Recently, a technology junkie friend of mine canceled his high speed broadband cable Internet service, in favor for a lower speed but much cheaper DSL service (this is from someone who downloads gigs of everything-online daily).
Figuring he’s on a cost cutting binge, I told him to try out BillShrink to see if he can also potentially lower his monthly cell phone bill. After a quick check, my friend figured he can do without the additional services on his cell phone plan — gone are the $15 unlimited SMS text message bundle and the $30 Blackberry internet package. A Blackberry addict saying goodbye to his data service? Hardcore.
During difficult economic times, it’s easy to cut back on any or all available services in order to free up cash flow and make sacrifices to make ends meet. Although the services my friend decided to forgo can easily be considered as unnecessary, you should still be careful when you’re cutting cost for savings! Many times, we may inadvertently scale back in areas where we shouldn’t.
Health and Auto Insurance
One of the quickest way to reduce insurance cost, regardless if it be auto, or health, is to cut liability and reduce coverage. This can be a very bad move for many of us. Depending on your situation, cutting your health insurance coverage should be the last thing on your list of cutbacks. Although you can potentially save hundreds, if not thousands per year, a health insurance coverage protects you from devastating illness, unexpected injury or accident that may cost upwards of hundreds of thousands in medical care cost.
If you’re young, relatively healthy and still in college, you may be able to reduce your monthly insurance premium to the minimum with a higher deductible — but if your household income depends on your health and well being, you should not cut corners to your health insurance coverage.
The same situation applies for auto insurance. If you’re driving a 15 year-old piece of junk beater (like yours truly) simply to get from point-A to point-B, ditching comprehensive coverage or collision coverage may not be a bad idea. But if you’re driving a brand new car that you depend on as a sole method of transportation, removing collision coverage may not be such a good idea.
If you wish to reduce your liability coverage to save money, consider carefully your situation. Are you reducing liability for yourself or for your newly minted 17 year-old driver? You should consider carefully how much you and your family can afford a setback in a worse case scenario (car is totaled, serious injury, etc.).
Stopping your monthly contribution to your various retirement accounts can be a very tempting method to gain additional cash flow, especially if your company has stopped matching your contribution due to difficult economic time. Even more so, it can be painful to continue to contribute to an account as the market continues to take a beating — but don’t let these setbacks prevent you from saving for your future.
Despite some of the aforementioned setbacks, retirement accounts, be it IRAs or 401ks, are tax advantaged accounts that provides real value when properly utilized. When you stop your contribution, you will lose the benefits of the contributions made in pre-tax dollars for 401ks and future tax savings on IRAs.
If the turbulent market worries you, consider reexamining your risk tolerance and the asset allocation in your retirement accounts. If your employer still matches your contribution up to a certain percentage, by all means, you should definitely contribute to the maximum matched amount. If you don’t, it’s simply money being left on the table.
Gym Membership (seriously!)
Although many frugality tips often suggest how you should cut monthly programs such as gym memberships to save money, for those of us that routinely frequents the gym for exercise (okay I personally don’t, but I know you people are out there), there’s little reason to sacrifice your gym membership. You can argue that many activities done at a gym can be substituted with alternatives at home and other venues — but for many people who have made a daily trip to the gym part of their morning or evening routine, it is important to realize that it can be difficult to find alternatives to replace an established routine/habit.
If your daily trip to the gym is your only source for exercise, there’s no reason to cut back. A continued strive for a fit and healthy body will do wonders both for your well being and your future pocketbook as you save money on potentially expensive health care cost.
This is another cut back that may end up costing you in unexpected situations. While we’re quickly moving along in the wireless and VoIP age, for many people, there are still many good reasons to have the reliability of a landline available at home.
Take emergency 911 calls for instance, where a dispatcher can use a phone number database to quickly send aid to a caller’s location. With landlines, you don’t run the risk of not having a cell phone signal during emergency situations and interruption to service during severe weather condition such as storms. Consider this, when was the last time you picked up a landline phone and wasn’t able to make a call?
While ditching landlines may make perfect sense for young college students or young professionals on the go, it is less of a practical solution for households with a big family. If you’re considering cutting your landlines service to save money, consider cutting only services such as long distance or find cheaper alternatives to long distance services. Generally, long distance service provided by your local telephone company is not the best available out there. Check out this long distance rate calculator if you want to do some shopping on long distance call plans.
Liked this post? If so, subscribe to Shrinkage is Good and we’ll be sure to keep you well stocked on money saving advice.