This turned out to be a rather lengthy article, so I have split it up into more manageable chunks. This is part four of the chunks. Part One can be found at Do You Make These Money Mistakes? Pt 1
In today’s article we will cover:
8. Neglecting to Review and Optimize Recurring Expenses
Your recurring expenses are like houseplants – ignore them long enough, and they’ll either die or grow wild. The difference is that financial neglect usually means things grow in ways that cost you money.
Most Canadians sign up for services, subscriptions, and insurance policies when they need them, then never think about them again. Meanwhile, these expenses quietly drain your bank account month after month, year after year, often long after they’ve stopped providing value.
Tom’s Subscription Surprise: This Ottawa software developer decided to review his bank statements after feeling like his money was disappearing. “I found subscriptions to three streaming services I never used, a gym membership I’d forgotten about, and a premium software plan I’d downgraded from at work but kept paying for personally,” he says. “I was spending $180 per month on services I didn’t use. That’s over $2,000 per year!”
The Subscription Creep Problem
The subscription economy has made it easier than ever to pay for services you don’t use. Companies love recurring revenue because it’s predictable and often forgotten. A $9.99 monthly charge is small enough that you might not notice it, but over time, these small charges add up to significant money.
The average Canadian household now pays for 12 different subscription services, according to recent surveys. That includes everything from streaming services and music apps to cloud storage and meal delivery services.
Insurance Policies That No Longer Fit
Insurance is one of the biggest areas where Canadians overspend without realizing it. You buy a policy when you’re in a specific life situation, then never review it as your circumstances change.
What and why you should be insured explained (but with a bias) Insurance Explained.
Common Insurance Oversights
- Carrying the same auto insurance coverage when your car’s value has decreased significantly
- Paying for life insurance coverage amounts that no longer match your financial obligations
- Keeping renters insurance when you’ve purchased a home (and now need homeowners insurance instead)
- Maintaining high deductibles when your emergency fund has grown substantially
- Continuing to pay for mortgage insurance when you have sufficient life insurance coverage
- Keeping travel insurance as an annual policy when you rarely travel
- Maintaining business insurance for activities you no longer pursue
The Cost of Inaction
Many Canadians unknowingly waste hundreds or even thousands of dollars annually by not reviewing their insurance policies. A recent survey found that 68% of Canadians haven’t reviewed their insurance coverage in over two years, despite significant life changes during that period.
When to Review Your Insurance
Your insurance needs change as your life evolves. Consider reviewing your policies when you experience:
Financial Changes
- Salary increases or decreases
- Paying off major debts
- Building substantial savings
- Retirement or career changes
Life Events
- Marriage or divorce
- Having children or children moving out
- Buying or selling property
- Starting or closing a business
Asset Changes
- Vehicle depreciation or upgrades
- Home renovations or improvements
- Major purchases or sales
How to Right-Size Your Coverage
Auto Insurance
If your car is worth less than $5,000, consider dropping comprehensive and collision coverage. The premiums plus deductible often exceed the vehicle’s value. However, keep liability coverage at appropriate levels.
Life Insurance
Calculate your current financial obligations including mortgage, debts, and family support needs. If your children are financially independent or your mortgage is paid off, you may need less coverage than when you first purchased the policy.
Home Insurance
Ensure your coverage reflects your home’s current replacement value, not its purchase price. Home values and construction costs change over time, and being underinsured can be costly during a claim.
Disability Insurance
If your employer now provides better coverage, or if your financial situation has changed significantly, review whether your private disability insurance is still necessary or appropriately sized.
The Annual Insurance Audit
Set a yearly reminder to review all your insurance policies. Compare your current coverage with your actual needs, and don’t hesitate to shop around for better rates. Insurance companies often reward new customers with better pricing than they offer to existing ones.
Remember, the goal isn’t to eliminate insurance but to ensure you’re paying for coverage that matches your current reality, not your situation from five years ago. A properly sized insurance portfolio protects you adequately without draining your budget unnecessarily.
Insurance Policies That No Longer Fit
Insurance is one of the biggest areas where Canadians overspend without realizing it. You buy a policy when you’re in a specific life situation, then never review it as your circumstances change.
Common Insurance Oversights
- Carrying the same auto insurance coverage when your car’s value has decreased significantly
- Paying for life insurance coverage amounts that no longer match your financial obligations
- Keeping renters insurance when you’ve purchased a home (and now need homeowners insurance instead)
- Maintaining high deductibles when your emergency fund has grown substantially
- Continuing to pay for mortgage insurance when you have sufficient life insurance coverage
- Keeping travel insurance as an annual policy when you rarely travel
- Maintaining business insurance for activities you no longer pursue
The Cost of Inaction
Many Canadians unknowingly waste hundreds or even thousands of dollars annually by not reviewing their insurance policies. A recent survey found that 68% of Canadians haven’t reviewed their insurance coverage in over two years, despite significant life changes during that period.
When to Review Your Insurance
Your insurance needs change as your life evolves. Consider reviewing your policies when you experience:
Financial Changes
- Salary increases or decreases
- Paying off major debts
- Building substantial savings
- Retirement or career changes
Life Events
- Marriage or divorce
- Having children or children moving out
- Buying or selling property
- Starting or closing a business
Asset Changes
- Vehicle depreciation or upgrades
- Home renovations or improvements
- Major purchases or sales
How to Right-Size Your Coverage
Auto Insurance
If your car is worth less than $5,000, consider dropping comprehensive and collision coverage. The premiums plus deductible often exceed the vehicle’s value. However, keep liability coverage at appropriate levels.
Life Insurance
Calculate your current financial obligations including mortgage, debts, and family support needs. If your children are financially independent or your mortgage is paid off, you may need less coverage than when you first purchased the policy.
Home Insurance
Ensure your coverage reflects your home’s current replacement value, not its purchase price. Home values and construction costs change over time, and being underinsured can be costly during a claim.
Disability Insurance
If your employer now provides better coverage, or if your financial situation has changed significantly, review whether your private disability insurance is still necessary or appropriately sized.
The Annual Insurance Audit
Set a yearly reminder to review all your insurance policies. Compare your current coverage with your actual needs, and don’t hesitate to shop around for better rates. Insurance companies often reward new customers with better pricing than they offer to existing ones.
Remember, the goal isn’t to eliminate insurance but to ensure you’re paying for coverage that matches your current reality, not your situation from five years ago. A properly sized insurance portfolio protects you adequately without draining your budget unnecessarily.
Part Five can be found at Do You Make These Money Mistakes? Pt 5
The Money Reservoir, a system for managing irregular income. A Smarter Way to Manage Your Finances and Harness the Power of Reservoirs to Break the Paycheque-to-Paycheque Cycle and Build Financial Stability. For more information please visit The Money Reservoir on Amazon
Disclaimer for ManageYourMoney.ca
The information provided on ManageYourMoney.ca is intended for educational and informational purposes only. It should not be taken as financial advice. The opinions shared are those of the authors and are meant to encourage sensible financial habits and decision-making. We recommend that you do your own research or consult a certified financial advisor before making any financial or investment decisions. All investments come with risks, and there is no guarantee of success. Past performance is not a reliable indicator of future results. Always consider your personal financial situation and risk tolerance before pursuing any investment opportunities.
As always, I am not a qualified financial advisor. I just relate financial management to my own experience which may not resemble yours at all. Advice is frequently worth exactly what you paid for it. Most of mine came from expensive experiences.
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