Do you ever find yourself frustrated because after reading so many articles about saving money you realize that you are already doing all the tricks under the sunt? Sometimes I wish I was the latte drinker, so I could just cut it out and save a ton. We budget, plan meals for six, get down with almost every DIY out there, side hustle, etc, etc, etc. At the end, we feel like there is no much more we can do other than keep riding towards FIREville slowly and steady.
With that said, sometimes you do hear advices from different bloggers and podcasters in the FIRE community that stick with you and kind of become part of your toolbox. One of those tools that always has stuck with me was the words of J. Money at budgetsaresexy.com who I heard once saying â€œmake sure you challenge every expense in your budget.â€ Yes, budgets can be a pain at the beginning but once you got yours down it becomes the most eye-opening experience financially speaking. Not only you realize where your hard-earned salary is going but it also helps you to project how much you will need in future months, as well as it can give you a starting point in your FI journey( I did it to figure out My Plan)
Anyway, 2018 was a great year for my family. We managed to stay completely out of credit card debt, and we got used to budget and track our income. We also managed to pay cash for a brand-new roof and keep our saving ratio untouched.
We have gone through each item in that budget scrutinizing how much we are spending in each category and how we can either cut back in expenses or tame the wildest beast called â€œmiscellaneous.â€
Now, some expenses are a true pain in the Arsch. Why? Because they are time consuming. They require research, looking up terms and lingo that you are not familiar with and sometimes you even do some reading your state laws to make an educated decision.
For a while, I have had my eyes on our car insurance. It seemed to me that $100 a month, $1,200 a year for two cars was too much; just as a speculative observation. Regardless, I was thirsty for some more savings and $100 a month seemed like an opportunity to challenge. But again, I needed time to do my due research and shop around for better options. I didnâ€™t want to call my agent without knowing exactly what is in my coverage and end up confused and intimidated with all the jargon.
With the arrival of my teacher summer break this was on top of my priority list.
As I mentioned before we were paying $100 monthly for two cars. We have a Corolla 2004 (177k) and a Dodge Caravan 2005(140K). Our lives unfold within a 15-mile radius. We havenâ€™t had tickets in more than 6-7 years. My expectation was to lower that bill to maybe $80. That would have made me very happy.
Starting July 2019 we will be paying only $40 a month for both cars, which will save our family $720 yearly. Another added bonus this was that we realized we never added our new (used) car to the policy. That would have been a huge disaster if one of us would have gotten into an accident!
Let me explain. We used to have a Grand Caravan that died with a transmission problem and we went on to buy another used Caravan; notice itâ€™s not â€œGrandâ€ but just Caravan. Since the insurance card still said Caravan the needed change went unnoticed. We have 4 kids, super busy tending to them and we missed. No excuse though. It was a terrible oversight.
This makes reflect on the importance of looking carefully into all these things. Many times we all tend to pay things as we go and we donâ€™t question much.
Itâ€™s scary to think that if we would have gotten in a car accident with that car, we could have been found ourselves in a predicament with no insurance to cover for damages, potentially sued, etc, just because we did not make a simple phone call to change it.
Straightening this up is probably the greatest saving of allâ€¦
Slaying $100 beast: What we had and what we have nowâ€¦
Well, in terms of liability everything stayed the same. Our coverage for our liability under â€œBodily Injuryâ€ stayed 100K for each person involved, 300K each occurrence. This is what my coverage would be if I get in a car accident, someone gets hurt. My insurance will cover that amount.
Under property damage, which would pay damages to other vehicle I wanted to cut back. However, it seems to be a preset with the â€œBodily Injuryâ€ coverage I mentioned before and there was no additional cost. So I kept that. My reasoning for trying to cut back was the fact that the average cost for a brand new vehicle in the U.S. is 36K. I figured, I could go with half the coverage for property damage (50K, rather than 100K) and save some but it wasnâ€™t possible. So that stayed at 100K as it was.
I care less about our cars. That is the bottom line. I donâ€™t brag about my cars or are a topic of conversation unless I am talking about savings, FIRE or if I am bragging about how many miles they have; now that last one is a badge of honor,
To me our cars are temporary vehicles to go from point A to point B. They are old cars that have served us well, but I have no emotional attachment with them.
This came up as I was talking to our agent and we were going through what they call comprehensive coverage. If you look at your policy, which I highly recommend, you will find a section that says â€œUninsured Motorists Insurance Limits.â€ Under this section you may find the comprehensive insurance coverage; at least with Allstate thatâ€™s how they call it. Basically, it means that you will be covered for some categories in the given case that the other driverâ€™s insurance is not enough to pay.
