I’m going to stick a disclaimer up here just to make sure everybody understand this: this system is not for everybody. If you get a credit card and make frivolous purchases until you’ve hit the limit and then have trouble paying things off, this system is not for you. However, if you’re one of the readers who are responsible with credit cards and never (or very rarely) carry a balance, this post is for you.

In today’s capitalist society, there aren’t many legitimate ways to get free money. In fact, there aren’t many legitimate ways to get free money in any society. So when this opportunity is given to you, you should pounce on it as quickly as you can. Cash back credit cards are one of these “free money” offers.

If you have a no-annual-fee cash back credit card on which you never carry a balance, you’re going to be getting free money back. In Canada, our cash back cards are generally limited to around 1% cash back, but with the Amex Blue Cash card, our American friends can take advantage of up to 5% cash back on purchases at drugstores, gas stations and grocery stores.

1% isn’t very much money, but when you make all of your daily purchases at 1% cash back, it adds up. I almost never use my debit card, except at places which don’t accept credit. As such, almost all of my day-to-day expenses go on my credit card and at the end of the month, when I’ve spent anywhere from $500 to $800, I can expect to get a few dollars back at the end of the year. Sure, $60 to $96 isn’t a fortune, but it’s free money that I can use to go out for dinner one extra time, that I can just stick in a savings account or invest for retirement. It’s also non-taxable.

If you’re the type of person who pays off their credit card monthly, you’re losing money by not having a cash back card, so go apply for one today! For Americans I would recommend the Amex Blue Cash card and if you happen to live in Canada, the TD Rebate Rewards card or the Citibank Enrich card are two of the best.

Stay tuned, as later this week I’ll be posting a full comparison of the best cash back credit cards in Canada!

Popularity: 19% [?]

I’m sure I don’t need to mention to anyone how huge gas bills these days are. However, with a little bit of science and a little bit of ingenuity, you can reduce that bill significantly.

1. Reduce your braking. This is one of the most efficient ways to reduce gas usage, as braking is horribly inefficient. Keep a fair distance away from other cars to avoid sudden braking, and try to coast into red lights rather than braking sharply.
2. Turn off your engine when you’re going to be idle for more than a few seconds. Having the engine running when you’re not moving is like leaving your lights on when you’re not home, but exponentially more expensive.
3. Remove everything from the back of your car that’s not essential. If you have an emergency kit, spare tire, anything of the sort can and should obviously stay, but if you keep your hockey equipment in the back permanently, take it out. The heavier your car, the more gas has to be used to haul it around.
4. Check your tire pressure. If it’s too low, you’re not getting efficient mileage, and it’s likely costing you tons of money in extra gas. At least air is still free!
5. Always maintain your speed as much as possible. When you’re accelerating or slowing down, your engine has to work harder and use more gas. This (and number 1) are the two reasons why highway mileage is often so much better than city mileage. The science behind this one works like this: mass x acceleration = work. If you decrease acceleration, you decrease the work that has to be done.
6. If you’re looking to get a new car, buy a fuel-efficient one. You can get them for relatively cheap, and considering how much you’ll save in gas, it’ll make the car even cheaper. In Canada, you can also get government rebates for buying fuel efficient cars. Natural Resources Canada lists among their top cars in fuel efficiency for 2008 the Honda Accord, Toyota Prius, the Mazda 5 and the Toyota Yaris.
7. In the summer, walk. When the weather is nice outside you’ll feel better by walking to the corner store instead of driving. Of course given geography this isn’t an option for some people, but if you are able to, try to walk instead of using your car. That’s a saving of 100%.

Following these simple tips can help tremendously reduce your gas bill over time. You should be able to implement these tips with relative simplicity.

Popularity: 15% [?]

There are a huge number of advantages to getting to know your bank tellers (and other bank staff) and it’s something I would recommend to you, especially if you’re living a frugal lifestyle due to being in debt or not having a hugely positive net worth.

One fact that most people seem to not realise is that tellers are the equivalent of customer service representatives at call centers. They can actually refund small amounts of cash for you. If you know the tellers at your bank (ie. Visit once a week or so) and you accidentally get an NSF charge, for example, you can have that refunded by sweet talking them much more easily if they have seen you around.

