In the introduction to this series of columns, I promised that many of the cuts to your spending in The $1,000 Challenge would be easy and painless, so let’s start by knocking out some expenses you won’t miss –- and may not even know you have in the first place. I am talking about the metaphorical junk drawer of every family’s finances: miscellaneous spending.
These are the odds and ends that pile up, unseen or at least unconsidered, usually on credit cards or via automated checking account debits. The best part is that since you probably don’t think about them, you won’t miss not paying them. But you will enjoy the extra money you find.
My real kitchen junk drawer is filled with useless stuff I haven’t gotten around to throwing out: broken rubber bands, dried-up tubes of Krazy Glue, and a spare trunk key for my long-gone ’76 Plymouth Volare. When I first did this cost-cutting experiment, my financial junk drawer included an unused subscription to Weight Watchers Online, a forgotten e-mail account, an old life insurance policy, a subscription to an online baby-sitter directory, legal insurance, and a storage unit that hadn’t been opened since Geraldo ventured into Al Capone’s vault.
What they all had in common was that they were automatically charged to my bank account or credit card. This made them easy to overlook each month. I expected that would also make them hard to cut, requiring lots of phone calls and paperwork. But I was wrong: Cancelling them was simple, and I easily eliminated more than $130 a month in spending.
Where You Should Begin
Start by digging out your most recent credit-card bills and bank statements. Comb through them, looking for things like the gym membership you haven’t used in three years or the automatic renewal on your subscription to Cat Fancy, even though it’s been two years since Fluffy went to that Great Scratching Post in the Sky.
Get as much data as you can, and scan every charge, asking yourself whether what you’re paying for is something you actually use.
If possible, go back for up to a year. If you didn’t save the paper copies of bills and statements, you can go online and view the PDFs of your credit-card bills, or your online ledger for your checking account (though the access your bank offers your online may not go back a full year).
Get as much data as you can, and scan every charge, asking yourself whether what you’re paying for is something you actually use. If not, it’s out. If you do use it, is it something you can get more cheaply, or even for free? They get Cat Fancy, at the library, you know. (Plus you can pick up DVDs of your favorite shows and movies there, and cancel your Netflix account or avoid those cable on-demand charges, too.)
Also, look for charges such as credit monitoring services or credit life insurance (which pays off your debt if you die). You can get a free copy of your credit report from each of the three major bureaus once a year at www.annualcreditreport.com (and nowhere else). And credit life insurance is expensive and pointless. If you croak, let your estate cover your bills with the proceeds from cheaper term life insurance (or any workplace policy you have), or let the card issuer write off your debt.
Gym or health club memberships, in some cases, can be very difficult to cancel. If you find that to be the case, contact your county or state consumer affairs agency, or your state banking regulator or attorney general’s office. They can help you.
It’s harder to stop an automated debit to your bank account, in many cases, than to a credit card. Credit cards offer much more protection, so it’s wiser, in the future, to have any automatic charges put on a card, not debited from your checking account.
What You Don’t Notice Can Hurt You
It can make you feel a bit foolish when you see some of the stuff for which you’ve been thoughtlessly paying each month. For me, the worst was an old email account I’d kept open after I moved, in case any previous freelance clients wanted to contact me. I’d planned to maintain it for a year, but I hadn’t even looked at it for more than 2 years –- at $25 a month.
If I had been getting a bill in the mail every month for that e-mail account, and had to sit down, write a check, dig out my nifty return-address labels (I know they’re around here somewhere), then find a stamp, I would have cancelled that account ages ago. But the charge went directly onto a credit card, where it was easy to overlook.
There was plenty of other unnecessary spending in my family’s budget, which I detail in my book, “The $1,000 Challenge: How One Family Slashed Its Budget Without Moving Under a Bridge or Living on Government Cheese.” Getting rid of those charges was easy, and you can find cheaper options for the things you do use. Make a pact to go walking with a friend every day after dinner, and cancel your rarely used gym membership. In the case of Weight Watchers, I was already attending meetings at work, so I didn’t really need the online subscription.
Give it try: I bet you’ll find some substantial monthly savings.
And, remember to come back and post your comments and results. And look for part 2 of this series next Tuesday, when we’ll tackle another spending category where you’re sure to find easy savings: your utility bills.