How to cut your cable bill down to nothing

High-speed internet and streaming services are making cable a thing of the past. Here’s how you can slash your cable bill dramatically.

C’mon! Everybody’s doing it!

Cut the cord

The first step is simple: cancel your cable service, keeping only internet. You should also negotiate your internet bill as low as you can. Use the current promotional prices offered to new customers as a starting point. If you have more than one internet provider in your area, check their prices and mention them as a negotiating tactic with your current provider.

When you cancel cable, you will also cancel any modem rental fees, DVR boxes, and other fees companies like Comcast like to tack on. If you don’t have your own cable modem, buy one that includes both the modem + WiFi router in one device for simplicity. You will save around $14/month meaning you’ll likely break even in less than a year, and using it is dirt simple.

Buy a HD antennae to get high-def local channels through the air for free. If you live in an area with really poor reception and can’t get those local channels (and you actually want them), you can ask your cable provider for Limited Basic cable instead, which just gives you all the free channels for a small monthly fee. Don’t let them upsell you for a more expensive service when you do this.

(Definitely try the HD Antenna solution first though! Paying $40 one-time is way better than paying $10 – $20 per month forever.)

Add back the things you really want to watch with lower-cost streaming services

Decide what shows & movies are actually important to you, and buy streaming services to replace them. Use the streaming services you might already have, like what you get with Amazon Prime, to see if that is enough for you (and cancel any subscriptions you don’t get enough value from!)

High-def Netflix is $14 as of writing. The Hulu/Disney+/ESPN+ bundle ($14 as of writing) is a great deal for families and those who still need some sports. Disney has all the Star Wars, Simpsons, Disney movies & cartoons, Marvel, and Pixar content, and a lot more. Hulu has TV & movies. HBO Max offers their own content at $15/month if you like their shows & movies.

The best way to use these streaming services is by mooching off a generous friend or family member, or splitting the cost/swapping services with them. Most services let you create and share at least 4 or 5 accounts, so make some deals with your friends & family and save big. Maybe you get Netflix, they get the Disney+/Hulu bundle, and you each create a user account for the other person. Do this for your other streaming services like music (e.g.: Spotify.)

Watch free content

YouTube has tons of free content including news and comedy shows like Last Week Tonight with Jon Oliver completely free. For excellent free news, download the PBS app for your smart TV.

Apps like Tubi or Pluto TV have a lot of movies & TV you can stream with commercials.

Use your library!

My library in Seattle offers a huge library of classic and contemporary movies through the Kanopy and Hoopla apps. Just get a library card, then use your card info to link your library account to those apps to get access. You can even link multiple library accounts to the same apps, so if you’ve moved around a lot, keep those old library accounts to use all the digital content wherever you live now.

The library is great for Kindle/ebooks and downloadable audio books too, not to mention physical books and DVDs that you can check out if a streaming version of something isn’t available.

Making it work: get all those apps on your TV

If you already have a smart TV (one with native access to the internet), just download the apps for all the services mentioned above, especially for free content via YouTube, PBS, Kanopy/Hoopla/Libby (via your library), Tubi and Pluto TV. Or, plug in an Amazon Fire TV stick to make an older HD TV ‘smart’.

Contact your cable provider right now to cut the cord or reduce your bill

My advice is to 1) cut the cord first without worrying about missing some content because you can always add it back with another quick phone call, 2) then look into all your free/mooching opportunities, and 3) only add new paid services once you’ve waited a month to see whether you really miss the stuff you’re no longer getting.

You might just find yourself watching less TV and doing something more fulfilling and productive with your time, which isn’t a bad thing!

Avoid these 8 common financial mistakes

TL;DR – Avoid buying these things:

  1. cash value aka Whole/Universal Life insurance (buy term life instead),
  2. annuities
  3. credit card debt (pay it off now & set up autopay)
  4. car leases
  5. time-shares
  6. a new car before your old one is completely done for.
  7. Generally avoid buying vacation property or
  8. expensive remodeling your home, at least until you have $1+ million in the bank or are otherwise ready to retire comfortably and have extra money to burn.

