While staying in Queens, New York a week ago, I discovered on Sunday that my car had been broken into. Some time between Friday night and Sunday morning, someone broke the front passenger side window and pulled out my car radio and a few other items I had left hidden in the car. In addition to the radio, they grabbed my iPod, GPS, and cell phone chargers. After several years of visiting Queens, I had become fairly lackadaisical about leaving items in the car, even hidden. Nevertheless, the suction imprint on the windshield, the out-of-state plates, and the fact that the car hadn’t moved since Friday night most likely signaled to the thief that my car would be a good mark.

I filed a police report and worked with the insurance company. They weren’t able to find a glass company that could come to replace the window until Tuesday; I found one that would come sooner, so the insurance company worked directly with them. There was no out-of-pocket cost for me to replace the window, but the stolen items were not covered.

This past weekend I replaced just about everything that had been stolen. In the process, I’ve learned or reinforced a few things.

People were amazed that I didn’t get upset about the ordeal. Stuff is just stuff. Nothing stolen was irreplaceable. At least no one I know was hurt. There’s a possibility, however, that the thief was hurt during the theft. There appeared to be a small drop of blood on the inside of the door under the broken window. We cleaned that right away.

Consider renter’s insurance or homeowners insurance. If I had renter’s insurance, the items stolen may have been covered. I should have researched this years ago. I’m not beating myself up about it because I had enough income in September to replace the items without dipping into savings, but that may not always be the case.

Don’t leave valuables in your car. I’m glad I didn’t have anything more valuable in my car. I don’t normally leave my laptop or camera, but those would have been significant losses for me. I switched to a larger laptop and I am getting into the habit of taking everything with me all the time.

This may not apply to everyone, but I plan on being more selective about where I park. My girlfriend lives in a decent neighborhood, but by the time I arrived at her house on that Friday night, the only parking spot I could find was close to one of the major streets through Queens and Long Island, in front of a business. It’s frustrating to have to drive around for a half an hour or more to find a decent parking spot, but I’ll have to wait until something in front of a residence opens up.

I’ve decided not to replace the GPS for now. While I had the device I didn’t use it as often as I thought I would. The cell phone I bought this year has basic GPS capabilities. As long as the cell phone has service, if necessary I should be able to use it to download a map of my location.

I may have fallen back into old habits. Several years ago, when I was refreshing my life and beginning to control my finances, I made deep cuts into my expenses. I took on three roommates, paying only $325 a month for my portion of rent. I didn’t own a car and relied on mass transit for most of my transportation. When I did move out on my own, finding one of the least expensive apartments in town, I eliminated all but the most basic cable television.

There was more I could have done had I wanted to reduce my expenses, but I reached the point at which I was consistently investing and saving money every month.

As my income has grown over the past few years, I’ve allowed my expenses to follow. I moved into an apartment I actually like and feel comfortable spending some cash on unnecessary things I like, such as amateur coin collecting, amateur photography, and amateur high-definition entertainment enjoyment.

I’ve already thought of some ways to reduce my expenses by $10,000 a year. Consumer Reports has some suggestions for finding another $6,000 a year, but only a few apply to me. How about you?

Find cheaper auto insurance. I mentioned that several years ago I didn’t have a car. That wasn’t quite by choice; my license was suspended when I was younger for failure to pay speeding tickets. It would be easy to say that I received those tickets thanks to a stressful job working 100 hours a week and my failure to pay was because I had no money, but I should have been more responsible. Until I got rid of the car, my insurance was about $4,000 a year if I remember correctly. Now my insurance is about $1,500 a year, and I could only find that rate by shopping around for a while. It’s been several years since I’ve shopped around, so that’s something I will consider. I need to add renter’s insurance as well—something I’m sad to admit I’ve never had despite its reportedly low price.

Optimize your life insurance. Right now, my cat Rupert is the only living being that relies on my income to survive. I have not opted for life insurance yet as it will be generally unnecessary until I have a (human) family. According to Consumer Reports, insurance premiums have decreased on average, so it may be a good time to replace your policy with a new one. You may be able to get the same coverage for less.

Shop smart for food. Buying food for a single guy is not simple. Food is usually packaged for families. This means I usually end up spending more per meal and eating larger portions that I should be. I don’t enjoy spending time preparing and cooking dinner. I have accepted my failure at brown-bagging my lunch and moved on. Consumer Reports’ advice is tailored to a family, indicating on average an household could save $190 a month by shifting to less expensive food. My entire monthly grocery bill is about $190, though eating out (and ordering in) matches that.

Plan menus around sales on fresh poultry, fish, meat, dairy, and produce, and make use of leftovers. Avoid costly prepared meals. Eat more low-priced, high-nutrition foods such as beans and potatoes… Shop in lower-cost stores such as Aldi Foods, PriceRite, Costco, Trader Joe’s, Wal-Mart, and Sam’s Club, but be sure to compare prices. Try less-expensive store brands. Sign up for store discount cards. Stock up on sale-priced staples.

