Choose Low Cost Financial Services & Products

by James & Miel on March 25, 2009 · 0 comments

Hi All,

One feature of healthy personal finance is relentless expense reduction. Most people who think about the subject look at lifestyle factors, such as reducing eating out or shopping with coupons. However, there are ways to scale back your expenses without making painful changes to your lifestyle. The way to do this is by exercising consumer choice when deciding on financial services and products.

You may not have a great deal of choices when when it comes to your 401k, but you can decide about who hosts your IRA and who handles your checking accounts. So, when you’re shopping for financial services and products, focus on low fees.

But wait, you might say, don’t some banks provide a superior product or customer service and therefore merit a higher fee? – Maybe, maybe not. Most financial institutions provide essentially the same types of services, the only question is how much they’ll charge you for it. Fees impact your bottom line, the average consumer spends about $2,000 in investment and bank charges over the course of a single year. This is $2,000 that could go into your pocket rather than the banks. So, when you make the decision to deal with a new bank or open an IRA, think about fees. They drastically affect your ability to build wealth.

Here are three specific ways you can choose to save money without sacrificing your lifestyle or quality of services.

1) Choose free bank accounts. Some banks will entice you to open fee laden accounts by offering higher interest rates. Most of the time however, the fees these accounts charge can outweigh the benefits of the added interest rates.

2) Go with low cost financial products. Instead of buying high commission insurance, annuities, or mutual funds, consider looking around for alternatives that are cheaper. Very often you can find products that meet your needs for much less.

3) Use discount brokers. Companies that broker stock and mutual fund sales are a lot like banks. You really just need them to buy, sell and hold your securities, a high fee scale is often not justified. So, instead of opening an IRA with a bank or insurance company, consider getting it with a discount broker like Etrade or Schwab. There is no reason to sink your wealth into overpriced brokers.

The main point is that you can substantially reduce your long term expenses by choosing low cost financial alternatives, both when you choose who to do business with as well as what products to buy.

Best,

James

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