I love saving money!
I’m pretty sure you do too.
I’m not talking about being cheap.
I’m not talking about no-spend challenges.
I’m talking about normal, measured saving methods.
Things such as:
- Using coupons
- Signing up for free trial offers
- Prepaying expenses
You know, steps that anyone can take.
You don’t have to be a financial savant to do them.
Anyone can cut a coupon from the Saturday paper.
Anyone can sign up for a mailing list to get be sent discounts.
Anyone can sign up for a free sample or trial.
And anyone can make a one-time payment to get a disconnected rate on whatever it is they are buying.
There’s no need to have “connections” or know any insider secrets?
However, it’s not all gravy.
There are some pitfalls if you aren’t careful which can cost you if you…
Signing Up For Free Trials May Hurt Your Wallet
Get a free credit report!
How about a free month of streaming movie service!?
Like downloading music, get 30 days free.
How about books?
You see these offers in your email and on millions of websites.
In reality, they can be great for testing out a service and getting an idea of whether or not you would use them enough to justify paying for them.
They are also great ways to get something you need at no cost to you (as in the case of the free credit score offers).
Be very careful though, since the drawback to these offers can oftentimes come back to bite you in the wallet.
These types of offers are rampant among rewards sites as well as various other sites and direct email campaigns.
The companies invite you to take a free trial of their services for a set amount of time–usually from 7 days to one month–in exchange for you registering and providing a credit card.
Sometimes you have to pay a $1 registration fee to take advantage, which isn’t really so bad in relation to the rewards you can earn for doing so, in addition to having access to the service for this trial period.
But at the same time, there is a caveat included which normally states that if you do not cancel the free trial before the predetermined expiration date, your card will be charged a recurring monthly fee until you finally do cancel.
What’s worse is, if you are the type that isn’t diligent about going through your bank or credit card statements, it may be quite some time before you even realize that you have been charged these amounts.
Additionally, service providers will not be very accommodating about giving your money back since they provide a disclaimer about what happens when the trial period is over and thus putting the burden on you to make sure you stop the service before getting charged.
There are a few ways, however, to avoid getting caught in their trap:
Don’t Sign Up For These Offers At All
Many of these offers are designed to entice you to join their service, but by expressly stating that the trial will automatically convert to a paid plan, these companies are hoping that some of the people who accept will indeed forget to cancel.
What can be better for them than to have someone paying for a service without that service actually being used?
The remedy here is easy as pie; if you don’t take the chance of forgetting about the conversion to a paying plan you will never have to worry about it!
Cancel As Soon As You Sign Up
As soon as you sign up for a free trial offer, go to the help/FAQ page and fill out the cancellation form.
Many of the companies will make you call their “customer service” number which is simply another way to say pushy salespeople department in order to terminate the free trial.
All you need to do is tell them that you aren’t interested in anything they have to say or offer you, that you simply want to cancel.
Since many services will continue through the entire term, regardless of when you cancel, it ensures that you will be able to take full advantage without worrying about having to pay anything later.
Just remember to get the cancellation confirmation number just in case they screw up and end up charging you.
Set A Calendar Alert
In the case of some free trial offers, like Netflix, the trial period ends the minute you cancel.
If you want to use the entire trial period, but still want to make sure you get out before you pay, all you have to do is set a calendar alert to go off the day before the trial period is set to end.
If you don’t use some kind of computer-based calendar, and who doesn’t these days, just leave yourself a bunch of reminder sticky notes all over the place to cancel.
Like most things, these free trial offers can be very useful, if used properly.
All you have to do is plan accordingly and you won’t ever have to worry about being burned by these programs ever again.
Prepaying Expenses May Not Be Your Best Option
The way things are going these days, it seems like every family and business is re-evaluating its spending in an effort to trim the fat and add more to the bottom line.
Business cost savings are coming from reducing the costs to run payroll or looking at cheaper places to get office supplies.
Individuals are cutting out what they deem as unnecessary entertainment, taking steps to reduce utility bills, and reducing housing costs.
Both groups are even looking to prepay their regularly occurring expenses in an effort to get their spending under control, even if there is no or minimal discount involved in doing so.
Unfortunately, when it comes to prepaying expenses, even if you do get a discount, the benefits are far outweighed by the drawbacks.