Now, what they call comprehensive coverage is kind of camouflaged in the same section. Our agent explained to me that this is what would cover us if a branch falls on the car and breaks the windshield, or the car is in a hail storm (it just happened a week ago), the car gets broken in or hit by a lightning, etc. Well, the problem is that there is a deductible that comes with that coverage and it is $500. It is also costing us $20. Not much, but I like how $20 look in my account.
The other money pit was the auto collision insurance for uninsured motorist. In other words, if I get in a car accident and the other driver is at fault and his/her insurance is not enough to cover my damage my insurance will kick in. Sincerely, I am not interested in this for the same reason I mentioned before. We have old cars. The most we could get for our cars is around 2K and this coverage was costing us $114.
Finally there was the â€œautomobile
medical paymentsâ€ for underinsured motorist. This works in a similar way as the
â€œauto collision.â€ In the given case I get hurt or one of my car passengers if
the other driver at fault is underinsured to cover medical expenses my insurance
would kick in and over my medical expenses. This sounds great and plays with
your emotions too, but we have a terrific insurance policy with my school
district. If I end up in a hospital due to a car accident my health insurance would
pay. So, auf wiedersehen with that too!
There were few other fees that were eliminated with the comprehensive insurance change.
So, our new car insurance monthly fee will be $40 instead of $100.
Since I started writing this post and looking into the numbers something didnâ€™t seem quite right. I was told I was going to pay $40, but looking at the statement for the next billing cycle it says 320.58. Divided by 6 months it comes up to $53. $13 difference.
I had to call again to clarify and this is whatâ€™s happening. For the next two months we will pay $40, after that it will be $53.
Bummer! Still god savings but not as good as it once seemed.
However, in the conversation my agent told me that I could get a 10% discount if I pay six months in advance instead of installments. That would bring my premium to $288 for six months ( $48 monthly in my budget).
But wait there is more. If I go paperless, they will give me another 5% off. The premium would be $272 every six months ($45 in my budget or insurance bucket).
|10% Discount for paying 6 months||-$32|
|5% Discount for going paperless||-$16|
|Six months savings||$328|
|1 year savings||$656|
|Cost opportunity for 20 years at 8% return||$32,421|
As I was looking into all this, I had to go into our van glove box to get the policy number from the insurance card. Sure enough the one I found was expired. I told my wife to make sure she had the updated one. At some point she had to leave, the kids are fighting over who sits where, who walks out the door first, etc. She forgets about the card.
Five minutes later, she calls me to tell me she was pulled over because one of the headlights wasnâ€™t working and she has no insurance card. Really? I couldnâ€™t make this up.
Luckily, since I went through all the trouble of creating for the first time my login with our insurance company I was able to pull it up right away on the screen, take a picture and text it to her. We got only a warning ticket.
Can we call that a $150 savings?
This is still unfolding and hope
the savings remain the same through the year.
The discount was not as good as I thought it was at first but saving $656 a year I think it is still good enough to be happy about it. I think it is terrific. Especially when I never can find where to cut more than what we already cut.
The lesson though, is we all need to find the time within our busy schedules to scrutinize our expenses. There are hidden fees everywhere, and we just pay them sometimes because we donâ€™t question them in the first place. We get used to paying the same amount month after month and we never look back to unveil hidden fees or things that we simply do not need or want to pay for.
Fees that sometimes are disguised with a â€œrecurring feeâ€ label or â€œbilling origination fee.â€ A cloud synapsis fee or any other bullshit they can come up with to charge you more. Companies know exactly how to play these word games and appeal to your emotions to achieve their ultimate goal: take the most they can from you.
Another lesson from all this is the importance of staying on top of anything that has potential to become a legal issue or lawsuit against you. All it took me to figure out exactly what I have in my coverage was a phone call and a bit of time. Logging youâ€™re your insurance company website will provide you with most of the information you need to know.
Last but not least, like the cool dude with the mohawk ( J. Money, that is) says: Challenge every single expense.
Have you been able to rack up any good savings after reading other bloggerâ€™s recommendations? Feel free to share any mega savings youâ€™ve gotten or over-sighted for years.
*** Disclaimer: This post is simply my opinion based on my own experiences. By no means this intends to be a recommendation of what you should do. I am not a professional or financial adviser and take no responsibility for other people’s actions after reading this. Seek professional advice.***