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Are You Leaving Money on the Table?

by Suba

The Pareto Principle (80% of the results come from 20% of the efforts) has been applied to many different areas including personal finance.  Whether the actual percentages apply in a particular case or not is open to question.  What is implied though is that significant progress toward a goal can be achieved with relatively little effort.

How does this apply to what I’m going to write in this post?  A lot of times in our efforts to save money and reach financial goals we can lose sight of the little things.  Below I’m going to list some ways in which a large number of people leave money on the table.  In keeping with the Pareto Principle, I believe a lot of these issues can be addressed with little effort and can net you a pretty sum that you might be overlooking right now.  I will focus on three areas starting with:

Everyday Expenses

Are you mailing your mail in rebates? 45% of people who buy stuff with a mail in rebate forget to mail in their rebates!  That’s an astounding percentage!  Make sure you are not counted in that statistic.  As soon as you get the item, check if it works properly and then immediately fill in and mail the rebate form.  Don’t forget to take copies of everything.  On more than one occasion I have been told that I didn’t submit all the required documentation or that my rebate form was “lost” in the mail.  The copies are what allowed me to get my money from the rebate processing company.

Thousand Bucks Kitchen Table!

 

Using the wrong credit card.  I constantly have to remind my husband about this.  We have two credit cards that we use on a daily basis.  One gives us higher discounts on restaurants, gas and groceries.  The other credit card is better for all other purchases.  DH, most of the time forgets which card to use when.  While it might not seem like much, during our year end review last year, I did a calculation and figured out that using the right card over the entire year netted us $3800 Nothing to sneeze at!

Of course if you are the type who tends to spend more if you use a credit card then no matter what the advantages of a particular card are, DO NOT CARRY ONE!

Financially induced clutter.  That’s the name DH came up with for the rowing machine that has now become a clothes rack in our bedroom.  We purchased it about a year and a half ago with the noble intention of using it while watching a movie, thus making maximum use of our time!  I think we used it for about a week and then laziness along with a number of other inconsequential factors caused it to become a clothes hangar.  We should have got rid of it a year ago at the latest because it was pretty obvious that neither of us was going to really be using it.  Somehow though, every time I decided I was going to put it up on Craigslist I was confronted by the fact that I would only get back a fraction of what I paid.  So I would renew my resolve to use the rowing machine.  This of course doesn’t ever happen.  So now it has accompanied us on two moves and only recently I got rid of it. Should have done it a long time ago.

Late fees.  This can be easily avoided just by automating payments.  If you do get a late fee for any reason, call the company and ask that it be waived.  I was reading Ramit Sethi’s book “I will teach you to be rich” this past weekend.  He has a pretty interesting script that he uses to get the fees waived.  If you are the timid type you might want to give it a read.  Even if you don’t use it, it will at least give you the confidence to ask for a waiver.

Comparison shopping.  This is simpler than ever now if you have a smartphone.  Just scan the barcode and you will get a list of geographically nearby locations and online locations for the same product along with prices.  Need I say more?  In addition, if you find the price to be cheaper elsewhere you can always show that to the cashier at the store where you are to try and get a price match.

Tax Savings

Flexible spending accounts:  Last year a law was passed allowing you to only obtain prescription drugs with the money you put into your FSA.  But if your employer offers you a flexible spending account it is still a good area to save money with a little planning.  If you spend X amount of money in prescriptions every year why not reap the tax free benefits.  Be careful how much you put into it though because unused money is lost.  Start with a small amount and within a year or two you will be able to fine tune your FSA contributions to maximize your savings without spending much time.

Overlooked tax breaks:  Before you hand everything over to a tax preparer, just spend a little time looking up deductions that you might be eligible for. Don’t just trust the tax preparer to give you the maximum return. This is especially true if you are using the tax people at H&R Block type places. They use the same software and do not make effort to get you all the deductions. There is no substitute for doing your homework.  The IRS website has a number of documents to make the tax code easier to understand.  They give good examples for various situations.  Yes, it does take some time to read through everything but in the end it is definitely worth the effort because you know exactly how much you owe.

Retirement and long term planning

401k match:  This is a no brainer.  Put at least enough into your 401k to get your full company match.  Its a lot of free money that you absolutely do not want to miss out on.

Investment fees and expenses:  When comparing investment vehicles don’t just look at historical returns.  Look at returns minus expenses to get the true rate of return.  A lot of managed funds claim they beat index funds but once you take into account the much higher expense ratios of managed funds, a lot of them don’t look better than index funds.  Additionally if you are using a target date retirement fund in your 401k remember that these funds not only have expenses due to all the funds they invest in, they also tack on an additional fee for the management of the target date fund as well.  So you get hit with a double expense.  I’m not saying that these funds are bad.  All I am saying is that you have to account for all the expenses before deciding if any particular investment vehicle is worthwhile.

Credit check:  Periodically check your credit score. You can get it free once a year from each of the 3 credit bureau. So if you stagger them you can get a free report every 4 months.  Comb through it to make sure there isn’t any incorrect information.  If there is call the company that submitted the information and have it fixed immediately.