Having advised a lot of people financially, I see the same mistakes holding them back over and over again. These bad decisions don’t seem to be bad moves to people at the time they make them, which is why they are so dangerous. The combination of friendly salespeople serving their wicked corporate overlords + our consumer culture makes wealth-destroying behavior seem ok and normal to us. It’s not ok, and it’s harmful, so let me help you recognize it so that you can avoid it and grow wealthy. Your future self will thank you.

Financial mistakes ordered from ‘Absolutely-Do-Not-Do’ (1 – 5) to ‘Be Careful’ (6 – 8)

  1. Buying ‘cash value’ life insurance like Whole or Universal Life insurance. 99.8% of people only need Term Life insurance, and that is what you should buy. If you think you’re in the 0.2% that could benefit from a cash value life insurance, you are almost certainly wrong, even more certainly if you’ve been convinced of this after talking to a salesperson who might be thinly, or thickly, disguised as an ‘advisor’ or some other financial person deserving of your trust. Most are absolutely not. Trust no one. Not your bank, not your credit union, not your mom, not your co-worker, and definitely not anyone who works for a financial institution or gets any type of payment from them. Trust no one. Except us, we’re the good guys.
  2. Buying an annuity. Life insurance companies are again the villains here. They push annuities to people who are afraid of ‘losing/running out of money’, which is… everybody. In reality, only 0.0001% of the population would probably ever truly need an annuity, and even this tiny fraction could find a better one than being offered by your particular salesperson. Pricey annual fees sneakily included so you don’t see what they cost you combined with all kinds of heinous other fees to prevent you from getting out of the product will steal a ton of your money over time. To illustrate, $100,000 invested in 0.1% fee stock index fund over 30 years will generate income of $508,000. In a typical 2%-per-year money-stealing annuity (it’s often even worse), you’ll only get $247,000 over the same 30 year period with the exact same investment risk, less than half as much! Where did the missing $261,000 go? Straight into the saleperson’s and the insurance company’s pockets. They’ll be quick to emphasize how wonderful it was that your gained $247,000, and if you hadn’t read this you would have never known that you actually lost $261,000 thanks to their evil machinations.
  3. Not paying off credit card debt when you have the cash on hand to do so, and not setting up autopay. This one baffles me a little since everyone ‘knows’ that credit card debt is ‘bad’, and yet even when they have cash in a checking account making nothing they sometimes don’t take it to pay off credit card debt costing them 12+%. This behavior is correlated with people who don’t enroll in autopay to always pay off their credit cards in full every month. The best way to avoid this problem is to log into your credit card account(s) RIGHT NOW, and turn on automatic payments for the full balance. Seriously, do it now. Here are the links for Chase, Capital One, Bank of America (instructions here), American Express, Discover, and CitiBank. If you’re carrying debt, transfer any cash you have on hand to pay off the balance right now (the same links above probably get you close to the right place to make a one-time payment. Do this now too!) With autopay, you’re not losing any control or risking a bounced payment because you’ll still get all the same notifications of a bill about to be paid and can always log back in later and turn off/reduce your autopay to a less-than-full amount if needed. You can still check your statement 20-something days prior to your bill being due in case there’s some charge you want to dispute, which there won’t be, because yes, it turns out that the suspicious SAM’S SUPER DUPER 1000 COMPANY charge for $38.93 that you don’t remember and are positive was fraud was just some gas station somewhere that you did indeed fill up at. One urban legend I’ve heard is that it’s “good for my credit score” if you run a ‘small’ balance. This is 100% false. On the contrary, paying your bills on time every time without fail is the best way to maintain a high credit score, so again, set up automatic payments for the full balance amount right now! There’s no danger, and much goodness, in scraping together all cash you have on hand to pay off an outstanding balance now. In the worst case scenario, if you need cash later, you can simply run up the debt again back to where it was.
  4. Buying a time-share. This is another ‘sold-not-bought’ product that you will almost certainly not get enough value from. They come with annual fees, are difficult to sell, especially for any kind of money close to what you paid for it, and make you feel forced to use them even if you’d rather do something else with your vacation time. Just rent a hotel/AirBnB like everyone else and you’ll enjoy more freedom, and almost definitely more wealth.
  5. Leasing a car. Unless you absolutely must have a new model all of the time, or can wangle some business tax deduction that your accountant has actually run the numbers on and assured you it’s worth it vs buying (it’s probably not even then), leasing a car is a wealth-destroying move. Instead, buy a reasonably priced, reliable car and drive it into the ground.
