4 Easy Ways to Save for Vacation

Paying Cash for Your Vacation

Paying Cash for Your Vacation

How long has it been since you’ve taken a well deserved vacation? Or maybe I should ask, how long has it been since you’ve taken a well deserved vacation and paid cash for it?

Too many of us finance vacation with credit cards, and we end up paying premium for the rest of the year. If you are ready to stop “financing” your vacation, here are four easy ways you can start saving money for those few days or weeks of rest each year.

Determine how much you’ll need

In order to budget and save for vacation you first need to know HOW MUCH you plan to spend. Setting a specific amount will help you break your goal down to smaller, manageable chunks. It will also help you set boundaries to prevent overspending. On average, American families will spend anywhere from $1500 – $3000 on a vacation.

Once you determine your amount, divide that amount by the amount of months you still have left to save for your vacation. Once you do that, we can now look at creative ways to help you save.

 Discretionary spending 90-day “fast”

Discretionary spending simply means any non-essential expenditures that you make on regular basis. What can you “give up” for a season in order to do your vacation debt-free?  If you have 3 months before your vacation, do a 90-day “fast” from discretionary spending (clothing, meals outside of the home, entertainment, etc.) Whatever amount you’d usually spend on those categories set aside for your vacation. By doing this you could easily save $100/month towards vacation.

Direct Deposit – Out of sight out of mind

If you are a spender, you’ll have to do something a bit more drastic in order to set funds aside. Otherwise, if you have it it’ll be gone in no time – and you won’t even know where it went!  Ask your employer to direct deposit a specific amount ($50 or $100 a paycheck) into a separate account, which may even be in a different bank than your general checking account.  This will give you greater chance to actually have those funds available by the time vacation rolls around.

Generate extra income

 If your budget is stretched to the max and you’d still like to save for vacation, then generating extra income could be your best option.

Here are some ideas:

–  Find one home per week to clean. This will usually generate anywhere between $50 – 85 per cleaning session.

–  Afterschool care. Find out if someone in your neighborhood needs afterschool care for their child. This could save them money and give you extra income.     Afterschool programs usually cost 50-75/week.

–  Yard work – $35-$45/cut

–  Tutoring – $25-$35/hour

–  Grocery shopping for elderly in your area

As you go through these tips, some may feel more achievable than others. The key is to make a plan that works for you, and one that you can stick to between now and when the vacation begins. Remember, despite some of the sacrifices that may be made, there is great relief in coming home from vacation and not having the fear of walking to the mailbox and finding vacation bills that can’t be paid off in full.

Mvelopes for Google Glass

Mvelopes for Google Glass

Mvelopes for Google Glass

The new Mvelopes Mobile apps for iOS and Android phones and tablets, released just a few weeks ago, was a hit among our users. The release has also opened the door to a new group of users who are mobile centric and mobile first. We have been blown away by the hundreds of positive responses, constructive feedback, and innovative ideas on where to take Mvelopes next.

Today, we are pleased to announce the launch of Mvelopes for Google Glass, available in the Google Glassware marketplace.

Mvelopes for Glass makes managing receipts a snap. Simply tell Glass to take a picture while holding a receipt, then share it with “Mvelopes Receipt Tracker”. Mvelopes then creates a transaction with the receipt ready for use within our mobile or web apps.

Many of our die-hard users prefer a real-time envelope budgeting experience by snapping photos of receipts and entering transaction details manually at the point of sale. These users then match those transactions with the aggregated version when it clears their bank. Mvelopes for Glass makes creating manual transactions easier at the point of sale.

Wearable computing is an exciting platform for personal finance and we are working on other cool features and tools to help you be more a successful envelope budgeter.

Thanks for your continued support, app ratings, and feedback. For those of you who will be giving Mvelopes for Glass a try, we’d love to hear from you and learn more about your experience.