Most of these tasks won’t take much time at all. But the rewards are substantial. Are you leaving any money on the table?

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{ 19 comments… read them below or add one }

Little House July 13, 2011 at 6:27 am

These are great tips. I know that a few of the smaller things I do, like saving on a semi-regular* basis, and making sure I’m getting a good price on our purchases really do pay off in the long run.

*I’m getting better at saving, but variability makes it tricky! ;)

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Suba July 14, 2011 at 7:51 am

Now that I get someincome from the blog, I see what you are saying. One month it is windfall, next month not a single advertiser bothering to look in…

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Money Beagle July 13, 2011 at 6:49 am

Wow, am I reading that there’s a $3800 in rewards difference? That’s a lot of money flowing through those cards if that’s the case. Definitely makes a case for making sure you use the right one. Maybe a little note written on the back of a business card would come in handy so he can ‘check’ when he isn’t sure.

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Suba July 13, 2011 at 12:02 pm

Money Beagle, yes that really was $3800. This year we have already surpassed that by July. We spend a lot :) but I also do all the promotions and stuff to maximize the rewards. I have little post it note on his cards to remind on what to use for what.

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Alex | Perfecting Dad July 13, 2011 at 7:09 am

CONVICTED! We just spent the last few months moving across the country, selling one house, buying another before the first was sold, and in the frenzy I let my eye drift off the ball for a couple of months causing hundreds of dollars in losses. First we missed paying off our credit card by the due date, so we’re hit with interest fees. Second, I missed paying the property tax on time in the new house an wham! another $150 in late fees. I didn’t transfer the money properly for our periodic investment and slammo! a $40 NSF fee. Terrible. Then I read this article :)

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Suba July 14, 2011 at 7:53 am

Moving can be stressful. I get stressed out generally, so moving would make it even worse. I just write down all the things to do just so I wont forget things during the move.

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Paula @ AffordAnything.org July 13, 2011 at 8:31 am

I like the idea of using a rowing machine while you watch movies! I’ve tried to do something like this, but found that any kind of “complex” movement is just too much to keep up. The one thing that works, for me, is walking on a treadmill while I watch movies/TV. I set the treadmill to the 17-minute mile (a no-brainer pace) and gently stroll while I watch a movie … by the end of the movie, I’ve walked 5 miles! I tried to do this with other exercise machines (elliptical, etc) but the treadmill was the only thing that worked, probably because walking is so intuitive.

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Suba July 14, 2011 at 7:50 am

We considered trendmill but it was too big for the living room. Good thing too… it was costlier than the rowing machine ;)

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No Debt MBA July 13, 2011 at 10:12 am

My pet peeve is people not getting their company’s 401k match. Many of these don’t even have a vesting period. True free money going to waste.

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Suba July 14, 2011 at 7:49 am

I know a friend of mine who didn’t get 401k (generous) match for 5 yrs! just because he didn’t like going to that HR!!! I didn’t know if I should cry or laugh.

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jana July 13, 2011 at 10:48 am

i can honestly say i don’t think i’m leaving money on the table. not too much, anyway, since there are some things that i can sell that i haven’t gotten around to selling (anyone need a treadmill?). but this is a great checklist to go through to make sure that you’re being financially prudent!

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Suba July 14, 2011 at 7:49 am

You have done very well then, jana. I could sell/donate a whole bunch of stuff in my house… I will eventually get to it. We have improved a lot, but we could do better.

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Squirrelers July 13, 2011 at 9:36 pm

Last year, I almost left money on the table with the FSA I had contributed to. On New Year’s Eve, I went to the pharmacy and bought up a ton of OTC stuff just to use up the balance. Interestingly, those last-minute purchases ended up being pretty good!

That said, I decided to be a bit more conservative on the FSA this year, so I don’t run the risk of leaving money on the table. So, what happened? I’ve gone through the whole amount this year already. Oh well, it’s not an exact science:)

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Suba July 14, 2011 at 7:46 am

We are almost 75% done with our FSA too and we increased it from last year! Unfortunately medical expenses is a big item in our budget.

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101 Centavos July 14, 2011 at 4:44 am

So, the best of fitness intentions have a hard time morphing into consistent action. The multi-station exercise machine we bought used from a friend is now in the garage waiting for either Salvation Army or Freecycle. It follows the treadmill, which left in a garage sale.

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Suba July 14, 2011 at 7:48 am

101, yes, now for the last 3 yrs we have stuck with the free exercise option, but we just couldn’t get rid of the one that we already had :) There must be some term to it, holding on to junk for some perceived imaginary value…

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Syed July 15, 2011 at 3:48 pm

I am firm believe in pareto rule and this is good application of pareto rule!!

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Amanda L. Grossman July 19, 2011 at 5:30 pm

I am always amazed at how many fees can be waived just by asking.

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Shannon-ReadyForZero May 2, 2012 at 4:51 pm

I think the running theme here is to pay attention to what you do and make sure the little choices we make are the best ones in the long run. I’m the first person to forget about a rebate some other easy thing that could have saved me money. This article is a great resource to remind people of how many things they can do to save, and grow, their money!

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