Re-posted from AICPA.ORG
6 Money-Saving Tips You Can’t Afford to Miss
Those fun, light-hearted GEICO commercials that ask if you are tired of paying too much for car insurance hone in on the idea of wasting your money –– paying too much for something or not getting enough.
As a CPA who is passionate about making my hard-earned money work for me, it’s important to take time to critically analyze what my cash is doing. Busy lives often lend themselves to costly complacency in one’s personal finances. Basically, we want bill paying done and our retirement planning intact with as minimal effort as possible.
At least once per year, I do a serious deep-cleaning scrub on my family’s finances. I look at what we’re paying and why, and I see where we need to do better. This “scrub” saves us thousands of dollars and I suggest each of you take a few hours each year to review your finances critically. Don’t let your money run itself; it needs you to keep it on track.
Here are six tips to make your money work for you (consider sharing these with your clients):
- Carefully review your credit/debit card auto-drafts.
Did you join Consumer Reports to get insight on what car to buy and forget to cancel it after your purchase? Or sign up for other subscription services that you haven’t used in months? Review your statements for these $10-20 no-value bills. Though small, they add up quickly.
On the flip side, auto-draft anything you can to your credit card. You’ll consolidate bill paying, and get paid to pay your bills. Often, electricity, water, cable, etc., can be auto-drafted. One can easily earn hundreds of dollars each year (in points and rewards) by effectively using a credit card. But, don’t forget to pay off the balance each month! Interest on credit cards is extremely costly. I suggest setting up another auto-draft to pay your credit card bill directly from your bank account.
- Bundle your insurance (home, automobiles, etc.), and scrutinize rate increases.
These bills can significantly fluctuate each year as your insurance carrier offers new incentives or changes its rates (sometimes arbitrarily). This year, I noticed our home and auto insurance went up by about $1,500. After calling my agent, I learned that there was an explanation for some of it (insurance regulation hiked up the price), but there was no excuse for the bulk of it. After asking my agent to price shop, I decreased my bill and increased my coverage. My agent wasn’t going to do this price shopping without my nagging, but a five-minute phone call saved me over a thousand dollars.
- Review your investments.
Make sure you are deferring appropriately to your 401(k), taking advantage of company matches and profit sharing plans. Also, ensure you’re planning for retirement with other investment vehicles (IRAs, etc.). Review your portfolio, making sure it’s well-balanced. Consider contacting your 401(k) or brokerage adviser to confirm your investments (as a whole) keep your plans on track. Consider making serious adjustments the older you get; the closer you are to retirement, the less risk you may want to take.
- Know the market rates for cell phone plans, cable, internet, etc., and don’t be afraid to negotiate.
Cell phone rates have actually gone down recently as more competition enters the market. If you bundle plans with family members, you may be able to save even more. Plus, many employers offer their employees discounts for certain carriers.
Cable/internet, for example, is a bill that I need to renegotiate each year. Otherwise, they go up significantly. Call your cable/internet company and ask about promotions, and let them know you’re not happy that your bill went up. Talk to someone in their customer retention group. They usually have more flexibility to keep your rates lower (or offer you freebies like premium channels) to keep you from switching to a competitor. If it doesn’t go well the first call (and you have time and patience), call back. A different representative may give you a better deal.
- Review your debt financing and interest rates.
Prioritize what to pay off quickest based on which item has the highest interest rate. Explore where you may be able to decrease interest rates by re-financing or consolidating debt. Make an extra payment that goes directly to principal. You can save significant money by paying off your debt sooner.
- Know what you’re worth (net equity).
Annually, prepare a financial statement. Add up your assets (cash, investments, property, etc.) and subtract your liabilities (loans, etc.) to yield your net worth. Are you too heavily in debt, or saving enough for retirement? These are important questions to know your true financial health.
I use Mint.com (a free application) to track our family’s progress, but a simple spreadsheet or other system works. The point is: don’t let your finances be a surprise to you.
The AICPA is committed to helping us achieve financial security. Visit feedthepig.org for additional tips and resources to help you budget, invest and reduce debt.
Susan C. Allen, CPA, CITP, CGMA, Senior Manager, Tax Practice and Ethics-Public Accounting, Association of Certified Professional Accountants