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January 31, 2012

Decent income, little savings?

Maryland is a high-income state. But it's also got a big share of defaulted mortgages, delinquent loans of all sorts and outsized credit-card debt, according to a new study by the Corporation for Enterprise Development.

What gives? Some of it is probably housing costs. Two-thirds of states have a smaller percentage of "house poor" homeowners, people spending 30 percent or more of their before-tax income on their mortgage, property taxes and other ownership expenses.

But we could probably do better. Sure, if you're between jobs, it's awfully hard to save. And if you've already locked in a high mortgage payment that strains your budget, your options might seem limited. Still, chances are there's something you can do.

Take the budgeting challenge with me: Figure out what you spent last year and on what -- something you might be able to do down to the item if you generally use plastic rather than cash. Then add up your various forms of savings and see how much bigger, or smaller, the grand total is compared with a year ago.

Some questions to think about when you're done:

Have you managed to save enough for at least six months of expenses -- or (considering how long unemployment can drag on these days) even more? Are you able to also set aside something for your life priorities, whether it's a down payment or a retirement nest egg? (Eileen Ambrose's column today points out that one in five Maryland households has little or no savings.)

Can you cut something out to save more? Or find a way to earn more money? Or both?

Sometimes revenue-raising possibilities are closer to home than you might think. Some homeowners are renting out a room or two in order to save or to help cover their mortgage.

My own trick for saving is to be extremely boring and limit entertainment outside the house to a few movies a year. (Hey, my $50-a-month Internet connection offers more entertainment than I'll ever get to the end of.) I bring leftovers to work for lunch, and I don't drink coffee. Those things add up over time.

What are your savings tricks? Inquiring cheapskates want to know.

If you're trying to save more and don't have a clear idea of where your money is going, here's one example of a budgeting worksheet.

And there are plenty of places for inspiration. The Get Rich Slowly blog has posts on avoiding "lifestyle creep," for instance, and having a baby on a budget. And, possibly of more interest to you if you're a regular, this piece by a schoolteacher who cut her spending 30 percent and saved enough to buy a house.

Oh, and if you're a single person making no more than $25,000 or in a family of two or more with $50,000 or less, remember that you're eligible for free tax preparation help from the Baltimore CASH Campaign.

Here's to more financial security.

Posted by Jamie Smith Hopkins at 6:00 AM | | Comments (0)
Categories: Savings/downpayment, The foreclosure mess

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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
Baltimore Sun articles by Jamie

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