Talane’s Blog of the Week, November 13, 2006

Plugging the Money Drains

A few weeks ago I wrote about over responding to the discovery that my husband and I were overspending. I thought I’d mention that I’m still in the process of reviewing ALL of our accounts, investments and financial expenses to make sure we are doing the best we can with our resources and getting the greatest possible return. What I’ve discovered is that I’ve been lax about the investment side of our portfolio. While my husband is in charge of generating income to cover our living expenses, I’m in charge of saving and investing for our retirement. I’ve left too much money in savings or checking accounts that are generating little or no interest. I’ve also been overlooking little charges that have been happening for years. For example, because I own my own domain name talane.com I don’t need to use mindspring.com as my internet provider. I’ve recently cancelled the monthly email service I’d been getting charged $21.95 a month for the last 12 years. Funny thing, when I called to cancel, they told me of an email service I could get instead for only $4.95 a month. It looks like just a small expense in the grand scheme of things, but these little monthly and yearly expenses can add up to astonishing amounts. For example, if you pay $25 a year for your credit card and keep your card until you are 85, at 8 percent interest that $25 would add up to $6,476 if you’re forty-five today; $14,344 if you’re thirty-five today; and $31,330 if you’re twenty-five today. I don’t even want to think what the numbers would be at $21.95 a month! Egads.

The point is, we think that saving an additional $25 a year won’t make any difference, but as you can see, it most certainly does, assuming you take the $25 you would have spent and instead put it in an investment earning 8% or more (I simply pop it into the no-load Vanguard 500 Index fund that is currently returning at 10.5% a year, but talk to your financial planner for advice).

My current strategy is to call every one of my annual and monthly services to cancel and see what they say. I’ve discovered that they will either waive the fee for me completely (one credit card was willing to put it in writing and sent me a letter saying they would guarantee a fee-free card for life rather than lose my business) or offer another similar service for less. On the rare occasion that they won’t lower or eliminate the fee, I simply say, thanks, but I’ve changed my mind and will keep the service after all.

Now is a great time to review your credit card statements and look for sneaky little monthly or annual fees. Call to cancel and watch what happens.

All the best,
Talane