At some point all that Chilling Out fades its way into Complacency, and our natural Human nature starts to work against us, telling us to conserve energy and not really do much of anything. And laziness begets more laziness, and life actually becomes less fun.
Complacency Is Expensive
This laziness was affecting my financial life, and your financial life too. I had let thousands of dollars of uninvested cash build up in my checking account, where it was sitting around earning nothing. My credit card bills had come in, been automatically paid, and filed themselves away without me even reviewing them for fraudulent transactions or wussypants spending on my part. And I had a growing mini-mountain of things I need to do regarding insurance, accounting, and legal stuff in both my personal and business domains.
It’s not Just Me, it’s You
When I talk to friends and family, I notice a common theme: they tend to set up certain “hassle” things once, and then ignore them as long as possible unless some absolute crisis comes along and forces them to make a change.
Just recently a coworking member came to me and asked for some financial help. And as always, I suggested we start by looking at big recurring expenses. So we dug into the details of her insurance and other major bills streaming, and found an interesting breakdown:
- Required liability coverage on a 2010 Subaru Forester: $580 per year
- Optional collision and comprehensive coverage ($500 deductible): $360 per year
- Home insurance on a 2000 square foot house ($500 deductible): $1450 per year
- Mortgage interest on a $300,000 loan at 4.85%: $14,550 per year
- Student Loan interest on an old $35,000 student loan at 5.5%: $1925 per year
Total: $18,865 per year.
It’s no wonder my friend was having financial stress – she had interest and insurance costs that were soaking up half of a reasonable annual budget before she could even buy her first bit of groceries or clothing.
So, right there we did a quick round of phone calls and online quotes, and streamlined a bit of the insurance coverage by increasing the deductibles. Within 90 minutes, we had the following new set of options:
- Subaru liability coverage: $380 per year ($200 savings) through Geico
- Removal of collision and comprehensive (in the unlikely event of a crash, they could afford to replace the car with less than two months of income) ($360 savings)
- Home insurance on a 2000 square foot house ($5000 deductible): $650 per year ($800 savings) through Safeco
- Refinanced mortgage to 3.375% : $10,125 per year ($4,425 savings)
- Refinanced Student Loan to 3.85%: $1347 per year ($578 savings)
New total expenses: $12,502 ($6363 per year in savings!!)
It is hard to even express the importance of what just happened here. My friend just did two hours of work in total, and dropped her annual expenses by over $500 per month, or six thousand dollars per year. And she will of course invest these savings, which will then compound to about to about $86,000 every ten years.
Even if she has to do this annual round of phone calls and websites once per year to maintain the best rates on everything, she will be earning about $3150 per hour for this work. Hence the bold title of this article, which you can now see is very conservative.
If you are bold enough to climb into this spot (which really means just sending a few emails and Facebook messages, and making a large tray of high-end nachos for your guests), you can all reap the rewards for decades to come.
And instead of avoiding this little chore like a hassle, dive into it like a gigantic shower of fun and wealth. After all, this is pretty much the core.