  6. Buying a new car before your old one is used up. Like leasing, buying another car before running your current one into the ground is a very costly thing to do, especially if you repeat this process many times during your life. Whether you choose to buy used cars as I recommend, or if you must have a new car, always drive your current vehicle into the ground before upgrading. This saves you a lot of money by driving your car long after you’ve paid it off. Switching cars every few years is a good way to burn through a lot of disposable income that you otherwise could have invested and become wealthy with. One simple rule to avoid temptation is always paying cash for your next car. This forces you to save for it in advance, and also to reckon with the true cost of upgrading as opposed to fooling yourself into thinking it’s not that financially painful by financing it in little bits each month. Rule of of thumb: Spend less than $10,000 for your next car, and only upgrade when your current vehicle has > 200,000 miles on it or would cost more than half its value to keep driving it.
  7. Buying vacation property. After time-shares, this is another popular way to sink money into something that you will never ever get enough value out of. Anytime you consider buying a vacation property, take the purchase price, and multiple by 5%. Write down that number, and decide if this annual ‘opportunity cost’ is close to the annual value you’d get out of your property. Consider a $300,000 remote lake-front cabin. Sounds nice and peaceful right? Well, 5% * $300 K = $15,000 per year, which is $1,250 per month. That’s roughly how much more you’d make over time on that money if you invested it in a low-fee stock index fund instead. Let’s say you spend a month per year at this resort of yours, which is pretty darn optimistic for most working people. 30 days divided into $15,000 = $500/day. For that price, you could rent a room in the Bellagio in Las Vegas and order champagne room service every day. You are not getting a good deal on your vacations spent at Lake Woebegone. Plus, if you buy a vacation place, you’re gonna feel obligated to ‘get your money’s’ worth and feel pressured to go there every time you have vacation. Maybe you’d rather go somewhere else instead! $15,000 per year can buy a lot of hotel or AirBnB stays, or an annual multi-week European vacation, or anything else you can think of, including a very nice lakefront resort property that you don’t have to own and can instead rent as you like! Vacation property is almost never worth it from a financial perspective. Even if you plan to rent it out part of the time to get some money back out of it, the math usually doesn’t work when you subtract the cost of the mortgage, taxes, insurance, property management and other fees, and maintenance from the revenue you expect (which always ends up being less than you think.) There’s also the headache associated with managing and maintaining property of any kind, which is even worse if you’re also a landlord. If you must buy vacation property, try to get it so cheap that even if you only use it a few weekends out of the year (the most likely scenario), your per-night/annual costs are still reasonable. For example, getting a few acres of raw wilderness land for $20,000 that you could camp on, or even erect a cheap tiny mobile home for another $20 K, might be worth it. 5% * $40,000 = $2,000 per year. 10 nights a year = $200/night, not bad, and the land might even someday increase in value if you buy it in a nice area that is experiencing population growth (but don’t hold your breath.) Rule of thumb: Spending less than $100,000 for vacation property, maybe it’s ok. More than $100,000, DON’T DO IT!
  8. Remodeling your home. People love to spend on their homes by telling themselves ‘it’s an investment’. Every single remodel/addition listed here shows that the value of your house will increase by less than the cost of the remodel. Think about that. As soon as you’ve spent $20,000 remodeling your bathroom to your unique tastes, maybe your home value when you finally sell the place has increased by $10,000, so you’ve instantly destroyed $10,000 in wealth. If that $10,000 loss was worth it to you because you love your new bathroom by that much over the life of the time you spend in the home, that’s fine, but don’t fool yourself into thinking you’re gonna recoup anywhere near the spending in a future home sale. Of course, there are some price-effective home improvements that you should do like adding insulation to save on energy costs, but these tend to be few-hundred dollar DIY projects that no one sees, vs $10,000+ projects that you pay other people to do and then show off at parties. Houses do not build wealth anywhere close to stocks, and the same goes for remodeling them. If you are skilled and can do a lot of the costly labor yourself and scrimp on materials costs, you might be able to add some ‘sweat equity’ to your property as well as enjoying the results of your labor. That said, even skilled people in my experience end up spending much more than the value they create. Rule of thumb: If your home improvement projects total less than less than $10,000, go ahead, otherwise DON’T DO IT!

