Thursday, March 25, 2010

Bill Reduction 101

One way to have more cash to spend as you like is to have less bills to pay. This means both a lesser number of bills that you need to pay each month and a lesser amount per bill that you need to pay. Each year, usually around January, I review our bill list and see what bills I can reduce and what bills I can get rid of all together. Here's how this looks:
  • Mortgage payment. At the end of last year we refinanced our mortgage and knocked off both the number of years of payments (from 18 years left on a 20 year contract to 15) and knocked down the interest rate (to 4.5%!). This resulted in our mortgage payments, even with the reduced number of years, being about $100 less per month than we were paying before. Also, just this month, I called my car insurance company and asked about their rates for house insurance; turns out that by switching our mortgage insurance to bundle it with our car insurance, we are now saving over $200 per year.
  • Car payments. This was a biggie--the lease payments for my car were huge so at the end of the lease a couple of years ago, I turned the car in, got a bus pass, decided to share our one paid off car with the hubby...and ended up saving nearly $1000 per month!
  • Credit card bills. Since we do not use credit cards anymore, we simply pay the minimum on all of the credit card bills then choose the one credit card bill with the lowest balance and hammer away at it until it is gone. This has reduced the number of credit card bills from eight to three over the past couple of years. Soon the remaining three should be paid off. On a side note, if you are still paying off credit card debt, be sure to call the card companies and ask for a reduction in the interest rate you are paying, this can save you a significant amount of money each month.
  • Utilities. You need electricity, water, sewer, garbage, and natural gas but you can still reduce your rates on these bills by conserving. We have put low flow shower heads on all of our showers, we turn off lights and other electrical appliances when they are not needed, and we take other steps to conserve both water and electricity. We also did a bit of research and found that we could switch from weekly garbage pick up to every other week service and save money that way as well.
  • Cable TV. While cable TV isn't a requirement, most people can't imagine living without it. Each year we look at this bill and then call the cable company and see if they have a better deal. Often times this works--they will give us a promotional rate, say a $10 discount on the package that we have, for a year, at which time we call again and see what deals they have available.
  • Phone. We have done various things over the years to cut the cost of phone service. In some locations we have had great cell reception so we cut out home phone service all together. More recently we found that we do need a home phone (mostly for business purposes) so we researched the cost for regular phone company phone service vs. internet phone service and found that by bundling phone service with our internet we save about $20 per month. Other people have decided to use Skype in lieu of phone service, or switched to using cell phones only.
  • Cell phones. It always pays to review the various cell phone service plans frequently as they change often. You need to be aware of any pre-term cancellation fees you may be under before switching over, but it does pay to keep an eye on both the cell service packages that are available and also check to make sure that you are paying for the most cost-efficient service level (ie: if you only use 500 minutes a month, why would you want to be in a 1500 minute per month plan?).
  • Car insurance. We try to make sure that our car insurance plan meets our needs, both in terms of the rate we are paying as compared to the rates offered by other companies, and in the type of insurance we are paying for (ie: when the value of the car drops below a certain amount, we will take off comprehensive insurance and just go with liability).
  • Variable expenses. This category, which includes food, gas, clothing, entertainment, etc., has the most room in which to make a dent in the amount that you spend. In these areas, we tend to spend like misers (in a good sort of way). Food is bought on sale, we conserve gas by organizing our trips in the most efficient manner, clothing is bought at 50% off or more clearance sales, and entertainment is often a movie at home or a walk around the park. We realize that by living frugally in these easy-to-be-frugal categories, we have more cash on hand to spend on the things that are most important to us (like traveling to visit the family).
  • Extraneous expenses. We have cut out many expenses over the last few years that simply lopped these categories right out of our budget (and resulted in fewer bills to pay each month). These include cancelling the yard guy, the housekeeper, the gym membership, subscriptions to newspapers and magazines, etc.

By simply reviewing your bill list each year and considering your options, you can literally save hundreds of dollars per month (which can be better spent to pay down debt, bulk up your emergency fund, or pay for your CASH ONLY vacation).

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