My Emergency Fund Saves Me Money Too
GREAT NEWS!! I just saved a lot of money on my car insurance! And of course, I have GEICO. LOL!
I’m only half kidding. I did save a few bucks on my car insurance by increasing the deductible from $500 to $1,000. Actually, I thought I’d made this change a long time ago but noticed I hadn’t when I received the renewal policy. After a few online clicks, my little mistake was immediately corrected. As a result, the six month premium was reduced from $468.10 to $406.30 - a savings of $61.80.
With the $468.10 premium, the monthly payment structure used to look like this:
- Nov $79.02
- Dec $79.02
- Jan $79.02
- Feb $79.02
- Mar $79.02
- Apr $79.00
For cash flow purposes, I choose to make monthly payments rather than pay the entire premium in full. With direct debit, GEICO applies a $1/month service fee, resulting in an additional $6 premium for the convenience of cash flow.
With the $406.30 premium, the new monthly payment structure looks like this:
- Nov $79.02
- Dec $58.42
- Jan $68.72
- Feb $68.72
- Mar $68.72
- Apr $68.70
Since GEICO bills a month in advance, the November payment was already processing by the time I noticed the deductible and made the change. Therefore, the $61.80 savings was prorated over the remaining 5 months. This works for me because it now reduces my cash outflow by over $20/month in December and $10/month through April. On the next renewal, the points from one of my speeding tickets should fall and I expect to see even more savings. Yay!
The monthly reduction may seem paltry, but the cumulative total becomes significant when you apply the same savings approach to every monthly expense that is vying for a portion of your limited income. Start with one bill and accept every small savings. In my opinion, no savings is ever too small to ignore. Reduce your car insurance by $10, your cable bill by $15, your cell phone bill by $20, and so on. Eventually, you will have an extra $100+/month that could provide a little wiggle room in a tight budget.
Why would I increase the deductible from $500 to $1,000 if I’m so concerned about cash flow? I did it for several reasons:
- The purpose of car insurance is to cover “what if” scenarios. Therefore, I will only have to pay the $1,000 deductible if and when a “what if” happens.
- If a “what if” DOES NOT happen, then my premium becomes the insurance company’s profit. I’d rather minimize their profits and use the premium savings for other things.
- If a “what if” DOES happen, I have a healthy emergency fund to tap into if necessary. If an accident occurs, shelling out $1,000 will be the least of my concerns. Comprehensive damage less than $1,000, I wouldn’t file a claim.
- Until the “what if” happens, my emergency fund continues to grow from compounding interest and savings from the premium reduction can be invested to work for me as well.
Ultimately, it is my emergency fund that makes the decision a no brainer. It’s a FREE safety net that is there when I need it. Who would have thought an emergency fund can give you a peace of mind AND save you money too? Lovely!
~*~*~*~*~*~
Work to achieve, not to acquire.
And as always, BE FABULOUS!
Work to achieve, not to acquire.
And as always, BE FABULOUS!
If you enjoy reading this site, don't miss a thing! Subscribe to Fabulous Financials via email or RSS feed so you can receive notifications when I publish new content.
13 comments:
Write a comment:
Want an image next to your comment? Get your Gravatar here!
Have you read the Fabulous Financials comment policy lately?
This is a great idea! I have been looking for ways to reduce my monthly bills. I have been shopping around for a cheaper cable company. I also have Geico and I am going to call and see about increasing my deductible.
Why don’t you stick your monthly payment into a savings account marked for your insurance and then pay it in full every 6 months when it is due. You’ll earn a little interest and not have to pay the $1 fee. That is what I do.
Wow single ma, a whole post on “deductibles”
It’s all good!
You know, that’s how I feel about my federal taxes. I get most of my cash from them upfront. I see people running around talking about those big refund checks they are getting and I think to myself, “They aren’t giving you anything. That’s money you earned and let THEM borrow and now they are just now getting around to giving it back to you…which you had to do all of this paperwork to get!” And, did you hear that they (IRS) might have some problems making good on repaying folks next year??? LMAO
I always owe them a little each tax year and I don’t care one bit. I’d prefer to do that paperwork because I owe them than because they owe me. http://www.sugarnspice.typepad.com
@ ntbeach - I could pay the 6 mos premium in full, but I don’t want to tie up the cash. I could also take the 6 mos premium out of my emergency (already saved), but I don’t want to do that. Building a separate savings account will tie up even more cash, which I don’t want either. I have considered changing from a 6 mos plan to a 4 mos plan, reducing it to $4.
@ moneymonk - Problem with deductibles?
yeah…..LOL
Well stop talking in code and spill the beans!
I agree with you. Little avings add up just as much as little expenses, and we know how those can be killer!
yes, i agree with you totally about the use of EF vs. having a low deductible. i have a low one right now because my EF is low and I wouldn’t be able to cover an accident out of pocket. i love geico too!
Single Ma,
Recently had a similar situation with Geico. I forgot to notify them that I moved and they got the post office notice. They notified me and when I corrected my address I got $62.72 back in the mail for living less than 10 miles from work. Also, I do the two payment method. I get to earn interest on it and it only cost $2 to process the two payments which are spaced out pretty far apart.
I luv you, Single Ma.
You have articulated something I have known/practiced for years, but did not think of explicitly in these terms. Essentially the deductible is a statement of self-insurance (of your car, your house, other possessions and/or your health). An emergency fund can allow for more self-insurance freeing up cash for other investments.
I really liked your suggestion on how to save on my monthly premiums, and I think that it does make a lot of sense especially if you consider yourself I careful driver.
I also noticed that you talk about how to cut other bills. I recently set out to cut my cellphone bill and found this great service at http://www.myvalidas.com that does just that. I saved over $40 a month and got a clear view of what I am spending money on.
Single ma, Im just joking with you…you should know me by now!!