Warmly,
The Mvelopes Team

Raising Financially Smart Teenagers: What Parents Must Know and Do

Financially Savvy Teenagers

Financially Savvy Teenagers

It is easier to build strong children than to repair broken men.” – Frederick Douglass

Many of us, parents, can probably look back at our financial mistakes and the destructive financial habits we have formed over the years and quietly wish that someone would have shown us a different path. As we struggle to turn our financial mistakes into victories, we have a unique opportunity to help our next generation learn form us. We still have time to help our children understand the long-term benefits that solid financial habits offer.

Let’s look at the financial principles we should teach our 14-17 year olds, ways we can help them earn income and how to help sort though many higher education opportunities without incurring insane amount of student loan debt.

 Financial Principles:

Living within your means. This simple principle of living within a monthly income is critical to grasp, and it will set your teenage child apart from many of his or her peers. At this age children are starting to generate more income, many look for summer jobs, so it’s important your teenager learns this lesson now. Once boundaries are set, help your student prepare a spending plan that outlines how every dollar of their income should be allocated. This is also a great way to protect them from accumulating debt. There are great FREE online apps, such as Mvelopes, to help them set up to 25 spending envelopes and link up to 4 bank accounts. Technology can be a great way to get them “hooked” on budgeting early on and actually have fun with it!

Can I say NO to my wants? Teenage years can be very tough, especially considering the peer pressure to keep up with the latest trends, tech toys, ect. So it’s during these ruthless teenage years that, we as parents, should press hard to instill and cultivate the habit of saying “no.” The ability and the emotional “guts” to refuse what seems so appealing, will give your teenage child a great financial upper hand in life. It will give them the financial freedom and financial options while those who fail to develop this habit will most likely live from paycheck-to-paycheck, stressed over debt and over their financial future. So talk to your teenager about the essentials and non-essentials of life and how overemphasizing and overspending on the non-essentials can destroy someone’s financial future. Using yourself as an example is always encouraged!

The principle of saving. Savings is one sure way to break the debt cycle and to create financial margin in life. Sharing your success or failure in the area of saving can help them relate to the concept in a more tangible way. At this age you can start delegating more of the responsibility to pay for certain major items your teenage child may want back to them! This alone will force them to think twice before they spend their cash. Now it’s your turn as a parent to say “you can have it IF you pay for it!” Opening a savings account that has certain withdraw limits placed on it can be a great way to help your child save money.

Creative ways to generate income

With age, your children can look for ways to perform various services to generate income. Sit down with your child, think through a list of jobs they could do for neighbors and family members. Help them determine what tools they would need to perform the job and how much those would cost. Determine a competitive pricing for each job and let them go out and get some business! If your neighborhood has a newsletter, ask your child to create an ad and ask about the possibility of including their service ad in the regular neighborhood newsletter. Because of their familiarity with technology, this age group is also a perfect candidate to be introduced to an online budgeting tool in order to manage their income in a way that’s familiar and natural to them.

 

  1. Car washing can be a great way to generate extra income. Your child could offer single car washing options as well as car washing packets that would offer slightly discounted price.
  2. Dog walking or dog sitting could be another way to generate revenue. Kennels can be expensive, so your child could offer dog-sitting services that would include daily feeding as well as daily dog walking before and after school.
  3. Babysitting is always a sought-after service, especially when there is an opportunity to hire a trusted neighbor. Help your child create a nice flyer that showcases the benefits of hiring them as a babysitter.

3 Easy Ways to Accelerate Your Debt Payoff

3 Easy Ways to Accelerate Debt Payoff

3 Easy Ways to Accelerate Debt Payoff

There are some times when we spend large sums of money on an item or a service that’s really needed, but there are also many times when we spend considerably small amounts of money in multiple areas which, on the surface, seem good and helpful, but, in reality, are costing us much more than we realize.

Here are 3 common expenditures that, if paused today, will make a significant difference in your monthly bottom line and will help you accelerate your debt payoff.

Overdraft Protection

A study conducted by the Center for Responsible Lending found that American consumers are paying over $17 Billion a year in overdraft protection fees! With an average fee of $27 a pop, consumers are paying a fortune to banks for the privilege of overdrawing their account. Even if your checking account is linked to another savings account or your credit card account, you’ll be charged, on average, a $5.00 “transfer fee” for the privilege of using your own money. That’s simply insane.

