Should Your Finances be on Cruise Control?

Finances on Cruise Control

Do you enjoy road trips? It is one of my favorite ways to go on vacation, and at least once a year my wife and I take such a trip.

To avoid the strain on our own vehicles, we usually rent a car. For a long road trip, one of the must-have features for that car is of course cruise control, which allows me to set the speed at a fixed amount.

On those long portions of the trip, it is nice to put something on “automatic” and out of your mind.

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The Danger of Finances on Cruise Control

In some instances, putting some elements of your finances on cruise control or “automatic” can be a good thing.

For example, if you are working on developing your savings habits, it might be a good idea to setup an auto-draft from your checking account to your savings account each month.

Or, if you want to make sure you are consistently saving for retirement or college expenses, an automatic transaction to your investment account would be a good option.

However, putting things on “cruise control” with your finances could also present a problem. That recently happened to me with our home insurance policy.

We had been with the same home insurance company for almost 20 years even through our move from Round Rock to Frisco. In all that time, I really did not have a reason to complain about coverage or service.

I also got into the habit of receiving the annual policy renewal letter on-line as opposed to receiving the paper version.

So far, nothing wrong with any of that. It saved me time, it minimized the amount of paper I had to file, etc.

But here is where I ran into trouble:  Two years ago, I received the notice of renewal but I honestly gave it only a cursory review.

There was a big cost increase in the insurance premium and even though I saw it, I did not really process it.

It really did not hit me until I received a notice from my mortgage company with the corresponding increase in the monthly escrow amount.

I was a bit surprised, and of course, our monthly budget had to be adjusted. So even though we could handle the change, the fact that I had let something like that slip by me, left me with a bad taste.

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Lesson Learned: Automate Your Finances but Don’t Disengage

So what did I learn? Well, I always tell you that you have pay attention to your money in all aspects. I had to apply that lesson to myself. Again.

This past December, when I received the annual renewal policy for our home insurance, I did a more detailed review. This time there was no major increase, no major surprise.

However, I took it one step further. I decided to look for other options with insurance to see if we could do better with coverage and get more value for the cost.

I contacted a trusted insurance agent and he reviewed our needs for both home and auto insurance.

I was pleasantly surprised that I could save about $400 annually combined between our home and auto insurance premiums. All I had to do was to take the time to ask for different options.

I made the switch and I am glad I took that step. Reviewing your insurance needs is just one example of looking at your overall financial plan.

So regularly, take a moment to review what you are spending on different areas of your budget (food, internet service, phone service, etc.). Take the extra step to look for alternative options.

You may end up not changing anything, but then again, you could find savings and more bang for your buck.

Now, where is that cable bill?

This post is also available in: Spanish