"I love money. I love everything about it. I bought some pretty good stuff. Got me a $300 pair of socks. Got a fur sink. An electric dog polisher. A gasoline-powered turtleneck sweater. And, of course, I bought some dumb stuff, too."
-- Steve Martin
We all want money -- for things we need, such as food and shelter, and things we want, such as a nice car and a fur sink. It might seem like there's no such thing as a free lunch or free money and that we have to work for every dollar we have, but that's not quite true. There is such a thing as free money (and free lunches, too).
Here are six different kinds of free money you may be able to grab:
401(k) matching funds
It's very common for companies that sponsor 401(k) plans for their employees to offer matching funds, too. If your employer offers any matching funds, contribute at least enough to grab all available matching money -- as that's free money. A common employer match is 50% of the contributions you make, up to 6% of your salary. Thus, if you earn $70,000 and contribute 6% of your salary, or $4,200, your employer will chip in an additional 3%, or $2,100. That's a guaranteed 50% return on your investment and hard to beat.
Despite this representing free money, many workers miss out on it. Investment advisory firm Financial Engines has estimated that about one in four employees doesn't sock away enough to collect their full company match, leaving an average of $1,336 on the table each year. Worse, over 20 years, that amounts to a loss of $42,855 -- a sum that could have made a meaningful difference in retirement.
Dividends and interest
This category of free money can be quibbled with. Receiving dividends or interest can be seen simply as a return on one's investment. But viewed from another angle, both are income you receive without having to tote any bales of hay or grade any student papers.
Cash-back credit cards
If you're saddled with credit card debt, you will be best served by avoiding credit cards altogether -- at least until you pay off your debt -- or, failing that, by using a card with a zero-percent interest rate for the first year or two or a card with a low overall interest rate. If you're not in debt to credit card companies, though, you'd do well to consider using cash-back credit cards -- because you'll get a percentage of whatever you charge on them back. The cash-back rates are typically 1%, 2%, or perhaps 5% applied to some categories, but you can do better than that.
The Blue Cash Preferred from American Express card, for example, offers some of the most generous terms: A hefty 6% cash back at supermarkets (on up to $6,000 in annual spending, after which it becomes 1% cash back), 3% cash back at gas stations, and 1% cash back on everything else. If you spend $6,000 at the supermarket (that's about $115 per week), you're looking at $360 or more in cash back just for that. Spend $50 per week on gas (which comes to $2,600 for the year) and you can collect $78 in cash back. The card does sport a $95 annual fee, but many people will find it well worth that -- and many people have been able to get annual fees waived or reduced just by asking. (Read our full review of the Blue Cash Preferred® from American Express to learn more.)
Another good card is the Citi Double Cash Card, which pays you 1% cash back when you make a purchase -- and then another 1% back when you pay off that sum, for a total of 2% on everything. If you spend $1,000 per month on your credit card, you can get $240 back for the year -- with no annual fee.
It might seem dreary to clip coupons and take them with you to the supermarket or elsewhere, but 10 coupons worth $0.50 used each week amounts to more than $250 in savings each year. Remember the best-selling "Millionaire Next Door" books from the 1990s? The authors surveyed gobs of American millionaires and found that, among other things, they used coupons. In fact, about 59% of households with net worths between $1 million and $2 million used coupons, and 38% of those worth $5 million or more did.
Don't restrict yourself to grocery coupons, either. When shopping online, use a search engine to look for coupon codes offered by the retailer you're using. It's not uncommon to find that just by typing in a few characters, you can get free shipping or 20% off or some other good deal. Those essentially represent free money -- they're dollars you would have spent but now don't have to. Browser extensions such as Coupons at Checkout will automatically have coupons ready for you to use when shopping at many sites online.
Your garage, basement, and attic
Another way to suddenly have money materialize in your hand is to get rid of items you own that you will never use. If you're done with your collection of 300 vinyl records from your youth, you can sell them. If you have a fancy new camera and will likely never use your old one again, sell it. Is there a treadmill or rowing machine in your life that will no longer be used? Those items all can be converted into cash. Craigslist is a good way to offload bulky items to local buyers, while eBay is a good way to reach millions of buyers all over. If selling sounds too hard, you can donate items and then deduct their fair market value come tax time -- donating $1,000 worth of clothing and household items can net you $250 or more in tax savings.
Speaking of taxes, deductions like the charitable one above can shrink your tax bill, leaving more money in your coffers, and tax credits can do so even more powerfully. A deduction lets you reduce your taxable income. Have taxable income of $60,000 and $4,000 in deductions you can take? Your taxable income is now $56,000. If you're in the 25% tax bracket, you avoid being taxed on that $4,000 and save $1,000. If you have taxable income of $60,000 and a $4,000 tax credit, though, the credit reduces your tax dollar-for-dollar. It saves you a full $4,000. There are lots of available credits -- for education expenses, energy-efficient home improvements, the adoption of children, the care of children and dependents, and much more. It's well worth spending time learning more about them.
Free money can come in lots of different forms, and it's worth learning about as many of them as you can. Taking advantage of just some of the free money described above can easily generate thousands of dollars in cash or savings.