You can save a lot of money simply by spending an afternoon examining your bills and making sure that they are valid and the best value for the money.
For all of my home organization and financial tips, also see How to De-Clutter Your Finances and Live Debt-Free.
How We Save $1000s Each Year
The first year we did started using the methods you’ll learn here, we shaved $3800 off our bills and we have continued to save money every year since then.
One of the top reasons many of us overpay for services we use every day is because we simply don’t have the time to deal with them. We let things carry on because it seems so daunting to find the time and information we need to make better choices.
Need an easy bill tracking system? Here’s ours: Easy Bill Payment System.
To combat this, many years ago we started booking off our regular work for a couple of days a year to make time to negotiate contracts including household services like cable, internet, phones, as well as insurance policies.
It may mean missing a few day’s pay (a couple of days per year) or using some vacation days (if you have them) but ultimately you may be able to save much more than you would have earned over a few days.
I’ll walk you through the steps. Keep in mind that we live in Ontario, Canada and our experience pertains to how businesses are run here. It may vary greatly where you live.
It is imperative that you do your homework first and remain pleasant but firm (and knowledgeable) throughout the negotiating process. Anger and aggression will not get you what you want.
If you have any questions after reading everything, let me know.
Go for Value not just Cheap
The goal here is to get the best value for your money and ensure every service you use is necessary and actually providing what you need at a fair price. In many cases, cheapest may not be best, so there’s some homework involved to make the best choices for your family and finances.
It’s Not Fun but It Pays Off
It’s not fun spending a day or two at the computer, reading contracts, researching competitor’s prices, and making phone calls, but, again, if it can save you hundreds or thousands per year, it’s worth it, right? And, once you’ve done it a few times, you get familiar with how things roll and it becomes less daunting and more like game you really want to win.
To make this work, you’ll need to keep thorough notes (even if they’re scribbled on a page-hang onto them-they’ll save you time next year) and do the math. You need to know exactly how much you’re paying and how much you’ll be saving.
Here’s what we do.
1. Stop Unnecessary Services
The first step is to know every single bill you pay, whether it’s daily, weekly, monthly, or annually.
This post shows how we organize our bills into a super simple payment and filing system:
If your papers are not in order, do this first.
Next, have a look at every single bill and service you pay for. Do you really want and need all of these services? We’re in an era where cell phone costs and things like cable TV are quite expensive, resulting in hundreds or thousands of dollars of extra costs per year. Can you live without them? Could you scale things down?
- Switching from a $120/month plan to a $70/month plan saves you $600 per year.
How Do I Know If I Can Afford This?
- If you’re living within your means (earn more than you spend), debt-free, and have a solid emergency and retirement funds in the bank, there’s room for extras. (Yes, my standards are high.)
- If you’re living beyond your means (spend more than you earn), carry debt, lack emergency savings or a retirement fund, sacrifice is probably going to help you turn things around and get back on your feet.
Obvious targets for cutting costs are things like extravagant mobile phone plans and cable TV. These can add up to thousands of dollars per year. Scale things down so you’re living within your means.
Do not get rid of essentials like home or auto insurance. They are often legally required and it’s not worth the gamble. Cut luxuries instead. You can live with less data roaming on your phones and less than 700 TV channels. Really.
2. Learn the Jargon
One of the most intimidating things about negotiating contracts and services is a lack of familiarity with the terms they use. If you want to get real with your bills and get the best value for your money, you need to understand what you are and are not getting.
To do this, I started reading every single statement and agreement from start to finish. When I did not understand a term, I googled it. There were growing pains but I gradually started to understand what was being said, and, in some cases, what was missing.
You may think your home insurance will cover you for flood or tornado damage, but, surprise!—it probably does not. Educate yourself now so you don’t have heartbreak later. And, by speaking their industry language, when you do call to get better prices, you will actually understand what they’re saying!
A key place to save money with insurance policies is to examine deductibles.
- Reducing auto insurance by $60 per month by increasing some deductibles saves $720 per year.
Yes, you will have greater out-of-pocket costs in the event of a claim, but this may more than cover it, especially if you look at this as an annual saving (and you’re claim-free).
I keep a prepared set of questions to ask each provider. Write everything down and never rely on a phone conversation as a contract.
If they promise you anything (e.g. your rates will not increase after one year or assure you that you will be covered in the event of a natural disaster like a flood), ask to have it in writing first before you sign a contract.
3. Research and Negotiate
Everything is negotiable. Again, look at every bill you pay. If you cannot or do not want to stop some of these services, research whether you’re getting a fair deal.
Each year we review everything including cable TV, internet, mobile phone services, home, life, and car insurance, and any other fees we pay. If you’re paying bank or credit card fees, there are probably better options.
- $25 a month in bank fees = $300 per year
- Switching to a no-annual-fee credit card saves $125 per year.
- Switching to a no-fee credit card that includes auto club saves $150 per year.
Again, it’s not about being cheap (or cutting essentials), it’s about doing the best you can with your money with the options available to you.
- Start by asking friends and family what they pay for the same services.
- Check websites to see advertised rates for your services and their competitors.
- Check online discussion forums to see what others are paying.
