In the theme of Christmas and the spirit of giving, I plan to use the next two weeks leading up to Christmas to count down the 12 Days of Christmas in all its Foolish glory. In my rendition of this Christmas tale, you won't be hearing about turtledoves or French hens, but you'll probably hear about great ways to save money in 2013 or about CEOs who laid rotten eggs in 2012.
In yesterday's inaugural "12 Foolish Days of Christmas," we looked at 12 dividend doubles in 2012 and one stock to watch in 2013.
Sing with me, folks: "On the 11th day of Christmas my true love gave to me..."
11 easy and great ways to save money in 2013!
With the prospect of higher taxes and federal budget cuts looming on Dec. 31, here are 11 easy ways you can save money and/or put a few extra dollars back in your pocket in 2013.
1. Pay down high-interest credit cards first
I'm a realist and I understand that debt arises from unforeseen circumstances for many Americans. What people should do, though, is take a good look at their credit card statements and focus on paying down their highest-interest account(s), even if it means making smaller payments on lower-interest credit cards. For instance, retail chain J.C. Penney's (OTC:JCPN.Q) credit card currently carries an APR of 26.99%. If I were a revolving-credit cardholder, I'd be focusing every dollar I had on paying this off ASAP! This is a similar trend you'll find throughout the department store sector.
2. Correct your tax status
Enjoy getting a big fat refund at the end of the year? So does the government, because they don't have to pay you a cent in interest on the money you overpaid them by failing to properly account for your tax status. Too many Americans overpay on their taxes during the course of the year, cheating themselves out of money-generating returns. While it's impossible to predict exactly what you'll make in the course of a year, sit down and determine what your rough tax implications are now to ensure you don't grossly overpay in 2013!
3. Buy dividend-paying companies
There are nearly 2,000 companies on the major U.S. stock exchanges paying out dividends in some form; how many do you have in your portfolio? Dividends aren't free money (you will be taxed at 15%, or possibly even higher if we go over the fiscal cliff), but they offer a way for corporations to share their profits with shareholders. Not only do you get the potential for share price appreciation, but stable names like Coca-Cola (NYSE:KO) and Johnson & Johnson (NYSE:JNJ) have both increased their payouts for 50 consecutive years!
4. Buy a bond
Still scared of the volatility of holding individual stocks? No problem; buy a corporate or municipal bond instead! ExxonMobil (NYSE:XOM) bonds carry a AAA rating (one of only four stocks to carry the pristine AAA rating) and their yield will vastly outpace the current inflation rate. If you really, really have a penchant for avoiding individualized stocks, you can search out, in some cases, tax-free municipal bonds in your state.
5. Make a 401(k) or IRA contribution
Want a nice tax deduction while investing for your future? Then consider maximizing your 401(k) contribution each year (assuming your company offers one) as well making a contribution to a traditional IRA. Many corporations actually offer some form of contribution match on 401(k)s, which is free money, and IRAs allow money to grow tax-deferred until you take withdrawals from the account. Both are usually tax-deductible. Don't need a tax deduction? Consider a Roth IRA or Roth 401(k) instead, which lets your money grow tax-free.
6. Eliminate your checking fees
Still paying checking fees for your bank account? Well, stop it, right now! Between the emergence of local credit unions that rarely offer account fees and the ability, with most large banks, to simply sign up for direct deposit and avoid checking fees, there are many ways you can get around a $5 to $7 monthly charge for "holding your cash."
7. Customize your health care plan
Did you know that you can customize your health care plan to your needs? Most Americans don't, and simply accept that their HMO has written their plan in stone for them. Certain plans offer lower co-pays for drugs that they will regularly use, so it pays to do a little research. In addition, the passing of the Patient Protection and Affordable Care Act will soon open up a market of health-solutions choices for Americans and will give them more freedom of choice, as well as lower costs.
8. Buy generic foods and products
One of the easiest ways to save one dollar at a time is to switch to generic items whenever possible. With prescription drugs this isn't always possible, but with everyday items at the supermarket like cereal, batteries, and meats, it can make quite a difference. With no brand-name premium or middleman to deal with, grocery stores can offer store-branded merchandise far cheaper than brand-name products.
9. Scour travel sites for deals and be flexible
I may trash travel website Orbitz (NYSE: OWW) from a financial perspective, but I am an avid user of the site for my travel plans. Without question, I save thousands of dollars annually on travel because of online travel sites like Orbitz versus booking a vacation directly through an airline or hotel. I'm a realist and understand that taking a vacation is a healthy part of living one's life, so before you book that next trip, check your favorite online travel sites for deals and be willing to travel during non-peak times when rates are considerably lower.
10. Become a DIY homeowner
If you'd like to keep more of your cash now, you can do so by becoming a do-it-yourself homeowner. This means everything from doing the little things like eating at home more and making your own coffee in the morning to heavy-duty projects like painting the house yourself instead of hiring a professional. I can tell you for a fact that I spend in the neighborhood of $1,300 annually at Starbucks (NASDAQ:SBUX), and I could probably shave $1,000 off my annual expenses if I were to make my own coffee at home.
Finally, while this may sound counterintuitive, donate to those less fortunate than you if at all possible. Donations are tax-deductible and ultimately help put more money in your pocket come tax time by reducing your taxable income. Whether it's for the poor, the sick, or another cause altogether, your donations make a difference in the lives of others.
Editor's note: A previous version of this article erroneously said that you can take a deduction for a Roth IRA contribution. The Fool regrets the error.