Save Money With Your Home and Auto Insurances

As the economy downturn deepens, consumers and businesses are looking for ways to cut expenses to save enough to ride out the economic storm. The general principle I've been telling people is:

Spend on what you need instead of what you want, and invest for your future growth.

If you are an individual, use these savings to pay off your credit card or other debts. If you are a business owner, use these savings to invest in your business assets. The multiplexed effect of either action goes way beyond the face values of the dollars you save today.. If you are an individual, use these savings to pay off your credit card or other debts. If you are a business owner, use these savings to invest in your business assets. The effect of either action would go way beyond the face values of the dollars you save.

In this post, I'll discuss how to apply this principle to and save lot of money out of your homeowner and auto insurance policies.

Homeowner Insurance
Let's first talk about homeowner insurance. The rates of homeowner insurance policies depend on a number of factors: age and size of the house, dwelling cost, loss of use, personal property coverage, personal liability, deductible, and etc. You're not able to change the facts of your house, such as, age and size, unless you're making a move. There is lot of room for the rest of the factors. You have to decide what is reasonable and practical for those factors. Even with the same understanding of how your house is built and your location, each insurance carrier has different guidelines to calculate the cost to rebuild your house. The results can vary significantly, so do the rates you pay for.

Auto Insurance
The auto insurance depends on the age, the make, and the model of your cars, safety/anti-theft features, coverages for bodily injury and property damage caused at your fault and by uninsured motorists, comprehensive coverages, towing, your annual mileage, driving records, and so on. Again, you should decide on what's reasonable and practical for your condition.

Your New Insurance Mentality
Many people think insurances are supposed to cover all possible unexpected damages of their homes and cars. That mentality has to change, because the insurance carriers have changed their ways of operating business. If you ever file a claim, you're almost guaranteed to see your insurance rate rising, when the policy is due for renewal. For a serious accident or incident, you don't have a choice. That's what the insurance is for. You should avoid filing small claims, if at all possible. Your insurance policies are to protect you from unexpected disasters not bad lucks.

Once you change your mentality, you should consider removal of the comprehensive coverage and raising your deductibles to as high as you can. These adjustments can save you lot of money.

Comparing Quotes
These days, it's so easy to get quotes from multiple insurance agencies representing various insurance carriers by filling out a form on some websites. You can easily find those websites from popular search engines with keywords, such as, "insurance quote", "home insurance quote", or "auto insurance quote". You'll get a few quotes in your email and phone calls within minutes. You should also contact some carries that have operations in your state but not among those who reply. You can get the list of the insurance carriers from FreeAdvice. FreeAdvice also offers statistics of customer satisfaction about the insurance carriers.

I highly recommend that you make a simple spreadsheet to record all the quotes you've received for an easy overview and comparison. You should review your policies at annual basis, and the spreadsheet will become very handy during that process.

Keep in mind that these are just initial quotes. It's quite common that the actual rates become higher. In that case, you should immediately go back to your spreadsheet and decide whether you want to continue purchasing that policy.

Ask For Available Discounts
Ask your insurance agents for any potential discounts available. Almost of the insurance carriers offer multi-policy discount, if you purchase your home and auto policies or policies for more than one car. Even so, you should consider purchasing policies from different carriers, if the total premium turns out to be lower. Other discounts include, but not limited to, your profession and education degrees.

Carrier Ratings
Although our goal is to find the policies at the lowest cost, you may want to avoid carriers that suffer financial problems or receive lots of complaints. You can get the ratings from companies, such as, A.M. Best and FreeAdvice.

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Save Money With Pay As You Go Phones

[Updated 2/13/09]

The economy downturn is hitting on us in many aspects of our lives. While the government is working on the economy stimulus plan to help us spend more, my advise to you would be quite the opposite. You see... What gets us into this catastrophe is careless borrowing and spending over the past few decades. Continue this spending spirit would not get America out of this mess but worsen the situation. To get out of this financial crisis with a stronger America, we need to change our culture - spending on what we need and saving for our future. The point I'd like to put more emphasis is to invest your cut expenses in your future, such as, your business assets that could fuel growth of your business in the long run. If we had done this, our economy and American people would have been at a much better condition today, because we have got the savings needed to ride out the economic storm.

Having said that, I decide to make a change to my cell phone plan to save some bucks. I have got a local phone service and am able to make interstate calls using a service provided by a prepaid phone company. My cell phone is really for emergency calls or occasional talks with my family members and friends. Yet, I'm paying about $50 every month, which is $600 a year. A pay-as-you-go prepaid phone service would cost me only $100 for a full year based on my usage; a $500 that I can invest in my Internet business.