- Check for deals, promotions, coupons, and discounts available.
Ready? It’s Time to Make Those Calls
Armed with this research and your list of questions, contact your service providers and see what they are willing to do to keep you as a customer.
Tell them you need to reduce the cost of your bill and want to know if there are any discounts or promotions available.
Often they offer more services for the same fee. I don’t want to be distracted by more cable stations and instead hold firm to get a lower price.
When they’ve given you what they claim is their best offer, ask is this the best you can offer me?
- Cutting a cable/internet package down from $300/month to $175/month saves $1500 per year.
If you know you there are better prices available, consider switching. This usually requires making several calls to compare all of your options. Keep notes, do the math, and determine which one is the best choice (price, value, reliability).
Watch out for short term deals: lots of services offer great first year prices but lock you in to higher prices for any remaining years in the contract to recover the discounts they gave you.
Insurance companies do not like customers jumping around so they often only give discounts after several years of loyalty. You have to do your homework and know the fair, going rates. Also research what others have to say about claims they have filed. We had one insurance company give us such a hard time for a no-fault car accident that we considered suing them for our damages (pain, suffering, and time wasted). If we hadn’t taken the time to fight them, we would have lost thousands of dollars in the claim.
In some cases you will need to contact the ‘retentions’ department instead of customer service to be able to negotiate the best price. Do not threaten to leave unless you really are going to pull the plug (and never be angry or annoying. It never helps.) These days it seems they only give that final (good) offer when you are actually arranging to leave. I hate these games but that’s the way it is.
Found the Right Deal?
- Get everything in writing.
- Be clear on exactly what you will be paying and what the billing cycles are.
- Make a note in your calendar for the next negotiation period. It may be 1-2 years from now. Allow yourself a month from the deadline in case it takes time to make new arrangements.
- Keep your notes to refer to next time. Add up your savings. This will cheer you on.
4. Keep Current
Sometimes things like mortgage rates or internet provider costs jump around so much that it may be worth renegotiating mid-way through a contract. There’s often a penalty to break a contract but, if the new fees are that much better, your savings may exceed any fines or penalties you have to pay. But you have to do the math to be sure.
One problem we’ve encountered over and over again is that the sales person on the phone is not actually aware of the hidden or additional fees so you cannot take their word for it. You’ll have to do some digging. This is where it can be helpful to ask on discussion forums to see what others have experienced.
If you have a hunch that you could be doing much better with your mortgage, you need to find out every single cost (at opening and closing) before you enter into a new contract. The extra fees might wipe any savings you’ll make. Especially if a lawyer is needed for the paperwork.
We once renegotiated a mortgage where I was so certain the bank manager was wrong about the discharge fees that I had him give me a signed letter stating exactly what they would be. As predicted, he was wrong, and we saved ourselves $600 dollars because he had to back the note. Sometimes The Man doesn’t even know he’s The Man!
That said, arm yourself with knowledge, know current rates, and if you see the markets shift and there’s significant savings to be gained, do your research and see if it’s worth acting on.
5. Adjust your payment schedule
How often do you pay your bills? Could there be a better way?
The most obvious one is to increase how often you make mortgage payments. Switching from monthly to bi-weekly (every two weeks) or, better still, weekly, yet paying essentially the same amount, can save you a huge amount of interest payments over a long amortization period.
- $250,000 mortgage with a 5% interest rate and 20 year amortization period.
If you make bi-weekly payments (every two weeks) instead of monthly, over the 20 years you will save $21,389 in interest.
Do you pay late fees?
Set up a reliable bill paying system (this shows how we do it) and automate as many payments as possible. This doesn’t mean you don’t check every single bill-you have to-but it ensures they are always paid on time. You can dispute them even after payment.
- $15 late fees per month = $180 per year.
Do your homework and see if you can make your money work harder for you. And stop paying The Man when you really do not have to.
6. Take control of your finances
Don’t rely on a partner to take care of everything! Share the task or split it up. But no matter what, both of you should know where to find all the paper work, computer files and passwords, what the current bills and contracts are, and how to pay them. Don’t make me have to spell out why this is necessary. We are not immortal. Okay, I guess I just did.
- By taking a few days a year to research and arrange better services (cost and value), you may save yourself hundreds or thousands of dollars per year.
- Consider every contract to be negotiable.
- Learn the jargon. Do you read and understand your contracts? It’s time to school yourself so you’re able to confidently negotiate any deal and understand what it is included (and excluded) from the service or policy.
- It’s not just about the lowest price. You want good value and fair deals for longer terms (not a cheap year followed by overpriced ones).
- Get everything in writing. A sales person making a promise on the phone is not a contract.
- Stop any unnecessary services or ones you cannot afford and can live without. Yes, that means cable TV and overpriced mobile phone plans. If you live in a city, free Wi-Fi could save you lots of dough.
- Consider changing your payment schedule for additional savings. Automated payments avoid late fees and a weekly or biweekly mortgage will save you a lot of money over a long amortization period.
Show The Man you are the boss of your money.
I hope this encourages you to shave some costs off your bills. If you do, let me know how much you save. I love it when anyone takes control of their finances.