Since this series began in January 2018 there have been over 1100 Posts from Your Archives where bloggers have taken the opportunity to share posts to a new audience… mine.
The topics have ranged from travel, childhood, recipes, history, family and the most recent series was #PotLuck where I shared a random selection of different topics. This series is along the same lines… but is a ‘Lucky Dip’
In this series I will be sharing posts from the first six months of 2021 – details of how you can participate are at the end of the post.
This is the second post from author and financial expert Sharon Marchisello with some very helpful advice on living within your means.
Absolutely Necessary Expenses
In preparation for the release of the audiobook version of Live Well, Grow Wealth, I’ll be sharing excerpts each week on this blog.
This excerpt is from Chapter One, Live Within Your Means. I suggest categorizing your expenses as absolutely necessary, necessary but reducible, discretionary but important, and totally unnecessary. This post discusses expenses deemed absolutely necessary, such as housing, taxes, and insurance.
The absolutely necessary category should contain fixed expenses like your rent or mortgage payment, which are hard to reduce, but not impossible. You might be able to refinance your mortgage or move to a less expensive dwelling; however, while those actions can save you money over the long term and may be warranted, they can result in added short-term expenses.
Taxes belong in this fixed-cost category, as they usually are not negotiable. But if the value of your home has dropped significantly, you have the right to contest your property tax assessment with the county. (You can do it yourself; you don’t have to hire one of those companies who offer to do it for you—for a fee that eats up most of your savings.)
F.I.C.A. is a fixed part of your payroll tax, but if you work more than one job and earn a high income, don’t forget to re-claim the excess at the end of the year. Review your pay stubs and ensure you have not paid more than the maximum.
If you received a large income tax refund last year, or if you need more money in your pay check now, change the amount of federal tax your employer withholds by adjusting your W-4 form. You still have to reconcile next April 15 when you file your tax return, but do the research to ensure you are claiming every deduction to which you are entitled.
Insurance is another fixed cost that is hard to reduce. But if you haven’t done any comparison shopping lately, obtain quotes from competing companies to ensure you’re getting the best possible rates for the coverage you need. If you do find a lower rate for the same coverage from a different provider, your current provider may be willing to match it in order to retain your business.
Consider raising your deductibles to save money on premiums. Set the savings aside in an emergency fund in case you have a claim.
Look for unnecessary line items. Do you have a teenager on your policy who is no longer driving your car? Are you carrying collision insurance on an old car whose blue-book value is less than the deductible? Are you paying for towing insurance when you’re a member of the Automobile Association?
If your net worth is high, do you have an umbrella policy? For a small surcharge, this additional liability coverage can provide good value. Are you getting all the discounts that apply to your situation?
Some people buy more insurance than they need. Life insurance is important if you’re the main breadwinner and you have a family dependent on your income. But if you’re single, who will suffer financially when you die? If the answer is “no one,” why do you need to pay for a lot of life insurance? My husband and I each carried supplemental term life insurance while we had a mortgage. After the mortgage was paid off, we dropped the life insurance coverage. Because we both worked and had accumulated assets, the death of one of us would not have caused undue financial hardship for the other. Those premiums were better spent building up our assets.
Think carefully before letting an insurance agent talk you into buying a “whole life” policy, which is sometimes marketed as a savings plan. Unlike term life, which covers a specified period of time when it’s needed, whole life covers the insured’s entire lifetime, provided the premium is paid. Premiums for whole life insurance are generally higher than for term life, and the policy builds up a “cash value” as well as having a death benefit. My parents purchased whole life policies for my brother and me when we were babies, which carried a $1500 death benefit. Now that our parents are gone, my brother and I each own our paid-up policies, and the cash value exceeds $1500, but the money our parents spent on premiums could probably have grown a lot more had it been invested in something else.
Even if you don’t need life insurance, you might, however, need disability insurance to help support yourself if you can no longer work because of illness or an accident, and you need your wages to cover your expenses. On the other hand, if your income is not dependent on your ability to work, why buy disability insurance? I discovered that my 94-year-old mother-in-law was paying $19.00 a month for an accidental death and dismemberment policy; unlike wages, her pension and Social Security would continue even if she became disabled, so why insure her income against disability? She had stopped driving, and even if she died in an accident, I believe it would have been hard to convince the insurance company that her death was not at least partially attributable to natural causes. The fine print on the policy read that the death benefit would be cut in half “once the insured reaches age 70”; she was over 80 when this totally inappropriate policy was sold to her through her credit union. When purchasing insurance, consider your age and what risks you face. What’s the probability and the impact, versus the cost to insure against that risk?
