The basis of a budget is elementary: spend less than you earn. Spending can be divided into two types. Fixed costs are those that must be paid every month, the same amount or approximately the same. Variable costs are just that, unpredictable and varying from month to month. However, some of your bills might not be as fixed as you might think. If you’ve trimmed the fat from your budget and overlooked monthly bills, writing them off as “fixed,” you’re missing out on an opportunity for savings. Here are the first three bills you should cut to balance your budget.
1. Cell Phone
While you probably won’t rack up a $201,000 cell phone bill, you’re likely still paying too much. Data, apps, and overage charges on top of your regular bill aren’t so smart for your budget. For starters, consider the accessories and peripherals for your phone; cases, covers and chargers add significantly to the overall cost. Buying them where you buy the phone is convenient, but the same items likely cost less online or from a third-party outlet.
If you’re new to smartphones, monitor your data usage and find the plan that fits your habits. A service like BillShrink can help you navigate the maze of plans, terms, conditions and fees. If you use only a small amount of data, you could save money by switching to a less expensive plan, but once you’re over your data, the charges can pile up like unread emails in your inbox that you can’t access without incurring more charges. To reduce your usage without sacrificing productivity- or Angry Birds- be sure to take advantage of free wi-fi hotspots. It seems obvious, but according to a Nielsen survey, only half of smartphone users access free wireless internet connections in a given month. Some apps eat up data even when you’re not actively using them, so you may need to proactively turn off GPS or other background apps and disable automatic updates. Ironically, there’s an app to help you locate and turn off vampire apps: Advanced Task Killer.
Paying for cell phone insurance? Don’t. Insurance is meant to guard against catastrophic loss and protect what you can’t afford to replace, like your home. If you can’t afford to replace your phone, you overspent on it. Consumer Reports recommends keeping your old phone and reactivating if your new phone suffers an untimely death; use it until you qualify for another free or reduced-priced phone.
If you travel overseas, plan to change to an international plan or turn off your phone completely. You could be charged international roaming fees just for having your phone on, in addition to fees for incoming calls and texts. Most carriers allow you to change to an international plan on a month-to-month basis, so there’s no reason to rack up a huge bill in roaming charges.
2. Heating and Cooling
Depending on your choice of location, heating or cooling bills (or both) can burn a hole in your wallet. Regulate your temperature and your monthly bill by preparing your home and getting smart about utilities. To keep out winter’s chill, make sure your home has adequate insulation, an investment that pays for itself many times over. Cover old windows that leak heat with plastic kits available at home improvement stores. Even a fix as simple as a rolled-up towel on the sill or at the base of a door can make a surprising difference in the average temperature.
Find your lowest comfortable temperature and set your thermostat. There’s no reason to shiver to save money, but you may not even notice one or two degrees of difference, and one degree means two percent savings on the heating bill for the average house. Nighttime is perfect for lowering the temperature further because body temperature actually drops to prepare for sleep.
For those in warm climates who would like to chill out, there are options besides running the air conditioner like a marathoner’s daily workout. Dehumidifiers and ceiling fans will make your home environment feel more comfortable; just be sure to turn off fans when you leave the room, since they’re only moving air across your skin, not actually lowering the temperature. Don’t overlook the amount of heat generated in the house either. The oven, dishwasher, dryer and electronics all produce heat, so turn off electronics not in use, use the air dry setting on the dishwasher and consider hanging clothes out to dry. Closing curtains and planting shade trees on the south and west sides of the house can reduce the solar heat entering your home.
Whether heating or cooling, don’t pay for rooms you don’t use. Close vents and doors for spare bedrooms or rooms used primarily for storage. Well-maintained systems run more efficiently. Clean filters regularly and consider an annual inspection for your furnace.
3. Home Mortgage
This week’s market rate for home mortgages is 3.62 percent according to Bankrate.com. If your mortgage interest rate is a point or more higher, you would likely benefit from refinancing. A lower interest rate is a no-brainer for savings, and if you can afford a higher monthly payment, you could even shorten the term of your loan from thirty years to twenty or fifteen. The savings from refinancing can make the higher payment affordable, and repaying the loan sooner means huge savings in the long term. However, if you don’t feel confident in your job security or if your income is variable, taking on a shorter-term loan is risky. You can always make extra payments on a long-term loan, but you don’t want to fall behind once you’ve committed to the more aggressive repayment option.
Now you’ve begun to master cutting expenses that you thought were fixed and saved money without major sacrifice. All it took was a few changes of habit and a little legwork. It’s a valuable skill that will serve you well financially. Keep honing your skills and maybe you could take them to Congress and teach a lesson there.