The importance of reviewing your recurring expenses

Just a short story today about something that happened recently that hopefully someone reading can learn from.

My mother in law was asking us what power company we were with and that she was looking at changing providers. You see, they had just received notification for their annual price increase.

It turns out that she is with the same company as us, so should make for an easy comparison.

So being the nosey parker numbers person I am, I asked if I could see her recent statements.

Power charges tend to be separated into two categories:

1/. A fixed daily charge that you pay, as long as you are connected, whether or not you use the power. The cost is the same no matter how much power you use.

2/. A variable per unit charge. This amount changes per month depending on how much power you use.

One other thing to note is that we both have electricity and gas power. Gas connections tend to have a much higher daily fixed charge, but a much lower per unit charge. The key as always, is to calculate the total cost.

So, I looked at our statement to see how much we paid:

1/ Per day, and

2/. Per unit

I then multiplied each amount by the number of days and units that my mother in law used.

The difference between what she pays and what we would have paid under the same level of usage, was $42 for that month.

If we extrapolate that out to a year, then the difference is about $500!

For the same company, same dual power usage, same pricing plans. The only difference being the price we are charged. We are charged low amounts because I won’t put up with price hikes, and my mother in law is charged high amounts because she accepts the annual price increases and never complains or shops around.

The lesson here is to keep an eye on creeping recurring expenses. Electricity, internet, insurances, subscriptions etc. Recurring expenses can add up to large amounts over longer terms, and providers often increase their prices with very little notification. Don’t ignore these. Don’t accept these.

The great thing about the current environment is we are spoilt for choice in providers. Not like the old days. Phone around, shop around and find some substantial discounts just by being prepared to vote with your feet.

You don’t owe anyone your loyalty. Companies certainly aren’t loyal to long term customers. In fact, most long term customers are priced much higher than new customers. Don’t fall in to that long term zone of not being treated right.

Just like my mother in law you could save yourself $500 a year just for less than a couple of hours of your time and research. And that is only for power. Once you look in to insurances, phone and internet you could be saving thousands.

The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here