Friday, October 9, 2015

Our Largest Expenses and How We Reduced Them

The biggest expense we had over the years was a mortgage. After we felt comfortable with the amount of cash and investments we had, we decided to take some of the money we invested monthly and pay down our mortgage rapidly.

I know some financial people believe that you shouldn't pay your mortgage off. That might make sense today with interest rates as low as they are. If you can make more interest in investments than your mortgage is costing you then that is something to think about.

However when we had a mortgage, interest rates were a lot higher. It made sense for us to pay that debt down quickly and save a lot of interest on that loan. So we started paying extra money with each payment. We paid our last mortgage off years ago and paid cash for the house we live in now. We also paid cash for the house before this one. We have downsized the square footage of our home over the last 16 years. So the only really large expense for our house is the school and property taxes. They get paid in September and January. 

We also have homeowners insurance which has risen by a large amount over the past few years. So it is time again to look for a cheaper company without sacrificing any of the insurance we have now.  We look for a better deal every couple of years.

We know that there will always be home maintenance costs and we have accounted for that in our savings.

The next highest expense was an automobile which we have needed since we got married. In the areas where we have lived, we were not close enough to be able to bike to work and public transportation was not available. With the exception of the automobile we have now, we always purchased an automobile that was comfortable and had just a basic radio. There were not a lot of upgrades. We always paid those loans off early the same as we did our mortgages. The last two automobiles that we have purchased have been paid with cash. The one we have now has a lot of the upgrades that we never would pay for before. In our "older age", we went with comfort and love our seat warmers in the winter.

Many people buy used cars and that is a wonderful way to save money over buying a new one. If that is what you do, I admire your choice. For us, we have always purchased new ones and driven them into the ground. We have kept our cars for a minimum of 8 years and a maximum of 13 years with the exception of a lemon that we had. They always had well over 100,000 miles to 150,000 miles when we traded them.

The other way we saved on transportation costs was for my husband to carpool to work. So he saved 1/2 of the wear and tear on our automobiles and had 1/2 of the gasoline costs. This allowed us to only need one car until I worked in my children's teenage years. I arranged my children's and my health appointments around the days I had the car. All errands got run on that schedule also. For the past 14 years, we have only had one car. We arrange appointments around each others schedule. We decided if we ever needed a second car that it would be cheaper to rent one than to buy a second car and insure it. We have never had to rent one.

We also will look for cheaper automobile insurance without sacrificing the limits that we have when the policy is due.

We pay both our homeowner's and automobile insurance yearly to get a cheaper premium. My husband takes a 6 hour safe driver course in our state to give us a reduction on our automobile liability costs. The course has to be retaken every three years.

We also have done what we can to lower the gasoline and oil costs for our automobiles. We have always purchased gasoline at the cheapest price per gallon closest to our home. We try to only run errands once a week. If we can do it on a day that we have a health appointment that is even better. By doing this we keep our mileage under 5000 per year even with a few long 4 hour trips a year.

My husband changed his own oil for most of our years. Now that he is older, we go to our local repair place to have it changed instead of the dealer who is much more expensive.

We wash our own car with the exception of going to the car wash in mid winter.

Those have been our highest costs over the years with the exception of college costs for my husband and our children which we saved for and then paid each semester as they came due and property, school, state and federal income taxes, and Social Security and Medicare taxes. We no longer pay Social Security or Medicare taxes. Instead we receive Social Security benefits and Medicare benefits. Medicare does cost $ 104.90 for each of us monthly but in the spirit of being very honest, my husband's former employer reimburses us those costs monthly.

We also have  a secondary health insurance company premium through the same employer that we pay monthly for a policy that pays most of the most of the amount that Medicare doesn't pay after deductibles. 

If you have any questions, feel free to ask in comments.

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