Many customers have an overdraft protection on their bank accounts and don’t even realize it. So what should you do?

First, make sure you call your bank and ask to be “opted out” of the overdraft protection. This simple means that the next time you want to purchase something with money you don’t have, you’ll be denied at the checkout, but you won’t have to pay $27 (or more) in fees!

Second, spend some time reviewing you last 60-90 days worth of charges and see what may be causing you to overdraw your account. By building a budget and setting financial boundaries for yourself, you’ll become your own overdraft protection plan! Mvelopes is a great, practical solution for those who have a hard time setting financial boundaries. Sign up for a free Mvelopes account today and start using your money on purpose.

Third, use the funds you were paying in overdraft fees to build a safety net for yourself (we call that emergency savings) or, if you already have savings for emergencies, to accelerate your debt payoff.

Trash Pick Up Service

On average, Americans will spend between $200 and $400 a year on waste removal services.  Yes, this may not be a huge expense, but it’s one that unless your county or city forces you to pay for, you should simply scrap from your budget. Instead of paying someone to do what you can easily do yourself, how about putting that seemingly small amount of money towards your smallest consumer debt, or using those $20 – $30 a month to start building your emergency reserves. Your “trash” money can become your new found treasure!

Let’s do a quick calculation. If you currently have a $2000 balance on your credit card at a 16% interest rate, your minimum payment is roughly $48. If you pay only the minimum payment, it will take you over 60 months to eliminate your debt and you’ll end up paying an additional $900+ in interest. Now let’s say you add $20 a month to your minimum payment, making it $68 a month. By doing that you just cut your term to just over 30 months and your interest paid comes down to around $500. As you can see, $20 a month can make a big difference!

Lawn Care

Americans spend a whopping $40 billion each year on lawn-care. That includes lawn treatments, water, and mowing. Why spend so much money on something you could do yourself, and for a fraction of the cost? By simply taking ownership of mowing your own yard, you can add a minimum of $20 – $40 a month towards your biggest financial need or your next financial goal.

If you are looking for creative ways to save money on lawn care, bankrate has a great article with 8 cost-cutting ideas.

As you can see, there are ways you can “find” additional dollars to advance on your financial goals. Many of us keep making multiple small, unnecessary expenditures because we simply don’t realize how big of a difference they can make long-term. Your unnecessary expenses may be different than those we listed today, but I bet if you take a good look at where your money is going, you will find at least one or two areas that you can eliminate!

 

Want financial success? Learn to listen!

Listening will help you succeed financially!

Listening will help you succeed financially!

There is a habit, which on the surface may not seem associated with financial success. But it is!  The habit is listening.

During his five-year-long research of observing daily habits of the wealthy and of the poor, Tom Corley discovered that 6% of the wealthy say what’s on their mind vs. 69% for the poor. So it’s pretty apparent that those with substantial financial resources prefer to spend their time listening rather than airing their own opinions. They listen not only to others, but constantly engage in learning while listening activities.

Listening to audio books on the drive to and from work, listening to podcasts and messages that help us grow in specific personal or professional arenas of life and listening to sound financial advice, no matter how uncomfortable at the moment, is something all of us would greatly benefit from.

Take a step back and reflect on your past financial decision. How many mistakes cold have been avoided if you only listened?

Most of us, if honest, will find quite a few moments in life where we were given a solid advice yet we failed to listen to it and ended up in a financial mess.

So here is a list of old sayings about money. Some are humorous, others more serious, yet nevertheless, if we pay attention and listen, these simple proverbs can help us avoid common financial pitfalls.

 “A fool and his money are soon parted”

It’s not about how much you have, but how you spend what you have that counts. No matter how wealthy you are, if you spend foolishly, you’ll part with your riches sooner than later! Spend less than you make and do it over a long period of time and you’ll see great results.

