Spend Money Now, Save Money Later (Or Not)

by Shawanda Greene

AStacks of one hundred dollar bills and calculatorll forms of savings don’t happen instantly. Occasionally, you have to spend money to save money.

Presumably, you’re a savvy shopper. So I don’t need to tell you how low quality merchandise can end up costing more money than a well made alternative. What I’m referring to is a bit more nuanced.

Renting vs Owning

When it comes to lowering the price of internet service, few options exist.

Within the last twelve months, I’ve made several unsuccessful attempts to negotiate a better deal with Comcast. They’ve grown increasingly stubborn over the years.

I doubt Comcast will lose its monopoly status in my area any time soon. And cancelling internet service isn’t a reasonable option for me. So I decided to focus on elements of my internet bill that I can change: the monthly modem rental fee.

In three years, the modem rental fee went from five dollars, jumped to six dollars, and then pissed me the heck off at seven dollars per month.

I’d had enough. I’d paid enough. It was time to buy a modem.

The decision was a no brainer. A comparable device costs $55. It’d take about eight months to recoup the cost of my investment. Over another three years, that $55 modem would net almost $200 in savings. And that’s assuming Comcast doesn’t continue to raise the rental fee which is extremely unlikely.

Increasing Your Risk

How many times have you heard you should increase your car insurance deductible to save money?

I can’t imagine a scenario under which your insurer would raise your premiums if you opted for a higher deductible.

Admittedly, the strategy works. But are the savings worth the added risk?

Increasing my deductible from $500 to $1,000 would put a whopping five bucks back in my pocket each month.

For an extra $500 in risk, I’d basically have to stay accident free for over eight years. I hope I don’t damage anyone’s property with my vehicle in the next 100 months, but I dunno. To me, that happy hour appetizer that $5 buys me isn’t fair compensation for the additional risk.

Making the Switch

For two years, I paid $975 in rent. In May 2011, my rent increased to $1,050. A year later, it went up to $1,075.

Let’s say I found a place with monthly rent $100 lower than what I pay now. If it cost $500 to move, I’d recover my cash outlay in five months. I could save $3,100 over the next three years. Woohoo!

Not so fast.

What if the new landlord only agreed to a fixed rent of $975 for 6 months. With only 30 days notice, he could jack up my rent to the rate I paid my former landlord. Meaning, it’s possible I’d only save $100. Considering the time, effort, and frustration that goes into moving, one hundred bucks isn’t worth it.

From cancelling a cell phone contract to refinancing a mortgage, you need to know how much your investment will save you.

Running the numbers is a worthwhile exercise.

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{ 4 comments… read them below or add one }

Daisy @ Add Vodka June 20, 2012 at 9:59 AM

Running the numbers definitely is a worthwhile exercise! This is how I justify my buying a new-er car. I’m saving money on repairs, gas, insurance, etc.
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Shawanda Greene June 21, 2012 at 4:15 PM

Glad you mentioned insurance. A lot of people don’t think to check how much insurance will cost for a particular car. If you haven’t already, don’t forget to calculate the cost of tires. Prices vary enormously. I’m a little sensitive to the subject since I recently failed my vehicle safety inspection because I needed two new tires.
Shawanda Greene recently posted..Happiness in the Small ThingsMy Profile


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