Photo: Andrew Bordwin
By Owen Thomas and Amy Kover
Ten ways to plug hidden financial leaks.The Leak: Paying Bills by Snail Mail
The fix: The average household receives about 15 bills a month. With stamps now at 42 cents each, you spend about $70 a year just on postage―and don't forget the late fees if your checks get lost in the mail. Save time and money by signing up with the billers' customer-service departments to have your bills paid by credit card or automatic debit; payments will be documented on your monthly bank statement. If you want more control, almost all major banks offer free online bill payment, which lets you schedule payments in advance.
Savings: Almost $70 a year in postage.
The Leak: A Cell-Phone Plan That Doesn't Match Your NeedsThe fix: Too many minutes and you're wasting money. Too few and the overages can send your cell-phone bill into the stratosphere. On average, according to the consumer research firm J.D. Power & Associates, cell-phone subscribers use only 64 percent of the minutes they pay for. If you're still under contract, call your cell-phone company and ask it to analyze your usage. You may find that buying fewer monthly minutes but, say, getting unlimited evening and weekend minutes may work better than a more expensive plan―and you won't pay a termination fee of $100 or more. If your contract is up and you're thinking about switching carriers, shop for the best plan on myrateplan.com/wireless. Analyze special offers carefully.
Savings: An average of $16.50 a month, according to J.D. Power & Associates.The Leak: Letting the Water Run
The fix: Turn off the tap while you're brushing your teeth or shaving―every minute the water flows wastes up to 2 1/2 gallons, according to the Environmental Protection Agency. Run full loads in washing machines and dishwashers. Water plants in the early morning to ensure that the water goes into the ground instead of evaporating. And use a bucket to wash the car, hosing it off for a quick rinse, to save 90 gallons of water per wash. For more conservation tips, go to the California Urban Water Conservation Council site, at h2ouse.org.
Savings: $189 a year, or nearly 40 percent off the average U.S. household's annual water bill of $476, according to a study prepared for the National Rural Water Association.
The fix: Review your insurance policy annually with your agent or a customer-service representative. Does your home owner's insurance include the value of the land, for example? The land isn't going anywhere, even in a twister, so you don't need to insure it - just the structure and your belongings. If you have an older car, the annual premiums and deductible might make collision and comprehensive insurance cost more than the car is worth. On any insurance policy, auto or home, think about a higher deductible. Because filing numerous small claims can raise your insurance rates, you may be better off covering minor losses yourself and getting a lower rate with a high-deductible policy. You may also have unneeded special riders on high-value items you no longer own - an heirloom ring you gave to a daughter for her wedding, for example. Or you may be paying for off-premises property coverage, which covers loss of goods outside your home, when you rarely if ever carry around valuables. If you think you might be overinsured and want an opinion from someone besides your agent, go to the Insurance Information Institute site, at iii.org.
Savings: 15 to 30 percent on home and auto bills.
The Leak: Frequent Trips to the ATM to Withdraw Moderate Amounts of CashThe fix: On average, consumers withdraw $60 from an ATM four times per month, estimates David Gosnell, an editor at ATM & Debit News. That's about $240 a month in unaccountable spending. "As soon as you turn money into cash, you have no paper trail," warns Deena Katz, a financial planner based in Coral Gables, Florida. Instead, withdraw the exact amount of cash you'll need each week from your bank (to avoid other institutions' $1.50 to $3 ATM transaction fees).
Savings: Vary.The Leak: Eating Out on Vacations
The fix: Book a suite with a kitchen at an extended-stay hotel, which charges on average from $30 to $100 per night, according to a 2005 report by the Highland Group, a hotel-industry market-research company. Even if you have to pay a bit more for the accommodations, you'll easily save money by not taking your family out for breakfast ($5 a person), lunch ($10), and dinner ($15).
Savings: $70 or more a day for a family of four after the cost of groceries.
The fix: Sign up for overdraft protection and link a savings account, credit card, or line of credit to your checking account. Almost all banks offer this service for free or for a nominal annual fee of $5, and they typically charge $3 to $5 per transfer. You're responsible only for paying the interest on any credit you use, and you can avoid that by using the money in your savings account as your backup.
Savings: $14 to $100, taking into account bank and merchant penalties.
The Leak: Getting Cable, Internet, and Phone Service From Three Different ProvidersThe fix: Consider a package deal from your local cable or phone company. You can get digital phone service, which is provided by a broadband Internet connection, high-speed Internet, and digital channels for much less than you'd pay separately. For example, Comcast currently offers all three services for $99 a month in the Northeast (price varies by region), a 33 percent savings over the ‡ la carte price. Start by shopping for Internet access at BuyTelco (buytelco.net); then ask local providers what deals they offer when you bundle with phone and TV service.
Savings: $10 to $20 a month.The Leak: Paying the Minimum on Credit Cards
The fix: The average U.S. household carries a little more than $9,000 in credit-card debt, according to CardWeb, a payment-card research site. At an average annual interest rate of 13 percent, you'll spend almost $1,000 on finance charges alone in one year. Savings accounts earn little to no interest, so dip into them to pay off your balance. If you don't have savings, pay double the minimum and slowly increase your payments each month. "You will work off the balance faster and reduce the total amount of money that you will pay out over the long term," says Nick Jacobs, a spokesman for the National Foundation for Credit Counseling. Pay off higher-interest credit cards first, and never skip a payment, which can result in a late fee of $35 or more and an increased rate on all your credit cards. To calculate the most efficient payment schedule, visit creditcardnation.com and click on "Debt Zapper." If your bills are out of control, contact a nonprofit credit-counseling service, such as the Association of Independent Consumer Credit Counseling Agencies (aiccca.org), to locate a counselor who may be able to help you negotiate lower rates with your banks.
Savings: $10 to $20 a month.
The Leak: Paying an Annual Fee of $60 or More for a Frequent-Flier Credit CardThe fix: Frequent-flier cards make sense only if you charge $10,000 or more annually. For most people who pay off balances monthly or don't charge much, a no-annual-fee cash-back card, such as the Citi Dividend Platinum Select MasterCard (citibank.com) or the Chase Cash Plus Rewards Visa (chase.com), is a wise bet. Both offer a 5 percent cash-back rate on grocery, drugstore, and gas purchases and 1 percent on all other purchases (standard maximum rebate is $300 a year). Other cards may have a higher maximum cash-back reward, but you have to spend more or follow complex rules to earn it. If you carry a balance, forget reward or cash-back cards altogether and opt for a card with a lower interest rate. Switching from a cash-back card with a 17 percent rate to a no-frills card with a 10 percent rate can save you $350 a year on a $5,000 balance. Compare credit-card offers at bankrate.com.
Savings: $60 a year.Click here for the full story: 10 more leaks, and up to another $1,000 in savings
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