“Money doesn’t grow on trees”

We’ve all heard it many times. I know my parents repeated this phrase to me quite often, and I’m sure their parents repeated that to them as well! This simple proverb conveys very obvious yet so often ignored principle of working hard for your income. Instead of counting on luck or hitting it big time with that next lottery ticket, hard work should be something we all bet on, as we strive to achieve financial freedom and independence.

“Money can’t buy happiness”

Walt Disney once said: “A man should never neglect his family for business.” There is a difference between smart financial living and a life that’s spent chasing wealth at all cost hoping that it will bring about happiness. It never does. Take some time to count your true blessings in life. Your friends, family, health, ability to work. These are the things that bring us all true joy and happiness.

“Time is money”

It’s a simple idea that reinforces some of what we already talked about. How we choose to spend our time matters. Are there activities in your day that simply waste your precious time? What can you do to transform those minutes or hours into activity that will help you grow and produce?

“Take care of the pennies and the pounds will take care of themselves”

This proverb illustrates the power of small, consistent progress. Financial freedom is a long-term affair. When you prove faithful with whatever little you have, you’ll also find yourself faithful with much more. So focus on being a wise manager of your current income, no matter how insignificant it may seem, and soon you’ll see a great progress.

As you read these old sayings about money, you may be reminded of many others you heard your parents or grandparents say. Profound wisdom is often found in the simplest phrases, so pay attention and listen well. After all, listening rather than talking is a habit that can take you a step close to a place of financial success.

Do You Have a Needs Only Budget?

Needs Only Budget

Needs Only Budget

3 reasons why you should have a needs only budget, and how you can create one.

If your financial situation were to change, do you know how much or how little you’d need in order to “make it”?

I’m not talking about huge national or global disaster. I’m simply talking about a possibility of losing your income, facing medical challenges or maybe having another child and deciding that one of you will stay home for a season. Are you prepared, just on paper, for these or other life events?

Some time ago, just for the fun of it, I sat down and created a copy of our regular budget. I went through it line by line and eliminated everything that was non-essential. All I left in that budget were items we “needed” in order to have a roof over our heads, food on our table, access to basic utilities and transportation. To my surprise, my total monthly amount went down by close to $800! It was a very revealing exercise for many reasons, but here are my top 3 reasons why I believe everyone should have a Needs Only Budget and how you can easily create one.

Reason #1: Peace of Mind

survey conducted by the National Foundation for Credit Counseling (NFCC) and the Network Branded Prepaid Card Association (NBPCA) shows that over 56% of adults in the USA do not have a written budget.

Bankrate also reported that 36% of Americans are mostly concerned about paying bills or getting caught up on their bills.

If that’s you, just trying to make ends meet while wondering where your money is going every month, then having a written plan, a budget, is non-negotiable in order to make financial progress. The simple understanding of where each of your hard-earned dollars are going will give you the information you need in order to start making adjustments.

Having a Needs Only Budget will take you a step further and give you a peace of mind about facing unexpected life events. The feeling of knowing you are prepared will be worth an few extra minutes of your time.

Reason #2: Plan of Action

A Needs Only Budget is a great way to have a plan or a roadmap of what action steps are needed in order to adjust to your new financial reality.

Instead of panicking, you can simply pull out your Needs Only Budget, go though the list of items you’ve already decided to eliminate ahead of time (in case something were to happen) and you can spend the rest of your time looking for another job, considering other options like running a small home business (daycare, crafts, etc.) or simply enjoying some much needed time off.

Preparing ahead of time gives you peace of mind and protects you from making impulsive decisions in the moment of uncertainty.

Here is another interesting fact about budgeting. According to the research done by the authors of the book “The Millionaire Next Door,” the majority of those who are self-made millionaires not only have a budget but also track every single penny spent! If those with substantial wealth consider budgeting and tracking expenses as a key priority, all of us should pay attention and learn!

