How Default Settings Can Derail Your Finances

NEW YORK (MainStreet) — "Kicking the can down the road." If I hear that phrase one more time...

That's how (a lot) more than one commentator described the debt dodge our U.S. government recently completed. Deciding not to make a decision, but just dealing with the whole mess later.

 

We all do it. Choose not to think about something important that we really need to consider, especially when it comes to finances. And that's when we decide to let it ride. Leave things as they are and – kick the can down the road. In this case, default is not about neglecting to pay your bills; it's about maintaining the status quo. Default settings can mean doing the least required for any given task at hand.

Computer configuration? It's in the default mode. Lunch? I'll have what he's having. Ringtone? Factory setting. Shirts? Off the rack. Vehicle? Stock model, standard options.

Sometimes we're too busy, unaware, uninformed or uninterested to make a decision. So we pay more, lose more, make less and save less. Maybe it's time for all of us to stop kicking the can. Consider taking your finances out of the default mode and doing more. Here are some common auto-pilot decisions we make:

Minimum payments

Everyone knows about this one, but it's still a common mistake: paying the minimum required on credit cards. Congratulations. That new pair of shoes will finally be paid off in 2021. Think they'll still be in your closet by then?

Bank of America offers an example of a credit card balance that requires a $37 minimum payment. By paying just $10 more than the minimum required, and continuing to do so until the balance is paid off, you'll save $1,236.76 in interest and pay off the debt almost 10 years faster.

401(k) investments

Contributing to your company retirement plan is one thing; good job. But did you decide how to invest your contributions or did they just drop into the plan's default investment bucket? If so, your retirement dollars could be sitting on the side of the road looking for a ride when the market makes its next big move. Get good advice and make sure your 401(k) money is invested appropriately to meet your retirement goals.

Insurance deductibles

A higher deductible on your car insurance means you'll pay a lower premium. But it also means more money out of your pocket when you file a claim. Kiplinger says raising your deductible from $250 to $1,000 can lower your premiums between 15% and 25%. That's certainly worth considering. It all depends on the value of your vehicle and the amount of money you're comfortable with having to round up when you smash that rear quarter-panel.

Cellphone plans

Cellphone statements are almost as bad as cable bills. They're complicated: insurance, roadside assistance, text and data plans; there are lots of options and add-ons.

When it comes to cellphone insurance, monthly premiums of $5 to $7 and deductibles of $25 for lesser-value phones, to $199 for smart phones, can add up. If you file a claim after a year and a half, you'll have paid somewhere between $100 to more than $300 for the insurance, and then the insurer might opt to give you a refurbished replacement.

Billshrink.com says that 80% of Americans overpay on their cellphone service by more than $800 million a year, or an average of about $300 a person. And one of the biggest costs is paying for minutes we don't even use. The website also says nearly two-thirds (65%) of calls made by consumers are to the same five phone numbers. You might want to consider one of those "friends and family" plans.

By the way, after burning through $9 million in venture capital funding, BillShrink, the money saving service I've been mentioning, shut down in late July. That's a little too ironic, don't you think?

Cable service

A lot of folks are way ahead of me on this one: cutting the cable. Some of us still hang on. I like live sports, my wife likes reality shows. Don't think we'll be cutting out cable anytime soon.

I took a close look at my cable bill a while back and found that I was being charged every month for a converter box that I had long since thrown into the electronics burial box stashed in the corner of the attic. Right on top of those flip phones with the external antennas. Gotta recycle that stuff one day. I dusted that old box off, took it to the cable office and saved a couple of bucks each month. At least enough to stream an Amazon movie every now and then.

Sometimes cable boxes are provided free, but a monthly fee might kick in after the first year. Also, those "free" premium channel upgrades are usually offered for a limited time before fees eventually kick-in, so it's a good idea to take a little time and decipher the bill.

There's a bunch more

Do you really need to pay the monthly charge for a premium upgrade so that you have a voice coach on your fitness app? Probably not. Still using your premium Spotify? Being charged for paper credit card statements? Still hanging on to that land line? Tuned into SiriusXM lately? How about that gym membership? Reading that monthly issue of Cat Fancy? Netflix? Skype?

This stuff is nearly endless. You may have a bunch of recurring expenses that really add up over the course of a year. It's worth a little effort to dump the default settings -- and pick up that can you've been kicking.

You may even discover an old cable box in your attic.

--Written by Hal M. Bundrick for MainStreet

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