How to squeeze $500 out of your monthly budget

This post comes from partner blog ConsumerAffairs.com.

When large corporations face tough times, they often hire "efficiency experts" who come in and tell them how to save money. Households, struggling under the strain of higher gasoline prices, could use the same kind of service right about now.

Playing the role of an efficiency expert, Consumer Reports magazine says it has looked for and found ways for the average consumer household to trim up to $500 a month from its budget. Even at $4 a gallon, that buys a lot of gas.

The key is focusing on a budget's fixed monthly costs. These are the checks we write every month without thinking much about it: the cell phone, the cable TV bill, insurance for home and car, and other services that we need and shouldn't be expected to do without. The key, say CR's financial planners, is to find cheaper versions.

"It's surprising that there are so many savings opportunities hidden in your budget," said Jeff Blyskal, senior editor at Consumer Reports. "You don't have to radically change your life to save $500 a month."

Savings shown are Consumer Reports Money Lab estimates based on what a range of consumers really spend and can possibly save. Actual savings will depend on individual circumstances. 

Find cheaper car insurance for an average monthly savings of $65. Annual surveys of CR readers have shown that many have stayed with the same auto insurer for 15 years. Depending on people's profiles and where they live, they might be able to save hundreds a month by shopping around. For example, a married couple without violations or accidents but with a driving-age son in Los Angeles can save $380 per month on standard coverage by switching to a lower-cost auto insurer.

How to do it: Start at the National Association of Insurance Commissioners Web site, and click on "NAIC States & Jurisdictions" to find your state's insurance department. Most provide comparative premium quotes based on standard customer profiles.

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Optimize your life insurance for an average monthly savings of $110. Life insurance premiums have dropped so dramatically since the 1990s, it will probably pay for you to replace a policy bought years ago with a comparable new one. A $500,000 20-year guaranteed level term from Prudential, for example, would have cost a 50-year-old man about $2,125 a year in 1998. Today the same guy, now 60, could pay Prudential $1,385 a year for the same coverage over the next 10 years, saving $60 a month.

How to do it: Get premium quotes at Accuquote and LifeInsure.com. Don't cancel your existing policy until you have a new one already in place.

Shop smart for food for an average monthly savings of $200. Making different choices in the supermarket and when eating out can net monthly savings from $130 to $255. The average family of four can chop its grocery bill by $190 a month by shifting to a lower-cost mix of foods.

How to do it: Plan menus around sales of fresh poultry, fish, meat, dairy and produce, and make use of leftovers. Avoid costly prepared meals. Eat more low-priced high-nutrition foods like beans and potatoes. Try less expensive store brands, and sign up for store discount cards.

Eliminate bank fees for an average monthly savings of $25. Banks collected some $39 billion in account fees and penalties last year. That works out to an average of $28 per month per household. But with some planning, you can pay zero.

How to do it: Bank at large institutions with lots of ATMs in convenient locations. Shop for free checking, and strictly adhere to provisions for a minimum balance, direct deposit or other conditions to avoid monthly fees.

Find a better calling plan for an average monthly savings of $35. When CR's experts examined real phone bills, they uncovered savings from $15 a month for budget callers to $55 per month for heavy users.

How to do it: Peruse your last few months' phone bills to assess how many minutes you typically use on landline and wireless calls. Comparison shop among cellular-service providers, the local phone company, and your cable TV company. Don't buy more than you need, such as an unlimited cellular plan if you rarely go over 900 minutes per month.

Pay off your credit card for an average monthly savings of $65. On average, consumers who carry a balance owe $2,200, on which they pay 15.2% in annual interest charges. Eliminate that and save $28 per month. Some 15% of consumers carry balances of $10,000 or more; they can save $125 per month by paying off their debt.

How to do it: Stop charging, then pay more than the minimum required each month until it's paid off. Dig up cash for this from your U.S. Treasury stimulus check, garage sales, or extra part-time work.

Other articles of interest at ConsumerAffairs.com:

'Food frauds' rip off consumers, group charges

What's really fueling those sky-high oil prices?

Hypermiling is dangerous, says AAA