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Five Contracts You Should Review Each Year

Posted By Jim On 03/19/2012 @ 7:00 am In Personal Finance | 6 Comments

Reducing your monthly fixed costs is one of the most impactful ways to save money. It’s impactful because one small change, which can take as little time as an hour, can yield such big results over the course of the year.

Think about how much you spend on cable television and internet each month – is it $100? $150? More? If you trimmed that by $10 a month, that’s $120 in savings. That’s worth over forty cups of coffee. Instead of focusing on not buying forty cups of coffee, look for recurring monthly costs that can be reduced.

Here are five worth looking at:

Cable Television

The cable television business is remarkably cutthroat because the marginal cost, on the cable system, to adding a new customer is negligible. I current have Verizon FiOS and a Comcast salesman was going door to door in my neighborhood trying to sign up new customers. We talked briefly about my plan and he was able to offer a slightly better plan for about 2/3rds the cost. If I didn’t have a year left in my contract, I would’ve signed up right then and there.

If you aren’t on contract with your cable provider, start shopping around. If you see a better offer, try to get your current provider to match it. If they match it, you get better service for cheaper without having to waste a day on installation. If your cable provider doesn’t match the offer, switch providers.

Cell Phone

The typical cell phone contract is two years and is typically binding, meaning you can’t cancel without paying an early termination fee. They do this because they usually take a large loss on the device, like an iPhone, with plans to recoup that, and more, over the life of the contract. Nowadays, early termination fees are prorated across the life of the contract, so a $300 fee over two years drops $12.50 each month.

If you are no longer on a contract, you should be reviewing your cell phone contract to see if you can get a better deal elsewhere. This could mean getting unlimited data, a cheaper plan, a better handset, or even going to a prepaid phone [3] because you realize you’re overpaying for minutes.

Auto Insurance

You should be reviewing your auto insurance each year to see if another insurance provider can offer the same level of protection for less. There are plenty of auto insurance comparison tools and I recommend using a few of them to find a better rate.

What’s nice about auto insurance is that you can change your insurance whenever you want. You might have been billed for a year or for six months, but you can change your insurance mid-way without penalty, unlike a cell phone contract.

Two potential gotchas:

  1. Loyalty discounts: Check to see if your current insurance provider offers loyalty discounts for policy holders who have been with them for several years. I know that GEICO used to offer a small discount if you were insured for five consecutive years. If you’ve been insured for four years and a discount kicks in after five, take that into consideration.
  2. Avoid too cheap: I’m wary of no-name insurers who offer cut rate coverage because you never know how much of a headache submitting a claim can be (or more importantly, getting that claim paid). Saving a few dollars on your premium is not worth additional hours trying to get a claim approved.

Rent

A few of my friends are landlords and they always rave about their best renters – they are clean, they pay no time, and they renew their lease every year (sometimes for multiple years). Predictability is any business’s best friend. If your lease is nearing its end, negotiate better lease terms with your landlord. This idea was very popular several years ago so these two articles (Forbes [4], Chris Thorman, Software Advice [5]) should give you a good idea of how to proceed.

If your landlord doesn’t budge, try to find a better rate elsewhere. Most apartment complexes offer great deals for new renters, such as a month’s rent free, and the only way you’ll find them is if you do some shopping. Moving can be a pain but sometimes it can pay off financially.

Netflix

If you are a Netflix subscriber, how often do you use Netflix? Or any online service like Hulu Plus or Spotify? If you love the service but don’t use it that often, consider pausing or canceling it. If you’re not at the base subscription level, drop down a few levels to match your actual use. Netflix has several levels of membership. If you are currently receiving three DVDs but only watch one a week, drop down to one and save yourself $8 a month ($96/year). If you aren’t watching any, pause it temporarily [6] and see if you miss it. If you realize you don’t, cancel it.

These five are only the beginning. I chose the ones we are most likely to have but there are hundreds of others out there. Last year I cancelled a pest control plan we had ($25/mo) and we haven’t seen much of an impact (just annoying ants in the spring [7]).

Have you done this recently and how much money have you saved?

(Photo: joybot [8], sarahreido [9], so_wrong_its_kelly [10], kevinco2011 [11], kafka4prez [12], hinnosaar [13])


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[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/contracts-review-year.html

[3] prepaid phone: http://www.bargaineering.com/articles/save-money-prepaid-cell-phone.html

[4] Forbes: http://www.forbes.com/2009/04/21/pay-less-rent-personal-finance-young-money-landlord-tenant.html

[5] Chris Thorman, Software Advice: http://blog.softwareadvice.com/articles/property-management/how-to-negotiate-your-rent-in-2010-a-10-step-guide-1060310/

[6] pause it temporarily: http://www.bargaineering.com/articles/pausing-your-netflix-subscription.html

[7] annoying ants in the spring: http://www.bargaineering.com/articles/how-to-get-rid-of-ants-safely.html

[8] joybot: http://www.flickr.com/photos/joybot/6310306480/sizes/s/in/photostream/

[9] sarahreido: http://www.flickr.com/photos/sarahreido/3245498261/sizes/m/in/photostream/

[10] so_wrong_its_kelly: http://www.flickr.com/photos/so_wrong_its_kelly/4269756721/sizes/m/in/photostream/

[11] kevinco2011: http://www.flickr.com/photos/kevinco2011/6716377819/sizes/m/in/photostream/

[12] kafka4prez: http://www.flickr.com/photos/kafka4prez/35570058/sizes/m/in/photostream/

[13] hinnosaar: http://www.flickr.com/photos/hinnosaar/2655128664/sizes/m/in/photostream/

Thank you for reading!