Think carefully before you purchase travel insurance or all the add-on coverage the car rental agencies try to sell you. What risks might you face, and what would it cost you to deal with that situation without insurance? Check your existing policies (auto insurance, medical) to ensure you’re not duplicating coverage you already have. Some credit cards offer certain protections when they’re used to pay for car rental, cruise, or plane tickets.
A word about travel insurance. For years, my husband and I passed up purchasing travel insurance when we booked cruises at the last minute, often at a very low rate. We figured the odds of our canceling and losing our cruise fare were slim. Also, working for an airline, we’d fly space available, and missing our cruise because we couldn’t get a standby flight—the biggest risk we faced—was not a covered loss.
I also had a bad memory of my mother’s experience with travel insurance. Her companion dropped dead of a heart attack a few weeks before their planned trip. While the company refunded my mother’s money because “death of traveling companion” was covered, they refused to refund his portion because his death “must have been due to a pre-existing condition.” And dealing with travel insurance bureaucracy, providing proof that his “pre-existing condition” was cancer, not heart trouble, was the last thing his bereaved family wanted to do.
My attitude toward travel insurance changed when we took a Panama Canal cruise, with a stop in a small Central American port that our airline does not serve. A woman from our ship collapsed and died during a shore excursion. The cruise line put her husband off at that remote location and left on time. Fortunately, the couple had purchased travel insurance to cover those many unanticipated expenses: hotel accommodations while dealing with the death and securing release of the body, transportation of human remains back to the United States, etc. Now, my husband and I usually purchase travel insurance when our itinerary includes remote destinations.
Final thoughts about all types of insurance: don’t buy more than you need, but don’t skimp where it’s most important, or you could leave yourself vulnerable to catastrophic loss.
Review each of your expenses carefully, decide which ones are truly necessary, which ones can be eliminated or reduced, and then make a fiscal plan. The sooner your outgo becomes less than your income, the sooner you can start building wealth and enjoying financial security.
©Sharon Marchisello 2021
About Sharon Marchisello
Sharon Marchisello is the author of two mysteries published by Sunbury Press, Going Home (2014) and Secrets of the Galapagos (2019). She is an active member of Sisters in Crime.
She contributed short stories to anthologies Shhhh…Murder! (Darkhouse Books, 2018) and Finally Home (Bienvenue Press, 2019). Her personal finance book Live Well, Grow Wealth was originally published as Live Cheaply, Be Happy, Grow Wealthy, an e-book on Smashwords. Sharon has published travel articles, book reviews, and corporate training manuals, and she writes a personal finance blog called Countdown to Financial Fitness.
She grew up in Tyler, Texas, and earned her Bachelor of Arts from the University of Houston in French and English. She studied for a year in Tours, France, on a Rotary scholarship and then moved to Los Angeles to pursue her Masters in Professional Writing at the University of Southern California.
Retired from a 27-year career with Delta Air Lines, she lives in Peachtree City, Georgia, doing volunteer work for the Fayette Humane Society and the Fayette County Master Gardeners UGA Extension.
Books by Sharon Marchisello
My thanks to Sharon for sharing her expertise in this area… and I know she would be delighted to answer your questions.
How you can feature in the series?
- All I need you to do is give me permission to dive in to your archives and find two posts to share here on Smorgasbord. (email@example.com)
- Rather than a set topic, I will select posts at random of general interest across a number of subjects from the first six months of 2021. (it is helpful if you have a link to your archives in your sidebar by month)
- As I will be promoting your books as part of the post along with all your information and links so I will not be sharing direct marketing or self- promotional posts in the series.
- If you are an author I am sure you will have a page on your blog with the details, and an ‘about page’ with your profile and social media links (always a good idea anyway). I will get everything that I need.
- As a blogger I would assume that you have an ‘about page’ a profile photo and your links to social media.
- Copyright is yours and I will ©Your name on every post… and you will be named as the author in the URL and subject line.
- Previous participants are very welcome to take part again.
- Each post is reformatted for my blog and I don’t cut and paste, this means it might look different from your own post.
- If I do share a post which contains mainly photographs I will share up to five and link back to the original post for people to view the rest.
N.B – To get the maximum benefit from your archive posts, the only thing I ask is that you respond to comments individually and share on your own social media.. thank you.