Auto-Pilot: Good for Planes, Not Finances

Does it ever seem like the pace of modern life requires you to be on two speeds — frantic multi-tasking or exhausted auto-pilot?

With career, kids, commuting, and household demands, active financial management can often get relegated to “I’ll get to it when I get to it” status. And that’s the danger. From little expenses that drain our budgets to incremental financial opportunities we miss, auto-pilot can put us on a crash course toward long-term money trouble.

If you’re ready for a more conscious approach, here are a few areas to focus on as you take yourself and your budget off auto-pilot:

Fees

From late charges to convenience fees, businesses are more than happy to dip into your wallet if you offer them the opportunity.

It’s time to get hawkish and eliminate those nickel-and-dime fees. Avoid overdraft penalties, late charges from DVD rentals, and service fees for paying a bill over the phone or speaking with a customer service representative. Usually these charges are well within consumers’ control and can be sidestepped with better planning or good old-fashioned discipline. And if you do encounter one, ask to have it waived.

Mortgage rates

With rates still at historic lows, it’s better to be late to the low-interest mortgage party than to not show up at all.

If you have a mortgage you haven’t reviewed in a few years, it might be time to see if you can refinance and get a better deal. Even a half a percentage point in interest can save thousands over the life of a loan. For current mortgage rates, check out our rate search tool.

And get more tips here on how to save tens of thousands on your next mortgage.

Insurance

Insurance was originally intended to help folks avoid financial ruin resulting from catastrophic events like fires, long-term illness, accidents, or death. But there’s a new phenomenon afoot. Over the past several decades, policies have popped up to cover everything from smartphones to TVs.

Like other types of insurance, these products are marketed by leveraging a mixture of fear with our need for security. But the loss of a TV, laptop, or smartphone probably won’t wreak financial devastation. So why are we insuring these things? What’s the compelling value proposition?

As Money Talks News founder Stacy Johnson is fond of saying, “If you insure yourself so you’ll never lose a penny, you’ll likely end up without a penny to lose.”

Similarly, many drivers refuse to raise their deductibles to lower their insurance costs. If you wouldn’t report $500 in damage to your insurance company due to fear of a rate hike, you shouldn’t have a $500 deductible policy.

Raising your deductible from $500 to $1,000 could easily lower your premium by 10 to 15 percent. If you’d pay a $1,000 loss to avoid a potential rate hike anyway, you’ve assumed no more risk and saved yourself plenty. Shopping your insurance is simple; start with our insurance search.

Subscriptions

Besides budget-busting monthly subscription clubs, subscriptions to print magazines, newspapers, or online content can add up.

Do a realistic review of how often you use these services and how much value they provide. Often, what interested us a year or two ago no longer gets our juices flowing, but we let our accounts get charged anyway. Get motivated and cancel auto-renewing subscriptions you don’t use.

Unused memberships

Unused or seldom-used memberships to gyms and recreation centers, discount programs, saving clubs and warehouse stores aren’t doing your budget any favors. They drain your funds and provide little or no payoff.

Take a look at the dues you’re paying each month and what you’re getting in return. In other words, come to terms with your intentions versus your behavior. Would you get more benefit from working out at home rather than trying to wedge a trip to the gym into your already hectic schedule? Is that warehouse store just far enough out of the way to make shopping there regularly an inconvenience?

Take 20 minutes on a Saturday afternoon and liberate yourself from undue dues.

Interest on debt

Have you fallen asleep at the wheel with your credit card? Interest on credit card and other consumer debt is insidious because it usually hovers just below our pain threshold. We continue to pay every month and don’t realize just how much money we’re tossing out the window.

Resolve to pay off your consumer debt, actively avoid it in the future, and end your relationship with usurious interest rates.

Flat savings rates

As our circumstances change, so should our savings rates and investment approaches. Promotions, marriages, growing families, paying off of previous debts — even just getting older — should prompt a review of your savings and investment strategy.

Being on financial auto-pilot in this department can leave you unprepared and under-funded for critical events like home-buying, kids’ college and retirement. Ask yourself, “Am I saving as much as I can? Is it time to review my investment mix and my 401(k) contribution rates? Is now the time to begin converting my traditional IRA to a Roth?”

Take a few seconds and check out our savings account search and see if you’re earning as much as you can on your savings.

Time to turn off the auto-pilot?

The convenience of automatically paying bills is one side of a double-edged sword. The other is continuing to pay for things you no longer use.

Though it’s easy to slip into financial auto-pilot, it’s just as easy to decide to take a more active role in your personal money management. Start by looking for leaks in your budget that can be easily plugged. Then, explore ways to better optimize your income and savings so that both are working as hard as you are.

With a little determination, you’ll be off auto-pilot and flying higher financially. Have you ever found yourself on financial auto-pilot? How did your financial situation improve once you took a more active role? Share your comments below or on our Facebook page.

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Comments & discussion

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  • MITM

    Hi! This is a GREAT article.

    I wish I had read it 5+ years ago.
    The way, we finally started paying attention was to turn off all auto-pay bills and make everything come to us through the mail on paper bills. I don’t know if other folks could or should do the same, but it worked for us and made us pay attention like you’re talking about. Now we know where every dollar is going and if a particular bill increases by even $2, we can see easily from the statement why it did.

    Thanks again for the post. I sent it to a friend of mine.