How to Save When You Have to Spend

Very few people have the expendable income to be able to afford to travel. And neither do we. Which is why a good portion of this blog is focused on the financial aspects of traveling: how we save, how we budget, and how we spend. There are a lot of ways to manage and control your finances. One of the easiest is budgeting, a method that I follow pretty strictly. I use a Google Excel spreadsheet to track my budget, which I’ve written about here (you can download a copy of my spreadsheet to try out yourself).

Budgeting helps you manage your expenses and see where your money goes each month. But what about when you realize that your budget isn’t working out because you’re spending way too much money each month on your necessary bills- your car, utilities, insurance? Well, there are ways to ease those burdens. Sometimes it can seem like expenses such as these are necessary and that not much can be done. But that is exactly what the companies charging you want you to think. If you’ve been paying the same price on your car insurance for 3 years, it’s just going to feel like an uncontrollable expense that you probably don’t even register anymore. And that’s what they want- for you to keep mindlessly spending.

But not today, mister! Below and in the next installment of Financial Friday, I’ll explain a few really basic ways to reduce those expenses that recur every month- your car insurance, your phone bill, etc. The ones that you’ve just accepted as “they are what they are”. Now, I’m fully aware that I am a young, recent college-grad who doesn’t own a home or have investments or anything too financially deep. These tips won’t be complicated like refinancing your mortgage or anything like that. These will be actions that anyone can take and are some “step-one”s in overhauling your finances. Some will also be much more drastic than the others, but stick with me.

I’m also not a professional financial adviser and don’t claim to be one. These are just some tips that have worked for me or that I’ve learned through some of my research. So, check out the tips below, I’m willing to bet at least one will apply to you.

 

Reducing Car Insurance: Make Sure You Know What You’re Paying For

This was actually the topic that gave me the idea of this article in the first place. I recently was the victim of a hit and run on my car. I came outside one day to find my car, which was parked on the street, with a huge side-swipe mark and dent along the back corner. I was devastated. I was about to graduate and move in a few days, so money was already tight and I could tell this wouldn’t be a cheap fix.

After dealing with insurance (fun fact, even if you aren’t even in the car, damage like this will be considered “collision” and, if you have a similar plan to me, will come with a very high deductible), working through the claim, and finally getting it fixed, I got to thinking more about my insurance plan and how it compared to others. So, I started shopping around. I filled out forms on some major insurance companies’ websites and started collecting some quotes. I then called my existing insurance agent and expressed my concerns that I was paying too much.

Now, if you really do want to stick with your insurer, it always helps in situations like these to push the point that you’re shopping around and finding much better prices elsewhere and, though you love their service and company, you need to reduce your spending. That being said, don’t be rude, pushy, or dishonest. Be upfront that you need a better price and politely ask for your agent to review your policy with you. Also, don’t lie about the quotes from other companies. They know the going rates.

Side bar: It’s important to note here that auto insurance is a very tricky and complicated business. You can’t just compare the price of one plan to the price of another. There are many, many components that make up an auto insurance policy. Without going too deep into it, you need to compare all the aspects of each policy, including the different liability coverage limits (property damage, bodily injury, medical, etc.), the deductibles of comprehensive vs. collision, and other perks offered, such as decreasing deductibles, new-car replacement, and so on. Okay, side bar over.

I had my agent look over my policy and she found a “price-protection guarantee” that was actually hurting my price rather than helping it. Basically, it was meant to lock in a low price for a customer to protect them from rising rates, but for whatever reason, this was actually holding my rate much higher than it needed to be -over $400/year higher. If I had never called in, that would have never been found on my policy. Other methods of lowering your monthly premium could be raising your deductibles, getting rid of unnecessary perks (I chose to remove the new-car replacement option), or decreasing your liability coverages. That last one comes with a word of warning: first, be aware of state minimums where you live and don’t go too low just to save a few bucks a month. Second, in some cases, you may be able to go down a level for some of the liability coverages, but remember: those are your saving grace if something were ever to happen. Ask your agent for their input. I personally did not lower any of my liability coverages at the advice of my agent, but the option is there if needed. Lastly, find out about discounts. These can include multi-policy (add your renter’s insurance to your plan or link up with a family member), safe driver, college student/recent grad, and any other random discount they might offer. Just ask!

At the end of the day, just talking to my agent and asking what she could do to help me reduced my bill by over $50 a month! Car insurance is necessary, but check in with your agent and see what they can do. Of course, you can always switch insurers, too. This can be more complicated, but worth it if the savings are big enough. Just remember to compare every component of the plan, not just the price.

 

Debt: Ask for Help and Offer What You Can

Some of you may have certain types of debt that you have to pay off before you’re back in good financial standing. When I graduated, I was sitting on a small pile of medical debt. I had two not-very-but-sort-of-serious trips to the hospital while I was in school and, despite having insurance, was left with a sum of debt to the hospital and physicians.

Part one of this tip: I had been stressing about it but simultaneously avoiding the issue because I didn’t have enough money to pay them off. So, a few weeks before graduating, I called the hospital and explained my situation. I was honest with where I was at- I was a student, worked part-time, I had other expenses, and I couldn’t pay off the debt, at least not any time soon. She was completely willing to work with me. Note: hospitals and other bill-collecting agencies are much more likely to work with you if you address the problem right away (unlike me), are honest about what you can afford, and genuinely ask for help. They’d rather get small payments or partial amounts of what you owe rather than nothing at all.