It would be just a good idea to call up your cell phone company to find out when your current contract expires. You may be pleasantly surprised that you're already out of contract. In my case, I knew my contract would last for another year. But, I called and found that I'm actually out of contract due to the switchover, when the company consolidated their billing systems.

Here are some key elements you want to consider, when shopping your pay-as-you-go phones:

1. Network Coverage:
You have to know where you'll be using your phone, and check the vendor's coverage map to make sure those areas are well covered. Based on my research, Verizon offers the best coverage across the country in general. T-Mobile has spotty coverage in many areas and customers of T-Mobile have experienced lots of dropped calls. Again, that all depends on the areas you plan to use the phone. Coverage is the most important factor to me. After all, if the phone can't get any signals, what good is the phone? It's true that most of the vendors offer roaming services. But, roaming services are normally charged at a much higher rate that you would want to avoid as much as possible.

2. Plans
There are quite a few plans available from cell phone vendors. Even though the plans may look the same, different vendors may impose different interpretations or rules. So, you should always speak to the sales representative to find out the details. But, one thing you should be aware of, before you call:

• Daily access fee: In general, the big three vendors - AT&T, Verizon, and T-Mobile (Sprint does not offer pay-as-you-go) offer plans that charge various dollar amount depending on how much so-called daily access fee you're willing to pay. The fee is an extra service charge in accessing the vendor's network for the day you use the cell phone. The daily access fee ranges from $1 to $4 dollars; each comes with a different airtime costs per minute. For example, Verizon charges $0.99 of access fee for $0.10 of air time per minute, $1.99 for $0.05, $2.99 for $0.02, and $3.99 for unlimited air time. In addition, Verizon also offers various benefits of unlimited use (e.g. nighttime, weekend, and mobile-to-mobile).

Some vendors offer plans that don't charge the daily access fee. For example, Verizon Prepaid Basic charges $0.25 of air time per minute without the daily access fee. To me, this plan is ideal for an emergency phone. Verizon Prepaid Basic is a new plan and has not yet appeared on their website as of today (2/11/09). Refilling $100 or more with T-Mobile gives you special gold rewards, such as, $.10 per minute with additional 15% free air time and without having to pay the daily access fee.

One advantage with a no contract phone is that you're allowed to switch among these plans anytime you wish.

3. Expiration of Refills
When you purchase a new prepaid phone, the phone comes with some free (usually $10 worth) airtime. You'll have to made additional purchases of air time (called refills) within a certain period of time (60 days for Verizon). You consume the airtime for both outgoing and incoming calls.

Be aware that each refill comes with an expiration date. The larger your refill amount is, the longer your refill lasts. For example, Verizon has the following refill schedule:

• $15-$29.99 expires in 30 days
• $75-$99.99 expires in 90 days
• $30-$74.99 expires in 60 days
• $100 or more expires in ONE YEAR!

Your leftover dollars typically roll over to the next period, provided you make another refill prior to the expiration date.

4. Phones
You can purchase the prepaid phone from retail stores, such as, Target, BestBuy, and WalMart, as well as on the Internet. Before purchasing the phone, you should clearly spell out the exact features you need. Keep in mind that we want to scale down what we want to what we absolutely need. And, the more features you get on your phone, the more service charges you're going to pay. So, ask yourself honestly: Do you need a phone that surfs the Internet, downloads the ring tones, accesses your emails, or lets you do texting? Can you live without any of those services?

If you purchase your cell phone in California, watch out for how much taxes you pay and you'll be surprised (this time, unpleasantly). Regulation 1585 of the state code on sales and use taxes specifies that all cell phones will be taxed at the full retail amount, regardless of the price paid as part of a special offer. My cell phone was listed for $20 on Verizon's website. But, I have to pay $16.50 of sales tax, because Verizon claims that the retail price of my phone was $200. Ouch! If you're interested in learning more about this insane tax code, read this article.

5. Activation Fee
Once you get your new phone, you'll have to activate it. And, sure enough, there is an activation fee. Verizon charges $25 to activate your phone. You may be able to avoid the activation fee, provided you pay $100 of airtime upon purchase of your new phone with Verizon. There is a catch, though. The $100 airtime expires after 60 days instead of a year. Ouch!

6. Small Vendors
When you go with small vendors like Net10, TracFone, Virgin, and Metro PCS, you'd have to do more research on their coverage. Some of these vendors re-sale the bandwidth from the big four vendors (AT&T, Verizon, T-Mobile, and Sprint). You also need to watch out for their charges for roaming services, when you're in an area outside their network. If you plan to use the phone outside the states, you better have a in-depth discussion with your customer service staff or sales representatives of the service providers. This in fact applies to the big service vendors, too.