Any other common financial mistakes that you’ve made, or seen other people make, that you think should be added to the list? Let me know in the comments.

The most important step to becoming rich: figuring out your spending

Investing and saving tips get a lot of play in the financial advice columns, but the most fundamental step in building wealth is figuring out where your money is going.

First, jot down all the ways that money comes out of your accounts & pockets. This means any bills that come straight out of your checking/savings accounts, any credit and debit cards you use, and any cash you pull out of the ATM, or cash that you receive as gifts or income and then spend.

My wife & I keep a joint account for shared expenses as well as our own individual accounts, so I’ll share with you my half of the joint expenses + my solo expenditures.

Here are all of the ways money flows out of my accounts:

  • Bills that get paid individually straight from my checking account, which includes our mortgage & property taxes, as well as some city utilities, and the handful of checks I write each year. I try to use automatic, electronic billing direct from my checking or credit cards for everything, and Venmo/Paypal/bank transfer for payments to individuals, so I almost never have to write a check.
  • Credit cards: My personal no-fee, cash back Capital One credit card, which auto-pays from my checking for the full amount due, and our joint no-fee cash back Chase credit card which pulls automatically from our joint checking.
  • PayPal and Venmo, which both pull from my checking account
  • Cash: I use the highly-recommended no-ATM fee Schwab Investor checking to spend cash from an ATM or debit card.

Now let’s figure out how much I spent in total from those accounts and what the specific bills were for. (We’ll breakdown the credit card payments later.)

If you are spreadsheet-phobic, skip down to The Approximate Method – Pen & Paper. Otherwise, pop open your favorite spreadsheet program and follow along.

The Best Method – Using a spreadsheet

Hopefully your bank has all your transactions online, so all you gotta do is download them and take a look. It’s easiest to dump everything into a spreadsheet, and I recommend doing that if this is the first time you’re doing this. If you can’t be bothered, at least glance at the past couple of months of statements and jot down some rough numbers that accurately reflect your monthly averages.

I bank with, and highly recommend, Capital One 360, so let’s login over there and see what I spent in total for the past 12 months.

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Above: Capital One has a handy ‘Download Transactions’ widget where I can download everything as a CSV so that I can open it in Excel or Google Sheets.

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Above: I’ll grab a year’s worth of data and export it as a CSV.

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Above: Here’s what the CSV file looks like in Excel.

Capital One reports my spending as debits (money paid out) and credits (money coming in.) For now, we only care about spending, so use your spreadsheet program to just filter on ‘Debits’. (Add back any Credits/reversals of charges that represent cancellations/returns.)

Next, filter out any transfers (which also show up as Debits) that just go to your other savings or investment accounts. We only care about money leaving your financial ecosystem for good, not any ‘internal’ transfers. When you’re done filtering, you should only see actual expenses being paid out to others.

Exclude any tax payments, since those are not directly under your control.

After this filtering, I added up the numbers and bucketed them into useful categories:

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This tells me I spent about $35,000 last year, which sounds about right since I budget $3,000 per month for myself. This is a great start, but now I need to break out the line items for my credit cards.

Your credit card company should also let you download a CSV of your transactions. Both Chase and Capital One let you download a custom date range of at least 1 year, and they both helpfully provide spending Categories that you can use as-is, or tweak to better reflect your purchases. They also give you an ‘annual report’ each January with some mediocre category matching which you could also use vs doing it in a spreadsheet.

Here’s my joint Chase card’s transactions where I used the Category column to filter out my Payments to the card (keep Adjustments, which for me are cash back rewards, and Returns, since you should net those out against the Sales.)

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For my Capital One card, I needed to use the Description column to filter out the my automatic payments.

I also filtered out certain expenses that my work reimburses me for like work travel and parking at the office, since there’s no net out-of-pocket cost to me for those things.

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To make the categorization and accurate as possible, I went through everything and changed some of the Categories (switching Costco & Walmart from ‘Shopping’ to ‘Groceries’, for example.)

Then, I used Excel’s pivot table functionality (or Google Sheets) to sum things up using the Categories that each credit card company provided (after I edited them):

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Above: my filtered solo expenses (left) and our joint expenses (right. I only pay half of these.)

