Saving Money On Things You Don’t Even Want to Buy But Have To

Save MoneyThere are lots of costs in life we would rather pass on. Most of these things fall under the category of insurance. Life insurance, homeowner’s insurance, business insurance, auto insurance, renter’s insurance, health insurance: they are all things that we pay a premium for and hope that we will never ever have to use (well, except for life insurance; so far skipping death hasn’t been doable).

This makes a lot of us opt, almost across the board, for the cheapest policies available. Paying as little as possible takes the sting out of having to pay for this (hopefully) non-usable thing a little bit. Unfortunately, this is the wrong way to go. When you buy bargain basement policies you set yourself up for future financial disaster. Why? Because the bargain basement insurers are great at finding loopholes and technicalities that get them out of having to pay out on your policy at all. With a bargain basement policy you are literally paying for something you won’t get to use and isn’t that that’s worse than hoping that you won’t need it?

We don’t mean to say, though, that you should fork over all of your cash for the most expensive policies either. Just because something is expensive doesn’t mean it is necessarily better.  No, what you have to do is look for the right policy for the right price. Here is how you do that.

Do Your Research

At this stage in the game, you need to learn everything you can about what this particular type of insurance policy actually does. You need to learn the lingo. For example, “deductible” is the amount of money you can expect to pay out of pocket before your insurance policy kicks in and covers everything else. You’ll also want to look at coverage terminology, as well as the basic laws of insurance and insurance coverage in your state. The more you know about what insurance is, the language it uses and how it is governed in your state, the better able you will be to pick a policy that will actually work for you…and the less likely you will be to get taken advantage of by an insurance company.

Reduce Your Costs

The type of car you drive plays a large role in the amount of money you will pay for an insurance policy. Newer cars, cars that have safety issues, etc. are more expensive to insure. The more expensive your belongings, the more your home or renter’s insurance policy will cost. Now, nobody is going to tell you to trade your car in for an older model or to get rid of family heirlooms. If you’re in the market for a new car, though, consider an electric and super safe model. Consider keeping smaller expensive and important items in a safety deposit box instead of in your closet.

Look for ways to reduce the amount of coverage you need where you can. For example, if you’re shopping for a homeowner’s policy, consider installing a security system. It will cost more now, but you could make up that cost in insurance savings.

Shop Around

Once you know how to read and compare policies and you know the value of what you’re covering, it is time to go shopping. Take your time here. Compare the details and price of each car insurance policy. Which companies give you a better value for your dollar? Which policies will actually cover you and pay out when you need them?

Whenever possible, do your research and shopping around with real people. Talk to or, even better, meet with actual agents in person. Get each quote in writing. This way, if you decide to buy, they can’t unexpectedly charge you more than you had talked about in your initial consultation. Written quotes also give you leverage when shopping for a policy. Most insurance companies want your business and are willing to price match to get it. If you can provide written proof that the same coverage costs less with another agent, you might be able to negotiate a cheaper rate.

The point is that you don’t have to settle for terrible coverage or ridiculously high prices. When you do your homework and you take steps to reduce the amount of coverage you’ll need (where applicable), there is no reason that you shouldn’t be able to get the perfect amount of coverage for the perfect price.

Have you recently found a hack that will allow you to reduce the cost of those expensive necessities in life (the kind you don’t want to buy but can’t go without)? Share your advice in the comments!

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Is It Wrong To Get A Tax Refund?

Tax ReturnIt’s March, which can only mean one thing. All the green beer you could ever want to drink!!!

Or not.

It’s also the time of year many Canadians will begrudgingly start working on their taxes. If you’re anything like me, tax time is a myriad of forms, paperwork, and other tedium I really should have gotten around to in October. But here we are.

For most of you reading this, tax time isn’t so bad. Chances are you only have income from one source (your job), or maybe another source like a side hustle or investment returns. Add on a slip for your RRSP contribution, and that’s about it. Spend an hour on Turbotax and you’re done.

The average Canadian also overpays during the year — by design, since the last thing the government wants is to have to hound everyone for taxes at the end of the year — to the tune of more than $1,000, a pretty big chunk of change.

For years, the same advice has been given to taxpayers. Instead of getting a fat refund at the end of the year, you should opt for less tax taken off at the source and enjoy that money year round. If your refund is $1,200, wouldn’t you much rather have $100 extra per month? After all, there’s value in having money now compared to a year from now.

While that’s true, I’m of the belief that, for most people, it doesn’t really matter. Here’s why it’s okay to have a tax refund.

Pros aren’t really pros

Think of it this way. For the sake of simplicity, let’s divide people into two groups, even though real life doesn’t work that way. We’ll call them the financial studs and duds. The studs are maxing out retirement accounts, living frugally, and so on. The duds are doing everything wrong.

Let’s assume both groups get a tax refund each year. The studs do smart things with it, while the duds spend it on green beer and other silly things. Would that really change if each group of people had the tax refund to spend in equal increments over the year? I’m guessing not.

In fact, I’d even argue that the duds of the world are more likely to do something smart with the cash if it all comes in one big lump sum. There’s a huge psychological benefit to paying off a quarter or a third of your credit card at once, while many people wouldn’t even bother throwing $100 per month extra at it because it doesn’t feel like they’re doing anything.

The other anti-tax refund argument is that having the cash now is more valuable than having it later. For the most part, this is true. In theory, you could invest that cash for a few months and end up with gains.

But in reality, putting $100 per month in the bank at 1% interest gives you a whole $6 extra per year compared to the person who gets it all back at the end of the year, since you’d slowly be depositing it over the year. You’ll forgive me if I don’t get excited over that. You could make gains higher than that in the stock market, but those are hardly guaranteed.

But saying all that, I am in favor of you getting rid of your tax refund. Just not in the way you’ve been taught.

A better plan than getting a tax refund

There’s a really easy way for you to minimize your tax refund in 2015. All you have to do is earn more money.

I’m not talking about getting a raise at work, although that’s not a bad idea either. Instead, leverage your skills into a profitable side hustle. You’ll make income that isn’t taxed at the source, which will eat up your tax refund. Just be sure to figure out the tax implications of your side income so you’re not running into a different tax problem — being short.

There are other advantages to having a side hustle. You can write off part of your house as a home office, and chances are you can write off anything from a portion of your vehicle expenses or internet as well, depending on the nature of your business. You’ll make extra cash and cut down on your expenses.

There are hundreds of reasons why having a side hustle is a good idea. Using it to avoid getting a huge tax refund is just icing on the cake.

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