck!
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— Eric Litwiller has spent the last eight years of his professional career helping people achieve their financial goals through the use of budgets, retirement vehicles, and estate planning options. He is a firm believer in the importance of using Earthly riches to fulfill a mission of Christian stewardship. Eric is not a licensed financial planner.