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In my zeal to get rid of all my ‘excess’ bank accounts, I forgot one small detail…the mortgage comes out of the ING checking account.  I had already transferred all the money out when the December payment posted, or at least tried to post.  Of course, ING rejected the payment and sent me an e-mail.  When I get home tonight, I’ll log on to the mortgage site and see what the damage is.  I’m pretty sure it will be at least $25 for a returned payment.  Doh!

Have you made any stupid money mistakes lately?

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K.I.S.S. Keep it simple, silly. I decided that our finances have gotten much too complicated as of late. Three checking accounts and five savings accounts are just too much. As as of December 1, it will be bye-bye ING. Though I love them and have been happy with them, there’s no longer the need for them. The joint checking account will be closed and those bills will be paid from one of our credit union accounts. The two savings accounts have already been closed and the money put into the credit union account. So we’ll be down to two checking accounts and three savings accounts – maybe still a bit much, but better.

Next up on the chopping block will be ShareBuilder. As of today, I’ve sold the stock from my brokerage account and the proceeds will be put into my traditional IRA. So that account should be closed by December 1 as well. I’m also strongly considering moving my ShareBuilder Roth IRA to the brokerage where I have my traditional IRA. That will mean one less account to track and easier asset allocation.

How many accounts do you have? Do you think it’s too many? What are you doing to simplify your finances this year?

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I may come back to saving on discretionary spending but a convo had with a friend makes me think this aspect is much more important. JUST BECAUSE YOU CAN AFFORD A MORTGAGE DOES NOT MEAN YOU CAN AFFORD A HOUSE! The fact you that you pay $900/month for rent doesn’t mean you can afford a $900/month mortgage. Why not, you ask. Because there’s a lot more to it than just paying the mortgage.

When you use those nifty online calculators that tell you how much house you can afford, it only gives you principal and interest (P&I) which may well be $900/month…BUT wonderful homeowner you are, you have to pay property tax and homeowner’s insurance now. Generally speaking, neither one of those is cheap. Unless you have a downpayment of 20% or more, you will usually have to pay into an escrow account. This means you pay property tax and insurance along with your mortgage every month and the mortgage company pays those two bills for you. So you thought you’d be paying $900/month but you’re really paying $1050/month (for example).

Also, if you live in a townhouse or condo (and sometimes for single family homes too), you will be paying HOA fees. For a nice complex, you can expect $100+/month. Depending on where you live, this might cover garbage and/or water and it generally covers basic outdoor maintenance. So now your $900/month mortgage has turned into $1150/month and you haven’t paid any other bills or bought any groceries.

Your utilities will probably go up, especially if you have natural gas heat (vs electricity). And guess what else? Houses need stuff. No, you won’t buy all that stuff at once but for the first year, expect to drain your wallet on “house stuff”. From lawnmowers to towel racks to blinds, there will ALWAYS be something you need to buy and I’m not even talking about decorating. So you should budget an extra $250/month for increased utilities and “stuff”. Now a $900/month mortgage has turned into $1400/month of expenses. Still think you can afford it?

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Today’s topic is WAYS TO SAVE.

You have two types of expenses – fixed expenses and discretionary spending. Let’s talk about fixed expenses first. Not all of those are as fixed as you think. While you probably can’t do much about your rent, there are ways to lower other expenses.

• TAX REFUNDS ARE NOT A GOOD THING! If you squeal with glee every year when you get that fat refund check, stop now. You’re giving the government an interest-free loan. Rather than letting them hold onto your money, you hold onto it yourself in your online savings account. If you get a large refund every year, you should adjust your withholdings so that less is taken out of each paycheck. Funnel that money directly to savings because you can’t miss what you never had. The IRS withholding calculator IRS withholding calculator will tell you how much you should be withholding and PaycheckCity will tell you approximately how much your check will be once you change your withholdings.

• Eliminate unnecessary features on your cellphone and home phone. Do you really need *69 and 2000 anytime minutes? Sure it may only save $5/month but all those little $5/month’s add up. Wouldn’t you love to have $50-100/month extra just by putting forth a little effort? Also, if you work for a large company like I do, you may be eligible for employee discounts. Most of the cellphone companies will discounts of 10-25% off just for being an eligible employee. And while you’re at it, cutback on the cable. Do you really watch HBO, Showtime AND Cinemax? Probably not. Maybe stick with just HBO and save $20/month.

• Save money and the environment. Make an effort not to waste water, electricity or gas. Stop running the dishwasher and the washing machine half full. Invest in programmable thermostats if you have high utility bills. Also, don’t believe the hype. You really don’t need a capful of detergent and a whole sheet of Bounce for every load. Try using half as much. I promise your clothes will be just as clean and just as soft and you’ll save money to boot. Stop running all over town everyday too. Combine your errands into one or two trips per week. You’ll save time, money and wear and tear on your car.

• Are you getting the best rate on your car insurance? If you haven’t done so lately, get online quotes from a few different companies to see if you’re getting the lowest rate you can. Also, re-evaluate the coverage you have. If you have an old beater that’s only worth $1000, it’s probably not worth it to have full comprehensive and collision. Drop back to just liability coverage and save the difference. Are you being charged for gap insurance? Unless you’re upside down on your car loan, you don’t need it. Drop it and save the difference. Another cost-saving measure is increasing your deductible if it’s below $1000. Also, consider taking a defensive driving course. This will lower your premiums as well. Courses can be taken online for as little as $45 and an hour of your time. I don’t have the link offhand but post in the comments if you want the link to the course I took.

• While credit card companies aren’t as prone to helping these days, it never hurts to ask. I hope you don’t have credit card debt, but if you do, there are ways to ease the pain. If you always pay your bill on time, call and ask the card company to lower your interest rate. If they won’t, call back in three months and ask again. You can save hundreds of dollars a year in interest payments just by making a phone call.

That’s all for now. The next post will be about saving on discretionary spending.

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