Stop paying bank fees. This is one of the most unnecessary expenses for just about everyone in the United States of America. There is rarely a reason that you should have to pay incidental or monthly fees for any basic banking service if you manage your money. Avoid overdraft fees or over-the-limit fees by being aware of your account balances. Avoid monthly or yearly maintenance fees by taking advantage of only free accounts—there are many to choose from if your bank insists on charging you a fee for your banking. Avoid cash withdrawal fees by using the right ATMs.

According to Consumer Reports, 52% of consumers don’t pay any bank fees, but the rest pay lots.

Optimize your telephone service. I don’t spend that much time on the phone. I could probably save a lot of money if I were to choose a prepaid cell phone plan. However, I chose a Blackberry plan with Verizon Wireless, which I use more for business, and I don’t intend on changing the plan.

I’ve helped other people look at their telephone usage habits and choosing a plan that better fits the amount of time they spend on the phone. On many plans, going over the allotted number of minutes can be very expensive. If you’re consistently exceeding your limit, you can save tons of money by switching plans.

Pay off your credit card. According to Consumerism Commentary, “On average, consumers who carry a balance owe $2,200, on which they pay 15.2 percent in annual interest charges.” Paying that much interest negates any progress you may be achieving with your savings or investments. To get rid of credit card debt, stop using the cards and then apply the Debt Avalanche.

It’s been several years since I’ve paid interest on a credit card, but I still pay about $30 a month on my student loan interest. I still have a student loan because several years ago, I applied some tuition reimbursement towards expenses rather than my loan. I probably should have done whatever possible to avoid that, but for whatever reason, it was the choice I made. At the time, the interest on the student loan was about 2% and I was earning more in my savings accounts, but that’s no longer the case. Therefore, I have been increasing my debt repayments every month this year, with the goal of vanquishing the remaining balance by the end of the year. If I decide that goal still makes sense, I’ll have to accelerate in order to achieve it.

According to Consumer Reports, the average family can save $500 by making the changes listed above. I have a feeling that many Consumerism Commentary readers are already optimized.

Cut your spending by $500 per month, Consumer Reports, August 2008 (subscription required)

Should you get a variable annuity when you retire? The company I work for hopes you will, but many financial advisers, gurus, and authors steer people away. The reason is simple—the benefits in the form of gains don’t outweigh the fees and diligent investors can manage their retirement money in the form of index mutual funds, at least with a long-term time horizon.

Ben Stein holds a differing opinion. He is a fan of variable annuities in moderation. He admits that only a portion of a portfolio should be invested in annuities in order to ensure a modicum of guaranteed income. Here are his reasons:

• Variable annuities allowed his parents, both economists but not great investors, to retire comfortably.
• Some annuities will “lock in” your stock market gains to guarantee you won’t lose your money. Of course, the stronger the guarantee, the higher the fee.

• Old people get Alzheimer’s. Even skillful investors can lose their ability to control their portfolios and can benefit from a regular check.

  Ben admits that individuals who are successful at investing and continue to be through retirement can manage to perform better investing on their own. He is thoroughly convinced that most people should consider putting at least a portion of their savings into annuity products when they retire.

  I’ve generally been strongly against variable annuity products, especially after hearing story after story of elderly people being encouraged to enroll their life savings into products from which they would be unlikely to receive a benefit worth the fees. I do see Ben Stein’s perspective and perhaps annuities would be worthwhile for some individuals in varying degrees.

  Why Ben Stein Loves Annuities [Money Magazine video]

It’s great to focus on the little things that save you money, like The Expensive Coffee-Related Drink Factor. Reducing small, regular expenses add up over time. But all that focus on the minutiae is for naught if you make big mistakes. Consumer Reports recently published an article that explains how much some of those big—thought not always apparent at the onset—mistakes cost.

1. Investing too conservatively during retirement. I had a major problem with Kiplinger Personal Finance’s recent series on saving $1,000,000 for retirement starting at various ages. The authors there suggest shifting your retirement asset allocation away from equities much too quickly. Retirement funds have to last longer than the beginning of retirement. With people living into their 70s, 80s, and even 90s, retirement funds have to last much longer than they used to. Unless you can afford to withdraw only 1% of your assets every year for expenses, you’re going to need to stay strongly invested in stocks. Consumer Reports says this mistake can cost you $360,000 to $750,000.

This is risky; stocks fluctuate, and a drop in the market at the wrong time can have some ill effects. It makes sense to have more stable investments once you retire, but you’ll need those equities to make the funds last. Here’s what Consumer Reports found:

Overall, we found that an asset mix leaning more toward Standard & Poor’s 500 stock index than bonds provided bigger returns and annual cash draws. On average, over a variety of 20- and 35-year periods from 1940 through 2006, an all-stock portfolio provided our investor with $750,000 more than an all-bond one.