Reason #3: Opportunity to save now

Once you create your Needs Only Budget you’ll immediately notice how much you could be saving today, if you were to adjust your spending. Creating this secondary plan may open your eyes to possibilities of curbing certain budget categories in order to put more money towards debt repayment, savings or prepaying your mortgage. Having this quick visual will allow you to take a step back, think about your long-term financial goals and how a few small adjustments can help you achieve those goals sooner. Here are just a few of the items that may be an obvious candidate for adjustments:

–       Lowering or eliminating your cable TV bill

–       Readjusting your entertainment budget (eating out, movies, etc.)

–       Opting for a different cell phone plan / getting rid of your landline for good!

–       Trading your high payment car for something less costly

 Make Planning and Budgeting Easy on You

So many of us dread the word budget. Before we give it a try we assume that it’s too hard, too time consuming and, frankly, too restricting. What those who have and follow a written plan will tell you is that it’s actually the opposite.

Having a budget frees you to spend without worrying and guessing. It actually helps you financially prioritize what’s important to you and your family so that you can achieve your shared goals and dreams.

Creating a budget and tracking your spending is now easier than ever before. Mvelopes, an online budgeting software is a great example of what you can do in literally minutes.  Because Mvelopes is based on the tried and proven envelope budgeting system, you will not only be able to create a plan and track your every dollar, but you’ll also do it all in a proactive way rather than trying to correct spending errors after the fact. Mvelopes will become a great budgeting and accountability partner for you and your family.

So go ahead, set your preconceived notions about budgeting aside. If you don’t have a plan, create one. It’ll only take few minutes. If you already have a budget, go ahead and take one more step. Create your Needs Only Budget, tuck it away and relax, knowing that you’ve just created your emergency plan of action.

 

 

 

Paying Off a Mortgage Early: Good or Bad Idea?

Should Your Pay Off Your Mortgage Early?

Should Your Pay Off Your Mortgage Early?

Prioritizing Early Mortgage Payoff

I would love NOT to have a mortgage payment. Wouldn’t you? The sense of freedom, satisfaction, and security would be great.

But is prioritizing an early mortgage payoff the right thing for your family’s budget? That all depends on where you find yourself financially. There are a few other pressing financial goals you should achieve before you start putting extra dollars towards your early mortgage payoff.

In this blog post we’ll go over short and long-term financial goals we should prioritize in our budget before considering an early mortgage payoff, as well as, reasons why being mortgage free is a great long-term goal.

Financial Priorities Before You Tackle Your Mortgage

Quick Cash for Emergencies

Once you are able to live within your means (spending less than you earn), you should focus on setting aside a certain amount of money, $1000 for example, for immediate emergencies. Once you achieve that, build a 30-day fund so you are always one month ahead financially.

Here is a  step-by-step approach to building your emergency fund.

Prepare for 3 Months of No Income

Now that you have some cash set aside to cover immediate needs, your next step should focus on building a minimum of 3 months supply to cover all of your monthly expenses, including debt obligations.

Why do we say a minimum? In today’s economy it may take much longer than 3 months for you to find a job, hence you should eventually get to the point of having 6-9 months of living expenses set aside.

If you are ready to tackle this goal, here is a guide to building your 90-day fund.

Wipe Out Your Consumer Debt First

Your consumer debt, like credit cards, car loans, student loans, etc., will usually carry a much higher interest rate than your mortgage. You should wipe out all of your consumer debt before you start setting funds aside for an early mortgage payoff.

Fund Your Retirement

Being mortgage free should definitely be a part of your retirement strategy, but it should not be THE retirement strategy. Once you are free from all of your consumer debts and have a minimum of 3 months of living expenses set aside, you should plan on investing a good part of your “extra” cash into some form of retirement. Whether it’s a traditional IRA or a ROTH IRA, find a plan that suits you best and start building your retirement nest-egg.  Make sure that your investment risk is appropriate for your age. The younger you are the more daring you can be with your investment portfolio. If you are older, your investments should be more conservative in order to protect you as much as possible.

Paying Off Your Mortgage

Now we are finally ready to start focusing on the mortgage. There are quite a few ways to “skin the cat” when it comes to a mortgage payoff. You could opt to make large additional payments on your principal every time you pay your mortgage. Or you could choose one of these 3 low cost ways to becoming mortgage free.

