Sounds like an insurance ad, doesn’t it? Well, maybe I didn’t save a bundle but I did save some money and that counts for something!
I was reading a post last week (apologies as I don’t recall where I was reading, but if I do, I’ll come back and create a link) which mentioned essentially performing an annual expense audit.
I was struck by what a great idea that is. While it is something I’ve randomly done in the past, like when there’s a sudden realization that my cable bill is higher than I recall it being in the past. Or, when the cell phone bill skyrockets due to going over on the data plan.
So the other day, I had one of these random “hey, does this make sense anymore?” moments. My daughter is changing up her auto insurance and coming off the family policy to branch out on her own. It gave me a chance to look a little more closely at the rest of the policy. And I’m glad I did.
What I should have recognized earlier, but didn’t because I wasn’t paying attention, is that I no longer require comprehensive and collision coverage on two older remaining cars.
For a quick refresher, collision pays after a deductible, when I run into something or something runs into me. Comprehensive is for just about everything else that could damage the car. I like the analogy – Collision is for when I drive into a boulder. Comprehensive is for when a boulder rolls over my car.
We’ve had high deductibles for awhile and recommend to anyone who has a secure emergency fund (see my post about emergency savings) in place to consider the same. The higher amount you’re willing to pay if something goes wrong, the less you have to pay in premiums. It can be a significant savings if you’re willing to take on some of the risk.
So, that’s where I was able to save a bundle. I realized with our two aging cars, the amount of money the insurance company will pay us if we total the vehicles, after paying our deductible, is negligible. Before doing anything, I checked our car values on KBB to be sure the vehicles were no longer worth much on the market. Even though we take really good care of our cars, after a while time simply takes its toll on the value. After double checking the numbers, I then made the call to the insurance company.
Turns out that 15 minutes of review and speaking with the representative will save me nearly $450 in annual premiums. That’s a nice chunk of change. If I use the 4% withdrawal rule, another way to look at this is I no longer need $11,250 in my nest egg to support this expense going forward. That sounds much better!
Add to my year-end reviews
I’ll be making this little exercise part of our annual reviews just prior to finalizing the budget each year. While I don’t expect to be shaving significant amounts off our budget each December, I might be able to knock down a hundred or so from services we no longer need or value.
I recommend you give it a try as well. Look through your insurances, your cable and cell phone contracts, your memberships. They all add up and could be going towards debt reduction. Better yet, image you find another $100 each month from cutting out some silly expenses and redirect it into a matching 401(k) or similar plan! That could be thousands of $$$ every year going forward and that brings you closer to FIRE. Not bad.
Have you gone through a similar experience? How have you saved on routine expenses? Share your thoughts below in the comments.
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