Oran Hall | The not-so-obvious ways to save

Being able to save is critical to generating the financial resources required to live at a reasonable level now and in the future. There are some obvious ways to save, but there are others which do not appear to be obvious, yet they are very beneficial.

Putting money aside from earnings, investments and cash gifts seems the most obvious. But what about money saved by negotiating when making purchases, money saved by negotiating fees, money saved by being compensated for poor quality goods or by getting refunds, money saved by earning tax-free income, and money saved by making use of government programmes like the National Health Fund and the NI Gold health plan for people getting a pension from the National Insurance Scheme?

We often talk about shopping around to see where the best deals are. Knowing the prices in the market also helps buyers to negotiate, and here I am not talking about ‘bawling down’ prices as some love to do. The truth is, especially if you are buying for cash, there are people willing to make favourable price adjustments for buyers, especially the buyers who support them by buying from them regularly.

Knowing what is happening in the market is useful when buying big ticket items like motor vehicles and real property. In the case of the latter especially, sellers are often flexible, so it is useful to engage in negotiation for, at the end of the day, the price is what buyer and seller agree. It is also useful to have some knowledge of the market, or to get guidance from somebody who has.

Nonetheless, there are times and situations in which it is easier to strike a more favourable deal than other times, but any lowering of the asking price is savings to the purchaser, not just for big ticket items, but lower-priced items as well.

Savings can be made by negotiating professional fees. Not all professionals readily negotiate their fees, but some do.

An attorney-at-law once shared with me that prospective clients would sometimes discuss a price with him and then negotiate a lower price with another attorney-at-law, to whom they would give the business. Where possible, it is good to have an idea of the rates professionals charge.

It is also useful to know the fees that financial institutions charge, for example, the commissions stockbrokers charge. For active traders, commissions do add up, but there are factors other than cost that consumers consider when making such decisions. Knowing the interest rates that the issuers of credit cards charge on balances also makes sense, especially for people who do not have a habit of paying off their balances.

Consumer protection agencies protect consumers from financial loss and make it possible for them to be compensated for losses sustained, thus putting them in a better position to save. The Consumer Affairs Commission, for example, enables consumers to obtain redress in accordance with the requirements of the Rent Restriction Act and the Trade Act.

Long-term savings accounts give savers tax-free income for savings held in the accounts up to $1 million per annum for five years on condition that no more than 75 per cent of the interest earned each year is withdrawn. Additionally, capital gains on stocks and on capital growth funds in unit trusts and mutual funds are not taxed, thus facilitating the growth of income over the long term and the short term too. Less obvious is that the increase in the value of the investment or savings portion of some life insurance policies is not taxed, thereby boosting the policyholder’s long-term savings.

The National Health Fund gives beneficiaries access to prescription drugs for specified medical conditions at significantly reduced prices, and the NI Gold Health Plan pays a portion of the cost of a range of services, including dental, optical, diagnostics and surgery, as well as hospitalisation and prescription drugs. These benefits enhance the ability of beneficiaries to save by easing the burden on them to fully fund these medical expenses, but the only way to benefit is to use them and register where necessary.

Making the fullest use of National Housing Trust benefits is another excellent way for qualified beneficiaries to save considering that the rates compare very favourably with those of lending institutions in the private sector.

Asking can make a big difference. Financial institutions will quickly increase rates but are generally not so quick to reduce them. Yet, the customer who services loans well can ask for a rate reduction and get it. I benefited that way when I got a nudge from a good customer service representative.

So there are several ways to generate savings: by negotiating, investing and saving in tax-free products, making use of facilities which pay some medical expenses, making use of cheaper loan facilities, and getting help from consumer protection agencies. Taking time to know the means available for generating savings is the first step.

Oran A. Hall, author of Understanding Investments and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.finviser.jm@gmail.com