Cut Your Monthly Bills, But do the Math

This year has brought all of us a lot of challenges and for many of us, those challenges related to finances. If you had financial challenges before the pandemic, the pandemic only made things worse, so it’s time top look at cutting costs.

If you search the internet you’ll find a LOT of ideas about how to cut your monthly bills. Some are good ideas, some are not so good and some are horrible.

Many of the suggestions we found were promoting websites or businesses that will help you make a change. These websites or businesses will benefit financially if you follow their suggestion or buy their product.

That is why it is so important to dig deeply into these suggestions that may sound like a good idea on the surface. When you go deeply into the details, they may do more financial harm than good over the long term.

The challenge is that it’s up to you to do the math to understand 100% what your current situation is versus what is being proposed. What may seem like a good idea at first, makes no sense at all once you do the math.

Mortgage interest rates are historically low right now, probably even lower than when you bought your home. Now may be the right time to take advantage of low interest rates and cut your monthly mortgage payments by refinancing your loan. Even a small difference in interest rates can make a big difference in your monthly payments. However, do the calculations between your current loan and your refinanced loan to compare the total cost of each until the mortgage is paid off.

If you have 10 years paid off on a 30 year loan and you refinance with another 30 year loan, you will probably spend MORE money refinancing, even if the interest rate on the new loan is lower. Be sure you calculate the total you will pay over the life of the new loan and compare that to how much it costs to pay off your current loan to be sure you are actually saving money by refinancing.

You may think you can’t afford life insurance, but if the breadwinner in a young family passes away, the family needs the life insurance to survive financially. If the breadwinner dies, how does your family manage without that income? How will they pay the bills or the mortgage or send the kids to college?

 Both parents need to have some level of life insurance to help the family survive financially. Even if one of you is a stay at home parent, how does your surviving spouse pay the cost of child case as well as the other work you do?

The purpose for life insurance is to provide money to help the family survive financially, so ask lots of questions and be sure to understand exactly what you are buying. Buy the most coverage you can afford at the lowest price. The peace of mind knowing your family is taken care of is priceless.

Most of us buy a car insurance policy and stay with the same company for years without shopping around each time the car insurance is renewed. But if you last shopped for car insurance more than six months ago, you may be overpaying.

Once an insurance company lands you as a client they will usually increase your rates on an annual basis. Experts say you should compare rates twice a year to get the best deal.

Be sure that any rate quotes you get offer the exact same coverage you currently have. You need to be able to compare rates as “apples to apples.” Also check out the better business ratings or other sites such as your state insurance commissioner to be sure you are dealing with a valid company and agent.

It’s so easy to get used to paying that monthly cell phone bill without even thinking about it. The big companies keep increasing costs even if you are a good customer and have been with them for a long time. This is an area where you should ditch customer loyalty because it does not benefit your bottom line. When shopping for a new phone plan, analyze how you use your phone. How many calls or minutes do you talk each month? How many megabytes of data do you do use on your phone each month? How many texts do you sent each month?

To get the best deal, it’s important to compare how much your current carrier is charging vs how much you would pay with another carrier for the same service. Be aware of restrictions and other Gotcha’s if you are thinking about changing plans.

You may be wasting money on your homeowners insurance policy. Make sure you’re getting all the available discounts. Speak with a human don’t just look online. Many insurance companies will give you a discount if you bundle your home and auto insurance coverage.

If you have credit card debt, you know what it feels like to have that payment hanging over your head every month. Seems like you will never get the cards paid off. The best way to pay off your credit cards is to stop using them. You will never get ahead if you keep making charges every month. It’s like digging a hole in water.

Many people will encourage you to take out a personal loan to pay off credit cards and that may be a good idea, only IF you have changed your lifestyle to quit using your credit cards. You can make progress on this goal when you stop using credit cards and start managing how much you spend and when, where and why you spend money.

Otherwise, all a personal loan does is give you more debt. You have the personal loan to pay back and if you haven’t changed your lifestyle, you also have the new monthly credit charges to pay back.

Another idea you will find about credit card payoff is taking out a home equity loan. As soon as you are unable to pay the home equity loan, you are sliding down a slippery slope and have the possibility of having your house repossessed.

It’s always a good idea to find ways to cut monthly bills but do the math before making any changes to be sure the anticipated changes will turn into actual dollars saved.

Checkout the Manage Your Money God’s way podcast for more.

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