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| Wednesday, August 13, 2008 |
| Efficient spending |
The Boston Globe article: Efficient spending, not belt-tightening, can produce large gains in after-tax income Scott Burns points to a Consumer Reports article which says a typical household can cut its expenses by $500 a month - by examining the cost of only six items. He is clear that focusing just on getting the most out of your dollar does not mean cutting out or depriving yourself - just not overspending on items you already use and enjoy. The magazine estimates a typical household can save:
$65 monthly by getting cheaper car insurance.
$110 by optimizing life insurance.
$200 with smart food shopping.
$35 in phone costs.
$25 in bank fees.
$65 by paying off credit card debt.
That's a lot of money.
It's important to note this isn't belt-tightening. It doesn't mean a drop in your standard of living. It's efficiency, not penny-pinching.
With a median household income of $31,987, that $6,000 a year in savings is better than an 18.8 percent raise for the median US household. When I first started blogging I went through all of my various expenses and figured out how I could save without sacrificing too much (posts below). I found big savings in switching my phone to Vonage and making my twice yearly call to my cable provider (Comcast) retention department. I also raised my car insurance deduct able and saved there. I switched some credit cards to eliminate yearly fees and transferred from airline mileage rewards to cash back rewards. Obviously I pay off my credit card balance in full every month - so the cash back helps reduce my overall spending a bit. It takes a bit of time, but focusing on your various monthly and yearly expenses can save you quite a bit of money - just don't forget to make that money work harder for you by opening a high-yield online savings account (and get paid to earn more interest to boot!)
- Reduce, Reduce, Reduce!
- Comcast, the bill, and me
- It really does pay to review EVERYTHING!
- Citi Dividend MasterCard Update
- Consumer Reports: Smart moves for tight timesLabels: Saving Money |
| posted by Boston Gal @ 9:41 AM *
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| 9 Comments: |
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I haven't read the Comcast post but I've got them figured out too. After trying three times to change my plan to the VERY basic version (with only network TV) they offered me 6 month deals on plans that were better than what I was changing from in the first place. I hope they never catch on :)
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I would be interested in looking at that Consumer Reports article, because I don't believe some of the numbers.
$65 in Auto Insurance: This one is plausible, but seems to stretch it a little bit too. This means they could save $780 per year on insurance. That seems like a stretch if the person has ever shopped around for insurance. I would believe it if they saved $300 per year on average, but to save almost $800 per year means that someone was seriously overpaying on their insurance.
$110 in Life Insurance: I realize that in my late 20's with good health I'm a low cost to insure, but between my wife and I we pay less than $50/month for 500K EACH in life insurance. It seems like with the plethora of online sources that help you find good rates for life insurance in the first place, saving $1300 per year on life insurance is a stretch.
The other ones seem entirely reasonable though. I'm sure I save more than that over the "average" on a normal month.
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It's often hard for some individuals to see how much streamlining their costs really adds up. I remember the very night I turned 25 I called my car insurance company in the middle of the night and renegoitated my plan and I literally cut my monthly premiums in half just by running the numbers through again as a 25 year old homeowner. Just about everything in this life is negotiable. If you feel that you are paying more than you should, you probably are. Go negotiate.
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The article is available at http://www.consumerreports.org/cro/money/personal-investing/saving-money/overview/saving-money-ov.htm. Each of the numbers has a different basis, so I don't think they can generalize. For example, the car insurance section talks about savings for a couple with one driving-aged son in LA, while the food section bases savings on a family of four.
I can't relate to much of the article (no car, no dependents so no life insurance, no bank fees, no credit card debt...), but I did like their point about shopping around for insurance periodically in case you've been with the same company for years. Sometimes inertia in the short term is easier than figuring out how to save money in the long term.
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I just went through this with my own auto insurance.
For years I was a faithful customer of Safety Insurance. My bill this year for our two vehicles was far too high.
I spoke to my insurance agent and they quoted me the exact same coverage levels with Plymouth Rock Assurance and I was able to reduce my auto insurance costs by $560!
All it took was a single phone call, 10 minutes of my time. People should really spend the time reviewing this. There are options now that Massachusetts has allowed some competition in state for auto coverage.
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The biggest one for our family, is losing money on our savings account interest. We switched to ING and are earning at least 2% a year more than Bank of America.
Also, every 6 months or at least once a year I review the budget and find several areas that we can trim. This month, I found that I didn't use my cell phone data plan as much as I thought, and decided to cancel it. Saved $30 a month.
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I checked on our auto insurance. We have been loyal to our current insurance company because my husband went to school with the agent and felt he would give us the best deal. We've been with them for 20+ years. After shopping, GMAC quoted us $1500 a year less than we are currently paying Nationwide. Wow, didn't realize we were soooo stupid!
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Love your blog! You've been nominated for an award here:
http://juslivinglean.blogspot.com/2008/08/thanks-cherie.html
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LOL I always love these kind of stats because they make absolutely no sense if you don't live on the coasts. We don't even SPEND $65 a month for car insurance! My MIL in NJ spends more a month for car insurance than we do in a year. It's totally true that by moving you can reduce your expenses a lot.
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I haven't read the Comcast post but I've got them figured out too. After trying three times to change my plan to the VERY basic version (with only network TV) they offered me 6 month deals on plans that were better than what I was changing from in the first place. I hope they never catch on :)