If bank staff know you, they will also be much more likely to not hold your cheques. This is when it’s good to be friendly with one of the financial service representatives. They can authorize the tellers to not put a hold on a cheque. The main reason banks hold cheques is because they don’t know you and they don’t know how trustworthy you are. Coming into the bank regularly and showing that you’re a devoted customer of your bank will lean the employees in your favour. Every day I see customers who come in regularly and should have everything held being able to cash cheques for over $1000. These are the customers who get their fees refunded if they want to order cheques, make a bank draft or change foreign currency. They just need to ask nicely and there’s usually a good chance they get what they want.

Going into the bank once per week to pay bills or make a withdrawal is a good idea. If you bank someplace with longer hours, try going early in the morning or between 4 and 5pm. Those tend to be the quietest hours and you won’t waste much time standing in line. Depending on how often you need your banks services, you can save hundreds of dollars per year by doing this.

Popularity: 11% [?]

While I’ve already covered where you should keep your emergency funds, which can be accessed within a week if required, there’s the constant plague of not knowing where to keep one’s longer-term investments, such as a down payment for a house which will be saved for two to three years.

The three most popular options for these types of investments are high-yield savings accounts, mutual funds and CDs (GICs in Canada). While the best investment depends on the economy at the time, as of right now I would personally recommend CDs as being one of the better investments. Mutual funds are a terrible idea as the returns on them, save for a few led by amazing investors (Ken Heebner comes to mind), aren’t worth it at all. Many don’t even outperform the market, and on a year or so, if you look at the charts, you’re likely to only make one or two percent on your investment.

And so the debate becomes: CDs or savings accounts? This is where the economic state of the United States comes into question. Savings accounts generally offer higher percentages than CDs, but are much more volatile. Every time the Fed cuts interest rates, you can expect the rate of your savings account to be reduced by that same amount. CDs have a slightly lower rate, but are guaranteed. Given the way the economy is headed, if you have an investment such as a down payment for a house which you KNOW you won’t access for a couple of years, invest in CDs to avoid seeing your savings account interest rate reduce to below the CD level. It’s an extremely safe investment and guarantees you your rate in a world where it’s almost certain that it will take well over a year for interest rates to rise once again.

Popularity: 10% [?]

It’s said that one should always keep at least three months of savings, some say even six months worth, in a high interest savings account. I completely agree, and definitely recommend at least three month’s worth. Keep this money in a high-interest savings account, preferably an online one like ING Direct or HSBC. If you keep it in an account with the bank with whom you have your main chequing account, you’re going to be seeing that money consistently and if you see the money there there is a good chance you will spend it.

There’s a mental aspect to this as well: if you keep your savings account with your regular bank, you’re going to be constantly seeing that money and being aware that it’s there, making you more likely to spend it. When your savings are entirely separated from your chequing account and bank, you can’t see that money and you’re less aware that it’s there.

If you’ve got international connections, you can be extra sneaky by taking advantage of higher interest rates in foreign countries. For example, my fiancee in Australia has a savings account which offers him 7.0%, which is much higher than the 3.65% offered to me by ING Direct Canada. Of course you need to be able to fully trust anyone to whom you send money, but in the case of it being a trustworthy family member or spouse, this is a great way to take advantage of savings accounts.

Now for recommendations. Always make sure your bank is insured (in the USA this is with the FDIC).

ING Direct is one of the most popular ones. If you have a friend or family member who already uses ING, ask them for a referral. If you deposit $250 or more initially and keep it in ING for 30 days or more, you get an extra $25 and the person who referred you gets $10. Not being American, I don’t have a referral link to offer you, so you’ll have to find your own referral.

In Canada, the referral is only $13, but still an extra little wad of cash. If you’re interested, e-mail me and I’ll send you my referral link. If you’ve been thinking of opening an ING Direct account, take the referral route as it’s free cash. What could be better?

HSBC Direct is another popular option, which usually offers the same, or similar rates to ING Direct. In Canada the HSBC Direct rate was 4.75% until May 2nd, which was a full 1.10% higher than the ING rate. Given our half percentage interest rate cut, this is likely to go down, but ING’s rate is likely to drop as well. However, HSBC does not have a referral program in place.

These are the two banks I would personally recommend. If you want to be particularly smart, use your ING Direct account for a referral, keep the money in the account for 32 days and then take it out and move it to your newly opened HSBC account. You’ll likely lose a few days worth of interest, but it will get you the $25 (or $13) bonus as well as the best rate.

Popularity: 8% [?]