Lastly, I used these two tables to combine my two credit cards into a handful of big buckets of my own choosing to get a clearer picture of everything together. I divided our joint expenses by 2 to get ‘my’ portion of the expenditure:

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Above: the Holy Grail: my yearly expenses all in one table and with accurate categorization + a few notes in the ‘Expense Name’ to remind me what’s in each category and to call out any big purchases.

The takeaways:

Housing + home maintenance is by far my biggest expense (54% – $1,550/month)

I spent over half of my ~$3,000/month budget on housing. Nearly 1/3 of that is just going to utilities + property taxes, and the remaining 2/3s to the mortgage. I spent an additional 3% on home maintenance stuff, which included needing to buy a refrigerator ($900) when we moved in and also paying a plumber to unclog our sewer pipe a few months after living here ($800!), as well as tools & supplies from the hardware store.

Travel and going out is my biggest discretionary expense (22% – $615/mo.)

Travel was 12% ($335/mo.) We took a trip to Portugal for about $3,300 for the 2 of us for 12 days. We also visited my wife’s family in New Jersey. I had a bachelor party in Vegas that I was co-host for. Lodging for local weekend trips is also in here.

Coming in at 10% was eating/going out ($280/mo.) This also included miscellaneous cash expenses for activities like the State Fair, date nights, and weekend trips or local activities. Going out for drinks is also in here. (Some of this cash probably went to buying used furniture and tools for our home, but I didn’t try too hard to separate that out.)

Food & home products (12% – $335/mo.)

We cook the vast majority of our meals at home, and I spent about 7% of my budget on groceries ($400/month for the two of us.) This is lower than it normally would be because I ate a lot of my meals for free at work this past year.

About 5% of my budget was for ‘household shopping’, which included everything I buy off Amazon, as well as from big box stores like Target. I’ve been getting into hosting themed events like my inaugural basement haunted house that I put on last year for the neighborhood, so props and other things that feed my hobbies are in this bucket too.

Medical was a big expense this year because we’re having a baby (6% – $170/mo.)

We paid higher-than-usual medical expenses in preparation for having a child. We thankfully have insurance which covers most of this.

We’ve saved a good deal in our HSAs, which allowed us to pay these out-of-pocket expenses with tax-free savings & investment growth from prior years, so it wasn’t quite as painful.

Owning and driving a car (4% – $120/mo.)

Gas (about $75/month for me) + auto insurance ($380/year for my half of it) and other miscellaneous expenses ($164 for annual registration, motor oil, air filters, a new regulator to fix my automatic window) for my car ended up costing me about $120/month. My wife and I drive older cars from 2001 and 2002 respectively, so we have no car payments (a key pillar of building wealth.) I try to do most of our car maintenance and simpler repairs myself, so this is about as bare bones as it gets for dual car ownership.

I starting saving $100/month last year for a future replacement car since mine hit 200,000 miles in late 2019. Hopefully by the time it dies I’ll have enough to offset the purchase of another reliable used car.

Phone, entertainment, and home internet (3% – $83/mo.)

My cell service is inexpensive at $30/year from highly-recommended Consumer Cellular. I bought a new Moto G7 phone for $177 including tax + a protective case. It’s a ‘budget’ phone compared to Apple or a Samsung Galaxy, but as far as Android devices go I much prefer the Moto G line to the Samsung Galaxy that I use through my work.

I keep my data usage low by always leaving on the ‘data saver’ Android option, and also by connecting to wifi whenever possible like at work or home. Xfinity/Comcast, whom we use for our home internet, has a nice network of mobile hotspots that you can connect to when you’re on the go. I use wireless calling or apps like What’sApp or Google’s Duo when connected to WiFi to keep my plan minutes low to save a few bucks, but unlimited calling is cheap with Consumer Cellular too.

We had a 12 month promotion for $30/month for Comcast internet. It was set to go up to $69, but I negotiated them back down to $35 for this year. I do this every year which saves me over $300 annually with one or two quick phone or online chats to Xfinity.

For entertainment, we mooch off generous friends and family for streaming services including Netflix, Spotify, Hulu, and Disney+ and pay absolutely nothing for them. (God bless those friends & family.) We use the library and archive.org heavily for more free streaming video, downloadable audiobooks, and ebooks.

