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Part 2 – Saving Money and Reducing Costs

I received a few suggestions that perhaps I need to take the 5 steps I laid out in yesterday’s post and provide a specific example where I was able to save money and reduce my annual recurring costs.  Hopefully this example helps. (In very simple, non-technical form)


Let’s take my mortgage for example.  Given the recent lower mortgage rates, I was looking into refinancing my 30 year to a 15 year to 1) Pay off my mortgage quicker and 2) Pay a lower monthly mortgage than currently.


The first step I took was to work with my current bank to see what rates and closing costs they were able to provide me.  From my experience, working with the same bank as your current loan should yield the most savings, but sometimes you may be able to find another bank with lower closing costs.


The second step is to compare what you have been offered by the various banks.  The trick here is that mortgage rates are always changing, so you’ll have to do most of your research in one day and conduct your analysis immediately to lock in the rate.  Now if you’re like me and like to gamble with even lower rates in the coming days, you can always just wait it out and do your research over the course of a week or 2.  The only risk there is that the rates will increase, thus payments will increase, and you end up saving less in the long run.  Closing costs pretty much stay the same and are always negotiable.


The third step, is to then lock in the rate with the bank of your choice.  Based on your comparative analysis in the second step, you should have an idea of which bank will offer you the best rate / monthly payment at the lowest closing costs.  Let’s focus on the closing costs for a moment here.  Even though from your comparative analysis it shows that the closing costs for one bank is higher than the other, doesn’t mean you can’t go after and lower those closing costs.  Always do a line by line review of the final costs that the bank will provide to you.  ALL COSTS ARE NEGOTIABLE.   Remember that with a mortgage you are initially paying off your interest first, and then your principal.  So essentially, they are getting your money upfront and for the next several years.  You might as well try to lower your initial costs so you can keep more in your pocket and not theirs!

The fourth step, is to now put away the additional savings you have each month from your lowered mortgage rate.  Depending on the amount of your closing costs and how much you have lowered your monthly mortgage, it may take you several months to pay off the initial closing costs.  However, after the break even point, all that is reduced in your monthly mortgage is saved into your pocket!  Simple.


The fifth step, if you wish to do is to take some of that savings from your lowered monthly mortgage and use it towards your principal.  Doesn’t have to be much, $50-$100.  But it adds up and helps you pay off our mortgage quicker and become a TRUE homeowner sooner!


Again, I welcome any feedback on this.  As this was my own experience I would love to hear others!  Also, please correct me if any of my content is incorrect or doesn’t make any sense to you.  This is just my forum to discuss anything and everything on my mind…and right now its savings!



New Year Resolution – Saving Money, Reducing Costs

Happy New Year to my invisible and loyal followers. I thought I’d start out the new year (week 1 gone already), with a really simple way to save money and reduce costs annually. It’s a methodology that I learned in my consulting days that we helped to implement at large, global organisations. I believe it works and is applicable not only at the corporate level, but also at a personal level. Steps are simple, but the work, time and patience (as always) is what makes it effective. Here are the steps to follow:


1) Identify what your biggest cost drivers are on a monthly recurring basis. On a personal level this could be your car payment, rent/lease payments, mortgage, cable bill, entertainment, food, eating out, cell phone bill, etc.


2) Group these cost drivers as ‘Necessary’ and ‘Luxury’. This will help you identify what you really need vs. what is just excess waste. Excess waste in my mind would be cable bill, entertainment, eating out, etc.


3) Now that you have your cost drivers split between ‘Necessary’ and ‘Luxury’, first take a look at your ‘Luxury’ list. Which one’s can you do without? These monthly recurring ‘Luxury’ costs you can rid of, will now be costs going into your savings. Best way is to automatically deduct this from your paycheck into an account you don’t see or use often. I like to use an online savings account, like ING Direct or Ally, just to name a few. Just Google ‘Online Savings Account’ and I’m sure you’ll find a few. Also check out,


4) Next, take a look at your ‘Necessary’ list. I would assume that costs that show up here would be rent/lease, mortgage, car payments, gas, electricity, water (i.e. if these utilities are not included in your rent or assessments), food, etc. With this list, we should focus on the ‘Quick Hits’, such as food, water, electricity, gas, and even rent. It’s quite basic but with your utilities, just make sure you are using what you need and not wasting. Simple steps to take such as turning your lights off, adjusting your thermostat, turning off your thermostat when you leave your house/apt, etc. can significantly impact your utilities costs. With rent, you can be creative and work with your landlord. If you have some money saved up, perhaps you offer him to pay 2-3 months rent upfront at a discount of 5%. You pay more upfront; however, over the term you agree, you’ll pay less. A win-win situation. Your landlord gets the money and you end up paying less.


5) Finally, the remaining costs in your ‘Necessary’ list may take a bit of work.For example, if you’re looking at your mobile phone bill, you may be able to reduce your monthly cost by going to a pay-as-you go phone or a lower monthly plan. Take a look at how many texts you send vs. voice calls you make vs. data. What do you use most? If you’re like me and a heavy user of text and data, look for a plan that has more text and data usage. Always, call your provider and speak to a representative to discuss alternative plans and options. Better yet, if your contract is coming to an end soon, you have lots of leverage by stating you will leave if you don’t get a lower monthly rate. You know best what you want to spend and what you want, so tell them.


These are 5 simple steps you can take in the beginning of the year to assess ways to Save Money and Reduce Your Costs.


Happy savings! (And as always, let me know if you have any questions!)