How We Stay Warm and Save Money on Electric Bills in the Winter

So far, this winter is shaping up to be a brutally cold one, with record low temperatures being recorded all across the country. I have baseboard electric heat, so it's really difficult to afford our electric bill in the winter.

It' not just the high costs for electricity in the winter that make me dislike this season. In my part of the country its cold and the snowfall and ice make it treacherous to go to work or the grocery store. I know there are far colder locations in the U.S. in the winter, and I plan to stay as far away from them as possible.

I use the following strategies to keep warm and save money on the electric bill in the winter.

Winterize the Home in the Fall

I have written about my fall maintenance list in an earlier article, but performing some simple tasks in the fall help to lower my electric bill in the winter. Each fall I replace cracked window panes and caulk where the sash meets the trim on all of the windows. Install storm windows or plastic film covers over the windows to keep in the heat. The materials for these repairs are normally less than $20. 

I have baseboard heat, one of the most expensive and least efficient ways of heating one's home. I make certain to remove the panel on the front of the register and thoroughly dust the heating element so that it is clean before the season starts so it works more efficiently.

Years ago, I also made window and door "socks" out of scrap material and sand and I layer these on the window sills and place them along the bottom of the doors to keep the cool air out and the warm air in.

Cut Down the Thermostat and Dress in Layers

Many people have probably heard this one before, but it is really not necessary to crank up the heat at the sign of the first chill in fall. I put a timer on our hot water heater years ago and swapped out the incandescent bulbs to CFLs and cut my electric bill by a third the first year of this change.

I also turn off the heat and close the doors to rooms that are unused. Heating a smaller space reduces the electric bill. Many people have probably heard of these tips, but I do have a few more to resist turning up the heat when the temperatures drop.

Make Insulated Covers for Windows and Doors

While I do have curtains that I put up in the winter that have a special backing that works as insulation, one year I made an additional insulated hanging that I use over all of my windows and doors in the winter. You can use basically any heavy, thick material, but I used some fuzzy old blankets that had faded over time. I sewed a seam at the top so I could thread them through a spring tension rod, and I hung them at the top of the windows, and used a regular curtain rod to hang them over the entrance ways into my home. This extra covering reduced my electric bill by an additional 10% the winter that I first made them. 

When I first made them, I didn't like the idea of mismatched patterns being viewed from outside my house, so I got some acrylic paint, some fabric paint fixative and a foam brush from the crafts section of my local department store. For under $5 I was able to paint over the designs and these insulating cloths resemble the cream colored sheers that I normally hang under my curtains, so no one notices the difference.

Dress in Layers, Including the Bed, and Make a Hot Toddy

To me, if it's cold, it just makes sense to dress warmly when inside, in layers, and apply this strategy when dressing the beds. I put several layers of blankets on our beds, and top them off with a down comforter. At night, we take empty two liter soda bottles that we have saved, and fill them with very hot water and seal the cap tightly. Save some empty bread bags to slide these bottles in and tie, in case the cap works loose in the night and starts to leak. I place 3 or four of these soda bottles under the covers at our feet just before we turn in and it knocks off the chill and keeps us warm throughout the night even when it's freezing outside.

I hope my readers found these tips useful. If you have other strategies to stay warm and save money on the electric bill in the winter why not share them with us in the comments section below?
This personal finance article written by Lyn Brooks original appeared on Yahoo! Finance and the Yahoo Contributor Network.
Photo Credit: Sandra Forbes "Sage" on Flickr

Cashing Out My 401(k) Early Was a Costly Mistake

It's tempting to cash out your 401(k) if you are facing unexpected bills or a layoff. Losing out on interest and other growth opportunities, however, isn't the only consequence of withdrawing part or all of your balance from your 401(k) plan, as this contributor discovered. Continue reading to learn about why cashing out a 401(k) account is a costly mistake. 

By Lyn Brooks, Writer

Most of us who have 401(k) plans are told upfront by our plan providers to avoid taking early distributions from our 401(k)s if at all possible.

When I lost my job in 2011, and had unexpected medical needs and fell behind on my house payment and other financial obligations, it seemed like the only option that I had to prevent foreclosure was cashing out my 401(k). Since I wasn't returning to work, I assumed that the value of my 401(k), combined with my unemployment benefits, would be less than my earned income from prior years, so I did not plan for any potential tax consequences. This was a mistake.

Most people are knowledgeable enough about 401(k)s to realize that every dollar that you take out of your plan is a dollar that has lost time that it could have been invested, compounding and growing. What you may not realize is that if you take an early distribution from your 401(k) there is a "special" federal penalty tax of 10% on early distributions.

While the investment firm I used held out 10% of the value of my 401(k) for federal income tax purposes, this does not begin to cover the federal tax penalty for the early withdrawal. Also, to make matters worse, if you have taken a loan on your 401(k), and you do not pay it back before leaving your employer, the amount left due on the loan is also counted as a taxable early distribution and is also subject to the 10% penalty.

Each year I have always managed to earn a refund on my federal tax return, but in 2012 I had to come up with a little over $2,500 by April 17th to avoid the additional penalties and interest on my federal tax bill. While my total earned income from the 401(k) distribution and unemployment benefits was less than I usually make each year, the 10% penalty is an unexpectedly significant amount. The entire amount due on my tax bill for 2012 was the 10% penalty for the early distribution from my 401(k).

I cannot stress enough that if you have a 401(k) and you are short of cash that you should try every way possible to avoid taking an early distribution from your plan. If you are like me, and you find yourself without a job and you have no other way, then my suggestion is to run the numbers at the time of your distribution and plan for the 10% penalty that will be due at tax time so you can go ahead and set it aside.

Luckily, my state does not also impose a penalty tax for early 401(k) distributions, but not all Americans are so lucky. My suggestion would be to check with your state to discover if there is also a state penalty tax for the early distribution and plan for that as well.

Since I was unaware of this penalty, I only found out what was due when I completed our taxes, which left less than two months to come up with the $2,500 that was due. A little planning on my part at the time of the early 401(k) distribution in 2011 would have made this a little less financially painful and certainly less stressful.

At the time that I took the distribution, I assumed that I would eventually find another job and easily be able to rebuild my retirement savings. I was very wrong. Three years later, I am now self-employed as a small business owner and struggling, with even less means to begin to rebuild my retirement savings. Cashing out my 401(k) early was not only a costly mistake, it was, perhaps the worst financial mistake of my life. By sharing my story it is my hope that others will learn from my mistake.

Photo Credit: 401(K)2013 and 401K Calculator