My one subscription extravagance is a Seattle Times Sunday paper delivery + digital subscription that now costs $5/week. I was on a promo deal for most of 2019, but I’ve decided to suck it up and pay the full price going forward to support local journalism.

Great job assembling all your data! Now it’s up to you to decide where to spend more or less.

Whew! It took some web & spreadsheet work, but now I have a detailed picture of where all my money is going. If I was looking to trim some expenses, I could take a hard look at several places and decide what to cut. On the other hand, maybe I’m taking fewer trips or date nights than I think is ideal, and I might decide to spend more in those areas, perhaps cutting something else to pay for it.

Seeing the big picture of your spending

Going through this exercise drives home the fact that if I wanted to reduce my current budget in a significant way, it would be hard to do so unless we moved to a cheaper place since housing by itself is already 54% of my budget.

We’re pretty good at keeping our utilities & insurance costs low, and we just refinanced to lower our mortgage bill by $140/month, so there’s nothing left to do except sell the house and move to a cheaper area if we wanted to save more on our mortgage + property taxes. (We have no such plans: we’ve consciously made the cost tradeoff to live close to our friends & jobs and be in the city for now, but maybe years down the road we’ll change our minds in order to, say, facilitate earlier retirement, or provide better public schooling for our children, or just get more house/land for our buck.

Travel & going out is our next biggest expense, but honestly, I would spend more time on travel & outings if we could. Having novel experiences, investing in productive hobbies, and making memories is probably the best way we spend our time and money. Of course, we could prioritize cheaper trips like camping & local excursions vs expensive ones like European travel, but again, we’ve consciously set aside a certain amount of our budget for these more extravagant adventures. (And we do look for discounted airfare, good hotel deals, and reasonably-priced dining and transit to get the most memorable fun for our buck.)

We’ve already set up our budget to balance comfort & experiences vs savings in a way that meets both of our needs, and we aggressively max out our tax-advantaged savings while also setting aside more savings for early retirement, so I won’t be making any major tweaks today.

That’s all well and good for me, but if you haven’t done this kind of exercise before, spend some time deciding how you might like to shift where your money is going.

This exercise is about consciously spending & saving to get the most out of life. It’s up to you to determine what that means.

What next?

Congratulations! You just did the hardest part of personal finance: figuring out where your money is going. After you’ve made some decisions on how you might change you spending & savings picture, automate your banking & budgeting with my bulletproof spending & saving system.

Happy spending!

Addendum

The Approximate Method – Pen & Paper

If you don’t want to spend the time to get detailed info and use a spreadsheet, just jot down the numbers on a piece of paper, using the info you find online to help. I found this to be MUCH more painful than using a spreadsheet. If you go this route, I’d recommend trying to focus on the big picture: get down your total spending accurately, and then just fill in the detail as best you can, starting with the biggest spending chunks.

First, I looked through the past few months of bank statements and jotted down all the payments I made from there, excluding my credit card payments which I’ll look at separately.

For your credit cards, I recommend just grabbing your most recent year-end statement and basing your estimates off that (adjusting for any big changes that might make your current spending a lot different.) Both Chase and Capital One provide nice breakdowns by month and by category, so use those to estimate the details of where your money is going. Investigate anything that represents a large chunk of money or is confusing to you (i.e.: you’re not sure what that spending represents.)

Below: Example of Capital One’s Year-end summary that you can use to quickly categorize your credit card spending
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Use two pieces of paper at this point: one for the gory details as you parse through your bank statements + credit card summary, and a second one to categorize the numbers into a handful of buckets & add them up (far-right.)

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Add up everything in your ‘buckets’ sheet of paper and make sure the total is roughly accurate, and you’re done! Go back up to the end of the spreadsheet method to see the next steps.

