October 13, 2009


When I was a professor of personal finance, it continually surprised me to hear comments from students suggesting just how "convenience-driven" they were. When asked to choose between a financially prudent choice and one based sheerly upon convenience (i.e., selecting a lower interest rate at one institution vs. a higher rate with their existing bank/credit union), most selected the convenient (higher cost) alternative. Even after nearly a decade of teaching personal finance (and a degree in psychology), that frame of mind still doesn't add up for me. I personally believe that a little bit of added effort can pay big financial dividends. Let me offer a couple tangible examples ...

Auto loans can be a very 'tricky' product, particularly for used vehicles. Often, interest rates sit at double digits. Information supplied by Bankrate shows that an "average" 48 month loan for a used car is currently 7.7% (slightly lower (7.56%) for a 3-year loan). I am definitely an advocate of using Bankrate as a tool with which to compare loan offers and gauge expectations.

I've seen several references in the past few months to Pentagon Federal Credit Union and their impressive car loan rates (3.99% used auto loan rates!). The lesson here? It's more than just simply shopping to find the best rate ... I think most people would automatically discount this option assuming "I can't do this because I'm not a member of the military." Before giving up (particularly given the current economic environment where many companies are opening a back door to customers when the front door seems to be closed), look a little closer ... Not only is credit union membership [at Pentagon Federal] open to the military; but also to government employees, Red Cross volunteers, as well as members of the National Military Family Association (a group open to anyone willing to pay the one-time $20 membership fee) ... a pretty small price to pay for a sub-4% interest rate!

When our insurance renewal came recently in the mail (informing us that our premium would be increasing 20% over last year), I first called to find out why. There were no accidents, no insurance claims, no change in credit status, or any other 'logical' explanation for the increase. When they didn't have any good answers, I informed them that I'd be calling to cancel the policy in a few days. I called them later that week to inform them that I wouldn't be renewing our policy after we not only found a lower cost option; we found a policy that cost less than we had been paying the prior year! Be willing to stretch yourself and go beyond your comfort zone and you'll often find "greener grass." FYI - www.insure.com, www.insweb.com, and www.insurancefinder.com are some of my favorite online resources for insurance shopping.

I would argue that if you look around, you'll see that a little extra effort will go a long way in your financial world ... you'll save more, spend less, and more prudently invest and plan for the future. THE LESSON?? A little bit of extra effort can pay big dividends.