The Dark Side of Placing Your Finances on Autopilot

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Automated FinancesAutomating finances is a great way to build wealth. Perhaps the best example is setting up automatic contributions to investment accounts. Automatic contributions are standard with 401(k) accounts, but can also be set up in IRAs or taxable investment accounts. David Bach’s bestselling book, The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich, perhaps best describes the benefits of putting finances on autopilot.

But there is a dark side to automation that can cost the frugally-minded a lot of money–automating monthly or periodic expenses.

Having the cell phone bill, utilities, cable or other expenses automatically deducted from a checking account or charged to your favorite rewards credit card is extremely convenient. It also eliminates the possibility of a missed or late payment. But just like automating investment contributions, after a while, you tend to forget about these expenses.

Over time, you may end up paying more–a lot more. So while you’re working hard to cut down on the lattes, money is flying out the door on over-priced cell phone service. To counteract this problem, you can examine all of your monthly and periodic bills at least once a year to make sure (1) you need whatever it is your paying for; and (2) to make sure you’re getting the best price possible. Here are some of the expenses I’ve eliminated or reduced in the past with this method:

Cell phones: About once every year or so, I find that you can reduce the cost of cell phone service. I’ve slowly been moving my family over to prepaid cell phone plans, with Republic Wireless being the best deal in my view.

Home Equity Line of Credit: This one may surprise you, but Wells Fargo reduced the interest rate on our line of credit with just a phone call. Give it a try.

Trash Service: The trash service we use kept raising its price. Eventually I got fed up and changed companies to save about 25% of the cost.

Land line phone: We got tired of paying nearly $75/month for phone service with Verizon. We switched to Vonage about two years ago, and pay just $25.

Credit Manager: For a while we were paying $10 to Experian to get access to our credit report and to receive alerts should changes to our credit report occur. Because the expense was automated, we forgot about it after a while. We’ve since cancelled the service, and obtained a free credit report once a year.

Insurance: We check our deductibles at least once a year, to see if they should be increased to lower our insurance bill. As our cars age, we also change the coverage to save on premiums.

Cable and Internet: Our Internet provider charges varying amounts depending on the speed of service. We found that we didn’t need the fastest speed, and saved about 20% by changing to a slower, but adequate, service. The same is true with cable. Over time we had added services and equipment that we just didn’t need. Getting rid of some of these saved us considerably.

The above are just some examples. The point is to examine your monthly and periodic bills at least once a year to see what you can save. The savings could more than pay for an occasional latte.

For more details in this approach, check out my podcast on the One-N-Done method of saving serious money.

Published or Updated: April 21, 2014
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Moneymonk says:

    I never thought and never will think that lattes and movie rentals could affect your wealth.

    It is always the overhead, not the small stuff.

    Cars and Homes are always the killers

    My car insurance and student loans are the only things that are automatically I found the cheapest insurance and lowest interest rate on my loans. Therefore, I just auto- pilot

    For as the rest I rather pay, when I am due to pay. Because the prices fluctuate.

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