Pay-as-you-go phone plans may not be your best choice. But, they're inexpensive choices for those who are light in cell phone use. If you would spend some time reviewing your cell phone usages, chances are you'd be able to eliminate or scale down some of your subscribed services. Or, you might simply cancel your local and long distance phone services and completely live with your cell phones. Any of these actions can put more of your hard earned money in your banks and eventually improve your financial status.

If you're interested in other saving ideas, read my earlier post that discusses where to look for saving opportunities without sacrificing much of your standard of living today.

Improve Your Financial Status By Managing Spending

[Updated 2/13/2009]

Like it or not, American consumers are perceived as reckless spenders. According to the Federal Reserve Bank in October 2008, the personal savings rate for Americans is 0.7% of their income. This is a sharp contrast to 24% for the Chinese. I have read stories about the foreclosures and financial stress of some unfortunate people. I sometimes find interesting things in the pictures that came with the articles. For example, I clearly remember a lady who was facing the foreclosure of her house, who was siting in front of her RV with a cigarette between her fingers and two soft drinks on her picnic table. I later used that picture to teach my kids about what I thought was wrong with that picture.

I am not suggesting that an RV, a pack of cigarettes, or a couple of soft drinks would save her from her financial trouble. I do think that her luxury lifestyle was somewhat related to her financial trouble, though. If you are starting a business, I suggest that you keep in check how you and your business spend your capital, especially during the current "credit crunch."

Understand and Budget Your Expenses
First of all, you should secure the financial resources necessary for at least covering your basic living expenses and the capital needed for your business. If you are starting an internet business as a sole proprietor, you should at least have a computer with access to the Internet. For a starter, an entrance-level desktop computer would cost you about five to six hundred dollars. A basic DSL service costs you about thirty to forty dollars per month.

To assess your financial situation, you should have a good understanding of all your expenses. Software like Intuit Quicken and Microsoft Money can help you record your expenses and analyze where your money goes. Alternately, you can refer to the annual spending report from your credit card companies. With that big picture at hand, you can take strategic and conscious actions in restructuring or cutting your expenses.

Some More Tips
If you have made some strategic changes in your spending and are still in need of some small ideas, below are some tips that might help. The guiding principal here is: "Buy what you need, not what you want."

1. Credit Card Interest: Try to pay off your credit card debt in full and on-time to avoid the high interest rates charged by the credit card companies. It would greatly improve your credit rating and allow you to qualify for business loans at lower rates. If you really need the money for your business, consider a home equity loan that is at a much lower rate and tax-deductible.
   
2. Insurance: You have to change your mind-set when looking at your insurance policies. Insurances are the safety nets for big losses, not for casual bad luck. Avoid small claims, if possible, because the insurance companies are likely to raise your premiums at the next renewal. Raising the deductibles significantly of both your auto and/or home insurances can save you lot of money.
   
3. Cell Phone: How much does your cell phone plan cost you every month? You should consider a less costly program or even a GO phone (pay as you go) based on your usage. Take advantage of night and weekend minutes that are often free-of-charge. Save the money for new ring-tones and pay for the features that are absolutely necessary. Similarly, you should review your phone bills for your local and long distance phone services.
   
4. Entertainment: You may be paying too much to your cable company or for your satellite TV. Cutting down your time on TV may actually benefit your business. If you agree, consider terminating your TiVo or NetFlix subscription altogether.
   
5. Travel and Gas: Defer your travel plans to Europe or Asia. With the dollar weakening in recent years, you end up spending more for less. Consider shorter trips instead, which would benefit your local economy. Also, cut down on unnecessary rides to save on gasoline. Trade in your SUV for a smaller car or a hybrid, if that makes sense.
   
6. Food and Drinks: Spending on food is normally small compared to other types of spending. Going to restaurants daily or too often could be costly, though. Drink water instead of soft drinks, which are bad for your teeth and health over the long term. Drink tap water that is as good as bottled water and does not harm the environment. Lastly, enjoy home-made coffee and save the trip to Starbucks.
7. Newspapers and Magazines: If you are paying subscriptions to printed newspapers or magazines, consider reading the equivalent contents on-line. An RSS reader such as, Google Reader, helps you find and organize your contents-of-interest . The RSS feeds are more up-to-date than the printed newspapers. Best of all, they are free of charge.
   

Believe it or not, these tips can easily save you hundreds, if not thousands, every year. Plus, use the saved money to invest in your business' assets to further maximize the power of the money. What money can be made easier than this?