English Financial Independence Basics

Spend Less Than You Earn (5) – Electricity, Heating, Insurance…

Spend Less Than You Earn (5) - Electricity, Heating, Insurance...

This is the fifth and last part of my post series that I hope will be helpful if you want to lower your expenses

Please check out Part 1, Part 2, Part 3 and Part 4 as well.

Today I want to share some tips on cutting your fixed costs.

That includes costs associated with housing that you can influence yourself such as electricity or gas (for heating). But we’ll look at insurances or the contract for your mobile phone and other subscriptions as well. As always this is not an exhaustive list, but why not get started with these items.

 

Electricity and gas

The topic of rising electricity and gas prices pops up in the news on a regular basis. Nevertheless I’ve managed to lower our costs in this area during the past years. How can that be possible?

The obvious thing to do is to use less energy. I do have to admit that we totally suck as a role model as far as our electricity consumption is concerned. We only have a small  house, but it’s still a house and not an apartment. Which usually means comparatively higher energy bills since you’ll individually pay for outdoor or basement lighting for example instead of only paying a share per apartment.

That’s not the key thing with us, though. We actually have too many high-consumption appliances. We use several computers and have a second large side-by-side refrigerator in our basement. We also have a clothes dryer that we use very regularly.

 

Clothes dryer

You can definitely beat us there. If you dry your clothes on a rack at least in summer you’ll save a lot of electricity. You only have to make sure to air your rooms well not to have the humid air cause mould.

A friend of mine doesn’t even own a clothes dryer anymore. This summer I have actually dried our washing in the garden pretty often. But I won’t get my husband on board for challenging ourselves a bit more on this issue.

 

Dish-washer

The same goes for your dish-washer. There is some ‘research’ around which is claiming that using a dishwasher is more energy-efficient than doing the dishes by hand. But that’s only when the dishwasher is completely loaded each time. And no dishes are occasionally done by hand on top of this. That’s just not realistic in our household.

The other day I read an article and comments among the FIRE-community about the use of a dish-washer that I thought was really cool. It was about the parents of some first generation Asian-Americans who had been broad up in very modest circumstances in their home countries and are still very frugal with their home economics today. It seemed not to be a total outlier that they did their dishes by hand, and then used the dish-washer that came with the apartment to let the dishes dry. I think that’s genius: you can wash everything right after you’ve used it, so you end up with small batches that don’t get on your nerves. And afterwards the wet dishes don’t just sit around in your kitchen but are nicely waiting in the dish-washer till their dry. But my husband didn’t get caught by my enthusiasm for this idea either :-).

 

Gas/Heating

We’re actually doing better with our gas consumption. We cook and heat with gas. Especially where heating is concerned you can save energy if you’re okay with slightly below-average temperature levels in your rooms. To give you an example, we’ve set our thermostats to 18 degrees C (64.4 degrees F) in the living area. Our bedrooms, we usually don’t heat at all.

We don’t have have any doors between our corridor and living area. That’s obviously not ideal where heating is concerned. But on the first floor we can keep the doors to the rooms closed. And as always my opinion is: it’s great to be frugal. But as long as it’s for the sake of becoming more financially independent and not as an existential necessity, you shouldn’t sacrifice your quality of life.

 

Changing utility providers on a regular basis

As I told you, we’ve managed to lower our costs for electricity and gas although you can tell were not the world’s hottest energy savers. That’s been possible because I annually check whether I can get a better deal by changing the provider.

You can comparison shop on sites Check24.de (no affiliate-link) and Verivox. You type in your zip code and your annual consumption – make sure you have kept you’re annual bill – and you’ll get a list of all (or at least most) providers and offers available in your area. The offers have become more differentiated during the years, by now there are usually one or more sets of bonus included that you need to look at closely to make sure you’re fine with the details.

Usually, the discounted prices are only valid for the first year and you have to make sure you switch providers again, if you don’t want to pay the regular price. I have lately signed up for a contract without a bonus that seems to offer a reasonable regular price. That is actually the business model I would prefer to support since new customer discounts are obviously cross-financed by existing customers which is not very sustainable.

 

Important: Double-check providers

So far – I’ve basically been doing this since the market was liberalized – we didn’t have any problems with switching providers. But: for the switch before last I read some very negative reviews on the electricity provider I’d chosen after I’d signed up with them. It was about a ‘trap’ in the contract construction (start of contract fell before start of supply) which had led to the provider’s refusal to pay out part of the bonus in several instances. Even worse, people’s contracts had unwittingly be renewed by this ‘trap’, and prices were raised massively for the second year of supply. On top of that there were some other things that might cause unwanted problems in the small print.

To be honest, I was quite pissed off about the fact that this provider was recommended by Verivox through whom I had signed. I’m quite aware that the comparison shopping portals get a commission of the providers listed. That’s fine with me since they do provide a valuable service. But one should be able to rely on some minimum standards. When I wrote to Verivox about this I got exactly zero feed-back. That’s why I don’t use them anymore and haven’t linked them in this post.

There was a problem with paying out the first bonus with this provider, but that got solved quickly when I contacted them about it. I’ve already cancelled the contract and received a confirmation fairly quickly – different from what other people reported. So hopefully this will end well – maybe the provider changed his business model to a more customer-friendly one. But my learning for the future is: always do a separate only cross-check of the provider if you didn’t work with them before.

 

Insurance polices

I think it generally makes sense to get some understanding of which insurance policies make sens and which do not (apart from those mandatory by law). You can find independent information at the Verbraucherzentralen (German consumer rights organization) or similar institutions in your country. With that information, you can make up your mind what risks you want to insure against.

But there will be different prices for the same kind of insurance as well. It’s even possible that due to changes in the terms and conditions a new insurance policy covers more at a lower price. On the other hand it can make sense to keep an old policy – often the case for a Rechtsschutzversicherung ( legal protection insurance) – even though it’s more expensive than a new contract would be.

To check the cost versus the benefits I would start by reading the general recommendations on consumer sites such as Finzanztip (no affiliate-link). After that you can use the comparison shop sites again to get specific quotes.

 

Mobile phone contract

If you have a mobile phone contract like me, I would also check whether it still matches my phone usage and whether I get a good deal on a regular basis. I include customer service and user friendliness in this as well. I don’t have the cheapest rate for example, but a very easy to handle account and I can take advantage of new discounts as an existing client which is not a given with mobile phone providers in Germany.

 

Subscriptions

Subscriptions are the ideal business-model to reach comparatively easy to plan relatively stable revenues. But you’re locked into this on the cost side as well: you have an obligation to pay for a minimum period of time. That can economically make sense for a magazine subscription where the subscription offers a discount versus buying single issues for example, and where you’re sure you’ll want to buy and read every issue.

This is less and less the case for me, I noticed. If you’re similar to me, it makes more sense to selectively buy the issues you really want to read. If you’re taking a subscription to support publishers so we continue to have this type of media, that’s different of course. I think that’s quite a good idea by the way.

There might be potential cost savings in your screaming subscriptions as well. Maybe you don’t need Netflix and Amazon Prime. But we’re not frugal winners in this area either since I’ve been overruled by my family. But then I’m the one who uses them least.

 

So this is it for my series ‘Spend less than you earn’. I hope I have inspired you to take a closer look at your own expenses. And if you’ve found some useful tips, all the better.

Financial Independence Rocks!

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