She explained to me that, like many other hospitals, they offer a charity program, which typically awards anywhere from 25% to full coverage charity to patients with high balances they can’t afford. I was stoked. Because I was a student and wasn’t making too much money then, I just needed to fill out some forms, provide proof of my income level, and apply. I did all that and a few weeks later I got a letter in the mail that I received 50% charity and my bill would be cut in half. I honestly almost cried when I got that letter. Once I saw those numbers and felt a little more hope that I could actually start paying them off, I started making monthly payments, which kept my accounts in good standing. And I promise this wasn’t a random circumstance. Medical bills are one of the few types of bills that you can negotiate down. There are many strategies to this, but that’s perhaps another article entirely. The conclusion of part one of this tip: face your debt head on and be honest if you need help. It can often result in lower bills or at least payment plans.

Part two: While I got help on my hospital bills, I still had some physician bills that I let slip. This resulted in them being sent to collections. When a bill is sent to collections, it means that a debt collector has “purchased” the debt from the original source, in this case the hospital, and usually pays less than what the actual debt is worth (this is the key fact here). The debt collector then turns around and actively [read: aggressively] tries to collect that debt- they send you mail, call you a bunch, maybe try more invasive tactics which I luckily have not experienced. Now, like I said before, the key factor here is that they typically buy the debt for less than the actual bill. So, play on that.

After a couple letters and phone calls, I had a little money available, and decided to finally confront the debt and wanted to try something I had heard could work. The balance they were trying to collect was about $120. Not too much, but seeing as the bill was from 3+ years ago, I just really didn’t want to pay it. So, I gathered some courage, called them up, and offered my low-ball: “I have $75 in my account right now, if I make a payment of that amount today, can we call this done?”. She responded with a “let me check on that for you” and placed me on hold for a few minutes. When she came back, she said what I expected: “unfortunately we can’t accept that amount”. BUT THEN: “But I have been approved to offer you a discounted rate of $100.” WHAT??! YES! I went on to haggle a little more- yes, you seriously can haggle with debt collectors, just try it- and got it down to about $90. A 25% discount on a debt that is hurting your credit score and that you really SHOULD pay was pretty good in my book. Plus, that was on a pretty small debt. If you’re sitting on a more sizable debt and collectors are after you, try this! Even if the most they offer is 5 or 10%, that’s still savings on monthly payments you would be making anyway. It never hurts to ask.

Phone Plans: You Probably Don’t Need What You Think You Need

Okay, this is more of an extreme example, but hear me out: Do you REALLY need the phone plan that you have? This is one of those things where you really need to take a step back and evaluate your needs. It also involves confronting some stigmas around pre-paid phone plans. When I was growing up, prepaid plans seemed unreliable, with crappy phones, and just overall “weird”.  And that stigma stuck with me, like it probably has with you. But I promise you- that is no longer the case.

First, it is important to note that America is one of the few countries where contracted phone plans are the norm. Most of the rest of the world operates on pre-paid or month-to-month plans. The American media and marketing strategies have convinced you that contracted plans are superior and that anything else is sub-par, but that simply is not the case.

Secondly, it’s important to know that the quality is exactly the same. All the major carriers, including AT&T, T-Mobile, Verizon, and Sprint offer pre-paid plans and you can get all the new phones with those plans, too. It’s no longer just the crappy, plastic flip phones. You can get the new iPhone or Android.

Now, you’ll need to honestly evaluate your needs. For all my Apple users out there: how many texts do you actually send per month, considering how many are iMessages over WiFi? Take a look at your phone bill this month and see. Secondly, how much time do you ACTUALLY spend on the phone? If you’re the average user who doesn’t use your phone for business, probably not much. But even if you do, pre-paid can still work for you. And lastly, with the availability of WiFi at work, home, and pretty much everywhere you go, how much data do you truly use every month?

If you’re interested in trying it out, but are still hesitant, check out the plans offered by the major carriers. At the time of this writing, here were some offers from the big ones (pictured in order: AT&T, Verizon, Sprint):

ATT

Sprint

Verizon

 

For just $30-$40 per month, you could get unlimited phone calls and text plus up to 6 GB of data! Some even included other perks like international texting. And those were the unlimited plans. Dig deeper and you can find even cheaper ones with limits on texts and phone minutes, which may work for you. T-Mobile even had an offer starting at $3/month with $.10 add-ons.

I know, this may sound drastic, but it really isn’t. Take a hard look at what you actually use every month and think about if you’re willing to try something new. If it could save you $30+ per month, in some cases probably more, that’s more than $360 per year with one simple switch that you probably won’t even notice after awhile. The way I see it: that’s a cheap plane ticket or a few weeks in a cheap AirBnB…is that worth it to you?

 

Hopefully these 3 tips help you in some way. Even if none of them apply to you, maybe it will at least inspire you to start looking critically at your monthly expenses. Chances are, you’re paying more than you need to in at least one category.

Check back in on next week’s Financial Friday for part-two of this article. I’ll have a couple more tips, some basic, others more radical, but all doable by anyone.

Leave me a comment and let me know if one of these helps you or inspires you to make a financial change! Or, did you try something else that worked to reduce some of your expenses? Let me know!

 

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