And, in truth I was only able to come up with two really strong (well one really strong and one that’s just ok in my book) reasons to go ahead with a prepayment plan but 5 even stronger ones against it.
Saving Money With A Discount
In most instances, you will not receive any kind of special savings for paying your bill – let’s say 1 year in advance.
Sometimes, like with auto insurance agencies, you can save a couple of dollars by paying the premiums up front rather than using a semi-annual, quarterly, or monthly payment plan.
Vonage will give you a discount of up to 20% to pay your phone bill a year at a time, and Phone Power will give you the second year free if you prepay.
This is the only solid benefit of taking this kind of approach, and even then, there may not be significant savings realized.
Less To Remember
With all of the required payments being made upfront, that reduces the number of bill payments on a monthly basis.
This also reduces the amount of paperwork (assuming you do not use auto-pay) to be dealt with.
That being said, since many small business owners decide to do everything themselves, it also means that there is less of a chance that you will forget to make a payment as well.
On the personal financial side, it certainly helps those individuals who have trouble with organization and keeping track of their bills (and due dates).
Loss Of Liquidity
You are spending the money upfront, and losing the flexibility of having those funds available for other, more immediate, and possible emergency needs.
This isn’t like an investment account, where you can liquidate certain items in order to free up some cash in times of need.
You are locked into this purchase for the duration unless there is some sort of pro-rated refund policy, which to be honest is a rare characteristic of prepaying expenses ore, if there is, it will take time to get that money back.
Individuals will lose the ability to have their money working for them, and even though interest rates are low these days, anything is better than nothing.
Great, you’ve paid your next year’s worth of expenses in one fell swoop.
Did you remember to keep including the bills in your monthly budget or did you remove it since it’s technically not going to need attention for a while?
Whether you are running a business or a household, it is important to keep planning for that expense if for nothing else, then for the sake of repetition and accurately reporting the expense.
The last thing you would want is for the day that you actually have to start paying that particular bill regularly to come, only to realize that you removed it from your budget and now do not have enough free cash to cover it.
Not only is it a pain to deal with, but it also means having to spend extra time reworking that budget and finding a way to fit the expense back in.
Let’s face facts: some people just do not know how to budget and need to keep things as simple as they can for themselves.
Mergers and Acquisitions
Companies merge quite frequently, especially in this economy where the weaker companies have little other options than to allow themselves to be bought.
The problem is that many times the company that is purchased gets folded into the purchasing company effectively ceasing to exist.
What happens if your company merges with another and you end up not liking the resulting product or service or support from the new company?
Essentially nothing, since you are stuck with them until your prepayment expires, or you get lucky enough to get an opportunity to void the remainder of your agreement.
Every day, advances are being made in technology.
Every day, new ways of processing information are discovered.
Regardless of what the product or service is, somewhere a company is rolling out a better product or service.
Somewhere, a company is offering better rates for a product or service you or your business uses.
The unfortunate thing about it is that you cannot take advantage of either pricing or quality differences because you already paid for your current services, essentially creating a long-term contract that cannot be broken.
Even in your personal life, these things happen, especially if you are a tech geek and love having the latest innovations.
The (Very) Ugly:
Bye Bye Company
This is the most extreme and maddening of the negatives.
Any business can go belly up at any time.
Should a company happen to file for bankruptcy protection, the creditors are the ones that will receive the primary attention.
What happens to the customers?
They’re left holding the bag in most cases.
That means you will not only be out the money you had prepaid for the products or services but you will also be forced to find another supplier which means paying twice for one thing.
Would it suck should that happen?
But, that is life and that is what sometimes happens in business as well.
Can any of these scenarios happen?
Of course, they can.
The likelihood of some occurring is greater than others though.
So, what can you take away from all of this?
Simply put, it may very well be better to spend a few extra dollars in order to have more control over your money both in a business environment and in personal financial situations.
Do you have to listen to me?
Not at all.
This is simply my view of this particular spending strategy and how I view the pros and cons.
You are your own person and are free to choose to do business or handle your personal finances in any way your see fit, and without judgment (unless of course, you end up asking someone for their opinion).
Have you ever been in a situation where you thought you were doing something to save money but it ended up biting you in the ass when all was said & done? What examples do you know of that might seem like savings techniques that can backfire on your if you’re not careful?