Ramit Sethi: 3 Ways To Save $1,000 a Year on Your Bills

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One thing many people overlook when it comes to saving money is how much they could potentially accumulate just by lowering their monthly bills. According to money expert Ramit Sethi, finding ways to lower these can grant you an extra $1,000 per year that can go toward your credit card bill.

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Below he offers some of his best advice when it comes to lowering your bills and growing your nest egg.

Don’t Underestimate the Power of Negotiation

“Negotiation skills are the most powerful tools in your toolbox because they help you cut costs and earn more money,” Sethi writes on his website.

“Most people start paying for a subscription (gym, car insurance) and never check on it again. Any recurring expenses like your cell phone, cable and insurance, you should be looking for ways to get lower plans at least once a year. That means picking up the phone and negotiating.”

When it comes to the art of negotiation, Sethi points to research that shows people are more motivated by loss than by gain. For example, it’s more likely for you to stick with a gym membership once you’ve signed up even if you rarely use it because you’re afraid of the opportunity cost of missing out. 

“So we end up signing up for things we think we need and pay more because we worry we’re going to miss some new feature. Of course, you can cancel it altogether — or you can optimize your spending with a couple hours of phone calls,” he said.

Sethi recommends treating everything you sign up for like a test. He offers his own experience lowering his bills, noting that when he signs up for a new cell phone plan he picks out the most expensive option. Then, he makes it a point to set a reminder on his calendar for three months later to evaluate how much he used of his plan and whether he needs to downgrade. 

He urges people to do the same with everything: your cable option, Netflix, gym memberships, magazines, and online subscriptions. 

“The best time to do it is the month before you have to renew. That way you have all the power. You’ll have plenty of time to review your options and decide whether to switch services or not. And, because the company will want to keep you as a customer (remember, their customer acquisition cost is often in the hundreds of dollars), they’ll be more likely to give you what you ask for.”

Putting Your Negotiation Skills Into Action

One of the things that people have in their favor when it comes to negotiating a bill down, according to Sethi, is that companies hate losing a customer.

“Even they know that it’s cheaper to retain an existing customer than to acquire a new one. You can use this ‘customer acquisition cost’ in your favor.”

Sethi advises putting your negotiation skills into action by following these steps: 

• Find comparable plans for your usage on other cell phone networks. 
• Call up your current phone company.
• Nicely asking them what better plans they have to offer you.
• Using a script he offers on his website.

Try the “A La Carte” Method

According to Sethi, this method takes advantage of psychology to cut our spending, as we are more likely to do things when no involvement is necessary.

The way it works is you start by canceling all of your discretionary subscriptions you can: any newspapers or magazines, annual Spotify, cable, and gym. 

Then, you buy what you need a la carte:

“Instead of paying for a ton of channels you never watch on cable, buy only the episodes you watch for $1.99 each off iTunes,” Sethi writes. “Buy a day pass for the gym each time you go (If you go to the gym once a week, times $5-$10 for a day pass, that’s between $20-$40 for the month, which is at least a good $20 less than a $60 monthly membership. That’s another $240 savings per year.)”

The money expert says the above method works for several reasons. 

For one, you’re likely overspending already. “Most of us dramatically overestimate how much value we get from subscriptions. For example, if I asked you how many times a week you go to the gym, chances are you’d say, “Oh…2 or 3 times a week.” 

Second, opting for “A La Carte” also forces us to be more conscious about our spending. 

And lastly, he says we’re more likely to value what we pay for.

“You will value whatever you’re buying if you’re actively spending out of your pocket, rather than an invisible subscription.”

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