I used to play a lot of air-to-air combat games and always loved the high-tech missiles only required a pilot to designate a target, press the button and watch stuff blow up. This was much better and successful than having to use the aircraft’s guns, which required lots more time and skill to maneuver into the correct position, lead the target exactly right and fire at the precise time and avoiding inflicting damage on allied pilots. These close-in encounters also included a lot more danger since the enemy was usually firing back at me by then.
For me, it’s the same thing with saving money on expenses. Coupon clipping and sale ad perusing certainly have their place in saving money, but for me they take a significant amount of time with relatively little to show for it-it takes a lot of 50 cent coupons to save $500. Moreover, every time I want to use a coupon, I’ve got to find it and either physically tear it from the paper or pull it up on my phone to scan at the register. I still do this sometimes, but prefer making more significant structural improvements to my finances. While they require a bit of initial effort and then can be set on autopilot, they keep working long after I’ve put them in place, or to use the term above, they are fire and forget budget strategies.
Nearly a decade ago, I set what I thought to be an ambitious goal to increase my monthly cash flow by $500 or more without sacrificing quality of life. This could be done in two ways: increase our income without working more and/or decreasing our expenses. I did allow for one-time purchases to reduce ongoing monthly expenses provided the payoff was less than 1 year.
This turned out to be an addictive, positive feedback loop. We refinanced our mortgage from 7.65% to 4% with no out-of-pocket costs, which saved over $400 in interest each month. That was an easy decision and made me realize that perhaps I had set my goal too low. Even after adjusting the loan term to match the previous one (3 years shorter), I was still up over $350 bucks each month.
I next switched our home phone from Vonage, one Voice Over IP (VOIP) service, to another, Ooma, saving $20/month, with Ooma costing nothing each month. I had to make a one time buy of a Ooma box which ran about $75. Switching electric providers saved us about $35-we lived in Texas which allows you to swap energy providers when you want. We cut our cable internet from $45 to $20 for the same speed through the same provider. We comparison shopped for some new home and auto insurance and netted another $30 a month for the same level of coverage.
Total saved so far was $465 per month! We slightly tweaked our gas usage ($25) and our food purchases ($40) to still accommodate our needs and got over the hump of saving $500 per month and we hadn’t even discussed the income side of the equation. We found a local bank using an online interest rate checker that was paying 5.0%* for opening and maintaining a rewards checking account on the first $25,000 saved. The requirements were something like 10 transactions a month, electronic statements and at least one direct deposit-all things we did anyway with our old bank.
We had about $12,000 at the beginning, so that was giving us $50 a month and was FDIC insured against loss. As our cash flow increased dramatically, it wasn’t too long before we were bringing in $100/month without doing anything extra. So far we were up to $630/month or $7560 per year in extra cash flow that was essentially passive after making a series of one-time “fire and forget” changes.
With that all done, all at relatively low cost and zero noticeable effect on our lives, we started to dig deeper and began looking for other ways to reduce our expenses at little or no cost. We found a cell phone company that used Verizon cell towers, but had much lower costs at about $30/month.
A few years later, I found a company that had free cell phone service. That ended up saving us over $100 per month for two lines as compared to similar plans from the bigger providers with very few issues. I am still using that service and now enjoy 1000 minutes, 1000 texts and 1 GB of LTE data for absolutely free. I pay just 2 cents per minute/text/MB of overage if I need to, or I could upgrade my plan. There have even been offers of much larger allotments of data and minutes and texts, but I struggle to use close to the limit I have now.
We also recently discovered an interesting feature of our GEICO auto insurance: if you owned at least 1 share of its parent company (Berkshire Hathaway, BRB.B), you got somewhere between a 3 and 8% discount on your auto insurance. Note that these are not the A-shares that cost over $160,000 a piece, but the B shares that currently run around $140. Using a no commission online brokerage site, we bought one share and saved about $30/year on our auto insurance. Assuming the shares remain stable (highly likely to not lose 25% per year year after year), we start saving money immediately or if they do go to zero, it’ll be just over the four years before breaking even, but we don’t expect that.
We also found better rewards credit cards. We had been paying our expenses primarily with debit cards and a few old credit cards. Since we have great credit, we are continually looking for great credit card deals that give us a nice offer to join** AND at least 1% back on all purchases. Credit card options will be discussed in a future post, but we now strive to get at least 2% cash or travel credit on all expenses and try to average over 5% cashback on all credit card purchases, always paying the bill in full each month. Having about $20,000 of yearly expenses outside of mortgage, that works out to about $1000 per year in extra cash flow (not including signup bonuses).
So there you have it, we increased our cash flow by nearly $10,000 per year over the course of a couple years (not including raises/bonuses/promotions from work), by making a few easy and painless long-term changes, with no day-to-day decision making necessary and always getting the similar or better service for less.
Note the focus on reducing monthly expenses and permitting some additional one-time expenses. Saving money every month on autopilot is the best fire and forget strategy to reaching financial independence. Indeed, you get to keep the cash for what you don’t buy when you focus on what you need and compare options.
Coupon clipper aficionados need not despair-these strategies work in conjunction with the above ideas. One of the “coupon clipping” tasks that I use for purchases over $100 is the use of cashback sites to get an extra 1-15% back on normal online purchases.
* Our 5% rewards checking lasted for a couple of years, but then went to 4%, then 3% and finally rested at 2.5%. At that point, we elected to pay off our remaining car loan, which was also at 2.5%. We ended up changing jobs and moving homes so we purchased a larger house with all closing costs covered by relocation and dropped the interest rate to 3.125% on a 15 year fixed loan and financed to 2.75% for a 30 year 5/5 loan.
**We normally bring in a few thousand in credit card signup bonuses each year for which we’ve purchased big screen TVs, new fancy smartphones, home theater equipment, kayaks, flights, nice road and mountain bikes, sports equipment and also managed to save close to $10,000 in cash and investment securities. This year, we’ll be spending a week in a nice hotel flying on planes that were almost entirely paid for with credit card rewards (those dang government fees being our only travel expense). I generally look to make a minimum of $400 total value for each credit card application I fill out, though some have yielded almost $2000 in value.
Note: I do not currently receive any compensation or commission for recommending any of these websites/services. They just have saved me lots of money and I am happy to share.