How about using your home to generate additional revenue? If you have a basement, rent it out! If your kids are grown and on their own, consider renting one or two rooms out to local college students. Be creative in using your home to help earn extra cash that you can put towards your mortgage payoff.

Reason to Pay Off Your Mortgage Early

Peace of Mind & Cashflow

Knowing that you don’t have to make another mortgage payment ever surely does offer great peace of mind. Knowing that you, not a bank or a credit union, own your home is a great feeling and this reality creates much more freedom for you when it comes to your monthly expenses. Mortgage is most likely the largest part of your monthly budget, hence not having to pay that amount gives you enormous flexibility.

Inheritance for Your Children

If you want your home to serve as an inheritance for your children, then having it completely paid off will allow you to do just that. Be sure to educate yourself on inheritance tax and how to maximize your retirement, be it a home or cash, in order to make the most of your assets.

You’re Counting on a Reverse Mortgage

Those who are considering a reverse mortgage in order to generate income from their home will receive more if their house is paid off. The lump sum of cash available to you through a reverse mortgage will be much larger than if you still owed money to your mortgage provider.

If you’re feeling the lure of a reverse mortgage, here are five things to consider:

 1.    Too often, a reverse mortgage is seen as an easy way out. Make absolutely sure it’s necessary, and not something you’re doing just to increase discretionary spending.

 2.    The younger you are, the higher relative cost you’ll pay for a reverse mortgage. While the upfront fees are the same, you’ll receive a lower monthly payment and smaller lump sum when opting for reverse mortgage at age 65 versus 75 or 85.  So try to avoid taking out a reverse mortgage while you’re in your 60’s.

 3.    Discuss the loan’s pros and cons with your family (especially if you were hoping to leave your home to heirs). Consider your health, as well as, how long you plan to live in the home or area.

 4.    Beware of scams that charge thousands of dollars for information you can very easily get free from the Department of Housing and Urban Development (HUD).

 5.    Finally, there are quite a few options for reverse mortgages. Some offers are better than others, so do your research and don’t settle for the first one that comes your way.

 As you can see, paying off your mortgage is a great goal to have, but it needs to be carefully prioritized as part of your overall financial strategy. Having enough liquid assets on hand should be your primary focus.

 

Home Security and Your Budget: Is Paying for a Home Security System Worth It

Security System and Your Budget

Security System and Your Budget

The security of your family is definitely a big priority, but is paying for a home security system worth it? If you do decide to pay for a burglar alarm, what should you pay attention to in order to protect your family and your budget?

Over 80% of homes in the U.S. do not have a security system. There are a few reports that show that the presence of a residential burglar alarm systems actually decreases crime. We also know that installing and paying a monthly monitoring fee can cost you an arm and a leg, and if you are not careful, can get you entangled in multi-year contracts that are hard to get out of.

So here is your quick guide to shopping and budgeting for a home security system:

– Shop for no-contract monitoring security systems. If someone tries to sell you on a long-term contract, run! Nowadays there are plenty of reliable companies that will offer you a no-contract monthly fee service.

– Consider “self install” systems where you can purchase and install a system yourself, and then pay a low monthly fee for monitoring. This way, you can save big bucks on the equipment install fee and, your monitoring fee will be around $10 –  $15 a month.

– Monitoring used to be very pricey, but that’s no longer the case. If you are paying more than $25-$30 a month, you are probably overpaying!

– Be sure you are ready to cover your equipment installation cost. It will run you anywhere from $100 to over $1000, depending on your home.

– Make sure you ask your provider if their monitoring station is UL certified. Do not pay for a system that does not comply with all of the certification requirements.

– As soon as you get your system installed, call your home insurance company. You will often get a 15% or 20% discount on your insurance for having an alarm system. This is one way to offset at least a fraction of the cost of the alarm system.

– Security systems tend to have a high “false alarm” rate so ask your company about their false alarm rates and how they work with their clients in those instances.