Two big savings tips for homeowners: refinance, and use a smaller trash can

As I detailed in Part 1 of my 10 Savings tips, recurring expenses are a great place to save money. For homeowners, what could be a bigger expense than your mortgage? Interest rates are at an all-time low right now, so…

Tip #1 is to refinance your mortgage

First, check rates by calling up or emailing the broker on your current mortgage and see what they can offer you. Next, check rates online and with another broker, especially through Costco. I highly recommend NBKC, the online bank we used for our mortgage. NBKC’s rate was better than the other 2 or 3 local + national banks I checked, and we got a great deal on closing costs (like, $1,200 off or something) just by getting a $120/year Costo Executive membership. (I just upgraded my current regular membership for $60 more.) So, if you go with NBKC make sure to ask about the Costco discount.¬†

Our NBKC broker Jeff, who I also recommend (I get nothing for this, BTW), reached out to us with an offer to refinance to cut our interest rate from 3.9% down to 3.4%.

Since we had just bought the place a year ago, the bank seemed to give us a good deal on the closing costs, which were only $600 net of a $1,200 ‘lender credit’ that they gave us. In exchange for that $600, the 0.5% rate cut lowered our monthly payments by about $100 per month.

Consider the change in your loan payment time period

We went with a 30-year fixed-rate mortgage for the refinance, so our loan payment period extended as a result from the 29 years we had left on the original mortgage to 30 years on the new one. Personally, I’m happy to extend the timeframe out into infinity because at 3.4%, even with expected 10-year inflation at an extreme low 1.2% as of April 2020, it’s really cheap money at a real interest rate of 2.2% ( = 3.4 minus 1.2.) Plus, if inflation exceeds expectations, it’s that much better for us. I’d much rather invest those mortgage proceeds in stocks over the ~10 – 30 year time period that we intend keep the house and mortgage. (The mortgage interest tax deduction really isn’t worth anything to us since the Trump tax cuts raised the standard deduction to $24,800 for married couples in 2020.)

Is refinancing worth it?

The three main factors that determine whether it makes sense to refinance or not are

1) the costs to refinance ($600 in our case),

2) the monthly savings, and

3) how long you’ll be in your home.

A refinance calculator like this one can help. Because I’m a big financial nerd I run some net present value comparisons in Excel to satisfy myself that the math makes sense, but I think you can probably get pretty close by just estimating your ‘break even’ date: i.e.: how many more months would you need to stay in your home to earn back the refinance costs?

For instance, if your refinance was gonna cost you $1,200, but it reduced your mortgage payment by $100 per month, then as long as you stay in your home over a year the deal makes financial sense. Add a little buffer on the timeframe to make sure. I.e.: if it was gonna take you 2 years to get paid back, make sure you’ll stay for at least 3.

When you’re figuring your closing costs, make sure to only include costs that are truly lost to you, which are things like the new title insurance policy, lender/broker fees, any new appraisal fees required, and any state & local filing fees. Ignore the shuffling around of escrow items like all your prepaid items such as escrow property taxes, home insurance (if you pay through your lender via escrow), and the payments to the principal and interest itself. (Avoid any ‘points’ aka pre-paid interest though. And of course, always come up with at least 20% down to avoid PMI, which stands for Private Mortgage Insurance, or Preventable Money Incineration.

Savings: $50 – $100s per month

Tip #2 – Use a smaller garbage can

If your city charges you different rates depending on which size trash can you use, then it definitely pays to use a smaller can.

In Seattle, we have 3 types of waste: recycle, which is free, yard waste, which is cheap ($7 – 13) and includes compost, aka food, and also food-soiled paper or other compostable products, and garbage, which is the most expensive ($25 for 12 gallon bin up to $119 for 96 gals.) For just the two of us, we can easily get away with the smallest sized 12 gallon bin each week. We do this by recycling everything that can (junk mail, all those boxes from Amazon, glass bottles & cleaned plastic food containers), and throwing all of our food + compostable food containers in the yard waste (except for fat/oil/grease, which you put in a sealable container and toss in the trash), or in our own compost pile. Non-recyclable, non-food waste garbage turns out to be pretty minimal for us, and as long as your author remembers to fill up our small bin each week, we never run out of room. (Worst-case, you can set out extra trash next to your small bin and pay the one-off fee once in a blue moon. That’s far cheaper than paying for more than you need every week.)

Look up your city’s trash utility site online and find out what the rates are and how to switch sizes, and also how often you can switch sizes. Seattleites can go here to change trash cans (or yard waste bins) once every 12 months.

Savings: $5 Р$90 per month in our neck of the woods.

Below: Seattle waste service pricing. Lotsa savings to be had!

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