Cut Your Fixed Expenses

Save money—without feeling any pain

by Jean Chatzky • More.com Member { View Profile }
It’s a smart idea to trim your electricity costs.
Photograph: Photo by Gregg Segal

Before I left the house today, I rushed a load of laundry into the washer, argued with a delivery service that didn’t want to leave a package on my doorstep and dealt with the fact that my dog had managed to get into something truly vile. All by 6:30 in the morning. 

Life happens. Stuff happens. Which is why, long ago, I gave up trying to control the things that are beyond my control. Particularly when it comes to money. Living through the economic roller coaster of the past 18 months has taught us all that we can’t change stock prices, gas prices or milk prices. So why worry about them, particularly when we can focus our energy on things we can fix. Like?   

Our expenses. People everywhere are coming to the realization that yes, you should spend less than you earn each month. Preferably substantially less, to create a fatter emergency cushion in the short term and subsidize diminished retirement assets in the long term. It’s an exercise that goes way beyond easing off on the manicures. In fact, I think you’ll be surprised at the money you can save if you put your mind to it. 

Lower your interest rates

Mortgage, car loan, credit card debt. List your top expenses for any month, and these likely rank among the highest. You can knock them down by working on the interest rates. First, your mortgage. Thanks to the president’s Making Home Affordable program, you no longer need 10 to 20 percent equity to refinance. You can qualify if you owe as much as 105 percent of the value of your house; you should consider refinancing if you have an interest rate of six percent or higher, says Fred Brock, author of Live Well on Less Than You Think. Start by going back to your lender for a quote on a new loan. Then, shop Web sites such as lendingtree.com for comparison. Skip the mortgage brokers this time around, as some lenders aren’t willing to work through them anymore.

For roughly $15 out of pocket, you can refinance your car loan as well—right now, the average interest rate on a 36-month used-car loan is 7.89 percent. If your original interest rate was three points higher, you could save about $35 a month with a simple refi. To do it, call a local credit union (a good source for loans). If you’re not already a member, find one at the Credit Union National Association, cuna.org.

If your credit card interest rates have soared, call your company and ask for a reduction. If the answer is no, look for a balance transfer offer at a lower rate and make the switch. It’s important to remember that paying down a credit card balance gives you a guaranteed return equal to the interest rate on the card. That makes it a better deal than just about any other investment these days.

Take a whack at your insurance bills

Too many people consider homeowner’s insurance a fixed expense because they make the payment with the mortgage, says financial adviser Ellie Kay, author of Living Rich for Less. That’s wrong. “You could save hundreds of dollars in some cases by having the policy reevaluated,” she says. “Tell the insurer you’re shopping around. It’s incredible motivation for them to look for discounts.” Those include rate reductions for improvements such as security systems and roof upgrades. Increasing your deductible to $1,000 can get you another 20 to 25 percent off. If you buy home and auto insurance from the same carrier, you can net 5 to 15 percent off both bills.

A recent survey noted that 25 percent of consumers believe auto insurance rates are standardized among companies. Also wrong. Many discounts are available; make sure you’re getting the “midcentury” rate for drivers ages 30 to 59. And watch which driver is assigned to which car: A stay-at-home parent should be on the vehicle that’s most expensive to insure. You can save by shopping around for this insurance too. Start with a quote from your current agent, then compare that with quotes from Geico, esurance.com and other companies.

Then there’s life insurance

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