– Police departments may charge a fee for responding to a false alarm, so get yourself familiar with the way your city or county police department treats false alarms.

If you decide not to get an alarm system, there are a few things you can do to deter potential burglars.

– Talk to your neighbors and agree to watch for any suspicious activities.

– Having a dog is always a great burglar deterrent.

– Keep your doors and windows locked.

– Pay special attention to who does your yard work or home improvements. Be weary of “walk-ups” who show up to offer to cut your lawn or spread your mulch.

– Do not store your valuables and important documents in obvious places. Getting a safety deposit box at your local bank may be worth it.

Finally, as you consider paying for a home security system, keep in mind that they are not foolproof. Decide how much a month your budget can handle without being stretched too thin, then simply use Mvelopes to help you pre-fund your Security Envelope each month so that you are prepared and ready for the expense within your current income! If you are short on cash for your install fee, Mvelopes can help you budget for and save cash for that expense, so that you don’t have to use your credit card.

Saving on Electricity: Is Flat Billing Good or Bad for Your Budget?

Saving Money by Budgeting for Electricity

Saving Money by Budgeting for Electricity

Finding additional savings in our current budget is like finding a wad of cash in the pocket of freshly washed jeans! If you’re a wife or a mom, you know what I mean. Once in a while, right after doing a load of laundry, I’ll spot some “forgotten” cash, usually in my husband’s jean pocket, and I feel like Christmas came early!

I recently asked a coworker how much he paid for his electricity each month. He told me his family was on a “flat bill” plan of $200 a month. I gasped for a second since I knew his home was a single-story ranch that was barely 5 years old. As we started talking, I shared with him that our electric bill for a two story, older split-level home ranged between $100 – $180, depending on the season. As we continued our conversation, he did mention that although the flat bill kept going up each year, and even though it was convenient, his family was probably not paying as much attention to the usage because of the flat rate, knowing that whether he was careful or not, his bill would stay constant, at least for a season. By the time we ended our conversation, he was ready to take a second look at the way his family uses and pays for electricity.

For some of us, our electric bill can become that “unexpected” source of newly found cash, especially if you’re currently on a “flat billing” plan with your electric company. You may be, just like my coworker, less careful about your thermostat, simply because you don’t have to worry about the immediate rate increase.

Many love the convenience and consistency of paying the same price for 12 straight months, but without meaning to, that convenience may be costing them money.

Most electric and gas companies will offer flat billing as a helpful service that takes the “guesswork” out of the monthly electric bill game, but as you consider the convenience, please keep the following in mind:

– Depending on your electric company, this may be a great idea where you’ll get your money back if you use less electricity than what you paid for. In many cases, however, it’s a way for the electric company to charge you more money! So before you opt in, ask the necessary questions to understand refunds and usage policy.

– Don’t be deceived! Even though you’re on a flat rate plan, electric / gas companies set the rate assuming you will be using lots of electricity or gas during the summer or winter months.

– Check with someone who already has the flat bill rate and ask them what their monthly bill is and whether the rates have increased or decreased, year over year.

– Ask your electric and gas company about penalties for changing to a standard plan before your 12 month period expires. Also ask them about “administrative” fees associated with flat rate billing.

– Consider putting yourself on a “flat bill” budget. Simply assign a specific amount you’d like to spend on electricity every month, then monitor and adjust your usage to always come under that amount. Most likely, you will see that even though you may reach your maximum budget amount a few months out of the year, for the most part, because of being more careful about cooling and heating your home, you will have money to spare!

– Monitor your usage online by opening an account on your power company’s web site. This way, you can see your usage month over month, compare this year and last year’s usage, and have a full visibility as to all of the charges. The “out of sight, out of mind” mentality may be costing you unnecessary dollars.

So be smart, ask questions, and most importantly put yourself in the driver’s seat when it comes to electricity and gas usage–start controlling both your power consumption and your budget. If you’re not in the driver’s seat, somebody else will be, and it will most likely hurt your wallet!