Automating 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 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 year to make sure (1) you need whatever it is your paying for; and (2) to make sure your 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. The reduced cost usually requires extending the contract with the service provider.
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. But be careful, Verizon won a patent infringement case against Vonage that could present big problems for Vonage. The case is on appeal.
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 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.
Published or updated May 23, 2011.