Any good business needs to get revenue and also needs to control expenses in order to be profitable. Personal finance is no different. You went to school and have some kind of career and that gets you revenue. You have some influence on your revenue but you definitely can control a lot of your expenses.
I routinely review our expenses to check if we are getting the best deal we can. Below is a list of what I check and a very brief explanation of how I check it. These bullet points will fill in with links to articles that go more in depth over time so check back here every now and then.
- Credit score – Once per year, you can go to The Federal Trade Commission and get free credit reports. Some credit cards and bank accounts do also offer your credit score as a legit feature. Make sure your report is accurate and see what you can do to improve your score.
- Interest rates on mortgage and car loans – check sites like Bank Rate and local credit unions to see what current rates look like. Consider refinancing if rates are lower than your current rate, or if your credit rating has improved so that you qualify for a lower rate.
- Interest rates on student loans – look at current rates to see if you can get a lower interest rate on your student loans.
- Interest rates on personal or credit card debt – if you are carrying a balance, you should probably pay it off ASAP. But if that’s not feasible, consider a 0% no fee balance transfer or a peer to peer loan such as those offered through Lending Club to lock in a lower interest rate.
- Electricity – If you live in an area with multiple electric companies, check if there is a lower rate available to you. Also, check if you can lock in a lower rate even with your existing company. If you have neglected this, you may be paying a significantly higher month to month rate.
- Cable/Satellite TV – Consider cutting the cord. But if you really can’t live without commercials interrupting TV you are already paying for, trying to sell you stuff you don’t need, at least check if there is a competing offer at a lower price than you are currently paying.
- 401(k) – If your employer offers a 401(k) plan that matches a portion of your contribution, make sure you are contributing at least enough to get the full match available. It’s free money. For most people, putting as much as you can into your 401(k) or other tax-deferred employer-sponsored plan is the easiest and most tax-efficient way to save for retirement. Don’t worry! You can access those funds before regular retirement age through various methods I’ll go into later. Just save enough to retire early, then worry about withdrawing correctly to avoid penalties.
- Employee Stock Purchase Plan – Does your employer offer a stock purchase plan with a match or discount? Consider participating. Do you have a lot of money in company stock? Get your match, then sell when you can and invest the proceeds in an index fund.
- Investment fund fees – Check what fees you are paying on your investments. If your investment funds and what fees you are paying, also called expenses or expense ratios. I use Morningstar, enter the symbol or fund name in the Quote search field. Check the top right corner where it says ”expenses”. If you see over 1%, you are probably paying too much. Read up about how most active funds underperform passive index funds, but charge much higher fees. Check what funds are available to you in your retirement plan and see if there are any good performing low fee funds available to you.
- Broker fees and margin interest – If you’re a trader and paying more than a penny per share commission or more than ~2% margin interest, you’re probably paying too much. Compare your broker to a low-cost broker like Interactive Brokers.
- Home security monitoring – Check what you are paying to have your home alarm system monitored and see if there is a better deal out there.
- Mobile phone plan – Shop around for a better phone plan. As a light data user, I use Google’s Project Fi plan which only charges for the data you use and the price is $10 per GB (save $20 if you use this link). I make it a point to use wifi where available so my data usage is very low and my bill is usually low $40s.If you use a lot of mobile data, you may be better off with an unlimited plan such as T-Mobile One for unlimited 4G or their pre-paid $45 plan (no credit check) that gives 4GB of 4G LTE data then unlimited 3G after so there are no surprises on the bill.
- Insurance – Check what you are paying for homeowner’s/renter’s and auto insurance. Ask your independent agent to check if you are getting the best rate.
- Memberships – Gym, country/dining club, pool, clubs, yoga, massages, etc. Are you making full use of these and getting value or have you forgotten that one of these is still charging you even though you no longer go?
- Subscriptions – Same as memberships. Are you getting full value or are people charging you for nothing?
- Home warranty – In my personal experience, these are generally a bad deal. If you can budget to save for a rainy day/maintenance fund, then you probably don’t need this. Also double check the fine print, especially the limits. Think your warranty will pay to replace a failed HVAC system ($4000+)? Doubt it.
- Credit Card Annual Fees – Evaluate the annual fees you are paying on credit cards and make sure they are worth it. Check what features you have and if any cards are duplicating or have overlapping features causing you to overpay. Cards with $400+ annual fees are quite popular now and having the right one that fits you can be a good value. But if you have more than one high fee card you may be paying for the same benefits several times over. Do you need four cards with airport lounge access? You’ll often get a pro-rated refund on your annual fee if you cancel early, even after receiving your sign up bonus…
If you address everything on this list, you’ll probably save hundreds per month, which comes to thousands per year, and maybe a million over a lifetime after invested. I go through this at least once per year to keep it locked down.