We bring home a paycheck knowing that a certain amount will be immediately deducted due to those pesky recurring payments. Thinking back over last month’s expenditures, how much do you think you spent? Maybe $200? How about $400? According to an article by Venture Beat, the average American spends…drumroll please…$857 a month on recurring payments! That’s approximately 30% of the average America’s take-home pay. By the way, that doesn’t include your mortgage or rent.
Identifying All of Your Recurring Payments
Step one to fixing a problem is identifying your problem. Knowing exactly what is costing you money each month and how much money it is costing is key. Below are just a couple categories to help you identify recurring payments eating out of your bank account.
- The Obvious Ones: Cell phone, Cable TV, landline phone, internet, utilities
- Other Common Recurring Payments: Healthcare, car insurance, roadside assistance, Hulu, Netflix
- Sneaky Recurring Payments: Homeowners association dues, that pesky data subscription from Apple or Dropbox, credit card fees, bank account fees, PMI, hidden cable and phone surcharges, food subscription, Amazon Prime; car wash subscription, magazine subscription, free shipping clubs, organization memberships, wholesale shopping memberships
Now, make a list of all of the recurring payments debiting your account every month. Start thinking about which ones you can eliminate today.
Reducing Recurring Payments
The primary way to reduce recurring payments is to consolidate. Identify what is important and reduce the rest. Here are some questions to ask yourself to best understand what payments are truly important.
- Do I really watch cable TV? Consider getting an antenna instead of cable and combining that with Hulu. If you’re an avid sports fan, look at the NFL Sports Pass. Chances are, you could save a considerable amount by ditching cable.
- Do I really need a new cell phone? So many people are paying upwards of $25 a month so that they can get the latest and greatest phone. Does $300 a year actually make sense?
- Do I really need all of this data? Don’t let your jaw drop, but my wife and I share only 2 GB of data a month. We have not gone over. We are careful to hop on wifi wherever we can and use some key settings on our phones to reduce ghost data usage. In addition, buying data from the most costly provider adds up. Consider switching to a low cost cell phone provider.
- Does my house need to be freezing and my shower need to be scalding? Think about how much money you spend on cooling your house in the summer or relaxing in a hot shower in the winter. These extreme temperatures use energy and energy costs you money. With this in mind, boost your thermostat to 78 in the summers and 68 in the winters. You will be shocked how much you save.
- Do you really need to be a member? Imagine how much money you saved if you cancelled your credit card memberships, got rid of your Costco Memberships and cancelled your Amazon Prime (to name a few). Think about this, you probably spend more because of these memberships. Credit cards make you want to swipe more for points. Meanwhile, free shipping with Amazon makes you say, “Why not?” to the add-on item you don’t really need. All the while, you have a wholesale membership and stock up on bulk for things you never use. Chances are, your memberships cost you more than just the fee?
- Have you negotiated the best rate? Here is my favorite. Did you know that almost all of your rates are negotiable? It is a quarterly occurrence for me to get on the phone with my cell phone and internet provider and negotiate. I have saved as much as 50% off my bill. Insurance is the same way. It blows my mind how many people fail to simply ask for a better deal.
Next Steps to Reduce Recurring Payments
After reading all of this, is your memory spinning? Are you going to be the average American that has $857 in recurring monthly payments? Or, are you going to be frugal and cut that back to a comfortable $200 a month? One of the big ways to save is switching your bank account to a fee-free account that earns interest. It is amazing how much money you will save if you just seek out and eliminate those sneaky recurring payments in your life. Pick up the phone today. Start cancelling and negotiating. The savings will be tremendous.