2. Retiring before you need to. Early retirement is tempting. I’d like to stop working while I can still enjoy my life. There is enough I’d like to do that I won’t get bored with my time. But Consumer Reports says that early retirement can be an idea that provides the opportunity to forgo $237,000 to $309,000. Stay in the workplace longer, and the nest egg with which you start retirement will be significantly larger and will last longer. Also, the earlier you retirement, the less you’ll receive from Social Security. I’d hope that by the time I retire (if I take the traditional career path), Social Security will be the least of my concerns.

What else? Health care costs can be brutal if you quit the workforce before Medicare can help you:

What’s more, Medicare won’t cover you until age 65, so you might have to buy individual health insurance at an age when costs are apt to be at their highest. And each year you postpone is one less year your savings will need to support you.

3. Launching a divorce war. Unless you’re a “gold digger,” divorce can be a costly action. If it’s a particularly nasty divorce, not only can it drain you emotionally, but financially as well. A divorce could cost a person $49,000 to $188,000, though Consumer Reports cites an expert who says that a full courtroom ordeal could easily exhaust $250,000. That’s a quarter of a million dollars for a judge to say, “You get the house and you get the retirement accounts.”

So what do you do? Skip the divorce and live unhappily ever after? Mediation is a common cost-cutting measure. Finding a new rich spouse is an option.

4. Underinsuring your home. I am a poor example. I’ve been meaning to ask my insurance company about and shop around for renter’s insurance. I find myself busy during business hours and I put it off, even though I know that’s not an excuse. A home that’s not properly insured could end up costing you $16,000 to $194,000 more than necessary, according to Consumer Reports.

This has more to do with damage to a house, which as a renter I currently don’t need to worry about other than the contents inside. That could certainly contribute to a loss of $16,000. Consumer Reports explains that home owners, if they haven’t updated their insurance policies from the time they purchased their homes, could lose out on all gains if the house is damaged or destroyed. And if they’ve been living in the same place for a decade, that could be significant gains. The money you would receive from the insurance agency, while an amount that might have helped a decade ago, would be insufficient considering the climb in house prices.

5. Overpaying for your mortgage. You better shop around. It is absolutely worthwhile to look at different lenders when you plan on initiating a mortgage. Consumer Reports shows that a difference of 750 basis points between two otherwise similar mortgages could unnecessarily cost $27,000 extra down the road. Why pay someone an unnecessary $27,000? If someone asked me for that amount of money for no reason, I would turn them down. Why give such a gift to a mortgage lender? Find the lowest cost mortgage possible.

6. Carrying a credit-card balance. When should you carry a credit card balance? I can only think of two situations. The first is if you are using the credit card for arbitrage: earning more from a liquid investment than you’re paying in credit card interest. That’s a dangerous adventure for someone who isn’t prepared. The other situation is if a credit card is the only source of funding for starting out in a career. If your first job out of college requires a suit and you have no money saved up after boozing your way through higher education, you’re going to need to make do. Of course, it’s imperative to get rid of credit card debt as soon as possible.

If you have a card with an interest rate of 15 percent and you pay only the minimum due each month, it will take you 22 years and 2 months to retire a $5,000 debt, and you’ll have paid $5,729 in interest.

Minimum payments are not the way to go. They’re designed to keep you in debt for a long time. You must pay more than the minimum payment suggested by the credit card company. In most circumstances, take Consumer Reports’ advice and use credits only for security features (and I would add for rebates) and pay off the balance every month. Otherwise, you can end up paying $5,000 to $23,000 over the course of your life in credit card interest alone.

Common sense will help you with the small mistakes that add up over time. It often takes some education and awareness in addition to common sense to avoid wasting hundreds of thousands of dollars unnecessarily.

Image credit: banjo d
12 money mistakes that could cost you $1,000,000 [Consumer Reports]

In my mail recently, I received a colorful postcard from State Farm, the agency which insures my car, house, and several rental properties. I was “sorting” it directly into the trash when I noticed the word “dividend” peeking up at me.

Dividend. That’s right, my insurance company has declared a dividend for its New Jersey policyholders for the second year in a row. I’m so unused to this that last year I almost tossed out a $240 check they’d sent me for my dividend payment. Once I took another look at it, I called the company to make sure they hadn’t cancelled one of my policies, as I was worried the check might be a refund of monies paid.

It is a refund of sorts, but not due to a cancelled policy, the representative explained. “When we have a year where we profit, our policyholders profit too, since they’re also our owners.”

It was a nice surprise last year, especially since insurance rates in new jersey are so high, and now I’m looking forward to seeing how much I’ll get back this year. An internet search regarding the dividend yielded only 2006 information, so it seems I’ll have to wait for the company’s next correspondence or year-end financials to get more details.

Could it be they’ve avoided posting this among the news releases on their web site so other states don’t get jealous? Apparently the dividend payout is state-specific, so not everyone will be eligible.

Does your insurance company pay dividends?