by Ruth Mantell
During tough times, don't cut back on everything
During these tough economic times, more families need to scrimp and save. But cutting back everywhere isn't always the best course.
You and your family have to eat, house yourselves and stay healthy. Once you've taken care of the essentials, experts say there are additional areas that require real investment, whether you are spending time or money. Here are six places where it pays to lay out more money, not less:
1. Pay for Expert Advice
Now is not the right time to cut back on expert advice for significant financial transactions, such as buying a home, says Eric Tyson, author of "Personal Finance for Dummies."
"If you are making important decisions, I think it's worth paying for good advice, whether you need an attorney, a tax adviser or a financial adviser," Tyson said. "You don't want to skip advice if you're in an important transaction."
Checking out the Web for free tips may also not be the wisest move, especially when it comes to decisions that are dynamic and have a lot of moving parts, he says.
"One of the things that troubles me is that some people gravitate toward free information on the Internet, and if you are making an important decision, it's worth paying some money to get quality expert advice," Tyson said. "But people do it because they are cheap. You get what you pay for."
2. Pay to Bring Down Debt
It's important to pay down as much debt as possible, and keep on top of bills, especially when funds are scarce and the future is uncertain, experts say.
"It's critically important, due to the enormous impact that your credit rating has on so many aspects of your life, that you maintain your bill payments, and pay down your credit cards as much as you possibly can," said Jack Gillis, director of public affairs with the Consumer Federation of America.
If you are having trouble with payments, reach out to lenders, and try to come up with a new payment plan, said Carl George, chief executive of the accounting firm Clifton Gunderson.
3. Pay Yourself
George said wise spending is "absolutely critical" during this economic downturn, and that includes outlays for savings.
"Anything you can sock away is pretty critical, because even though you are strapped, times could get worse, and we each need to prepare for that," George said.
It may be tough for skittish investors who have watched their investments dwindle to go on investing. But workers with defined-contribution plans should take advantage of the "free money" they receive in the form of their employers' matching payments.
"If you don't put your dollar in, you lose that match forever. If you need to, then cut back on your contributions, but don't cut them out," George said. "You have to have faith in the economy and the fact that the economy will come back."
4. Pay for Little Indulgences
While it may sound counterintuitive, indulging in the occasional guilty pleasure -- a $4 latte, for example -- can be a good idea when times are lean, said Erica Sandberg, author of "Expecting Money: The Essential Financial Plan for New and Growing Families."
"It's a very dreary existence when you cut down your expenses to an absolute skeletal budget," Sandberg said. "If you do that too long, it's like a diet, and you are going to raid the refrigerator."
She recommended identifying a few key items or services that have a "strong punch" and will satisfy cravings for a bit of pampering.
As long as your budget has some wiggle room, even those who are looking for work can indulge, she said.
5. Pay for Some Things You Could Do Yourself
Retirees, some of whom may have memories of the Great Depression, should avoid over-scrimping, Tyson said.
"Some retirees are always worried they will run out of money. They know how tough times can get," he said. "But some retirees may be pinching pennies unnecessarily. They don't want to pay some guy $50 to shovel the driveway during a snowstorm, and then they may end up falling."
Housekeeping is another example. Consumers need to figure out which services enhance their lives and then make room for them in the budget.
"Spending four hours cleaning the house may not be the best use of your time," Sandberg said. "It may be worth getting someone else to do it if you have something far more important to do."
6. It Pays to Comparison Shop
Maybe you're not the coupon-clipping type, but experts recommend that consumers invest time in comparison shopping during tough times.
"The more time you spend shopping around, the more money you are going to save," said Consumer Federation's Gillis. "Spending 25 minutes looking on the Internet can save you $50, $60, $70. That's like paying yourself $50, $60, $70 for a half hour of work."
But shoppers should be careful to avoid getting caught up in a flurry of coupons that leads them to buy unnecessary items.
"If coupons are causing you to buy something you wouldn't normally buy, that's not a good thing," Gillis said.
Ruth Mantell is a MarketWatch reporter based in Washington.
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