Keeping Control of Your Money

Have you ever thought about how much control over your financial life you give to companies when you sign up for things like cable, cell phone contracts, Internet access, loans, or credit cards? When you engage in most financial transactions, you are letting someone else have a little bit of control over your financial life. The cable company can drop channels and raise rates. The cell phone company can extend your contract when you buy a new phone. The credit card company can increase interest rates and lower your credit limit without any input from you. All of these actions take control away from you and give it squarely to the company from which you’re buying services.

It probably doesn’t seem like a huge deal. So what if the cable company drops a few channels or increases your rates a few dollars? So what if they extend your contract when you order that new HD receiver? So what’s a few hundred (or thousand) less available on your credit card? So what if the cell phone contract comes with a huge penalty for early termination? Taken separately these aren’t big deals. Taken individually they can be annoying, but not detrimental to your
financial life.

However, many of us are involved with several of these types of transactions and contracts. The problem with ceding control over so much of your financial life to others comes when you are faced with a situation where you need all the control. When you lose an income or face some other crisis that requires major financial cutbacks and changes, you discover that you have no control. You can’t just cancel the cable because you’re locked into a two year contract that will cost you $200 to break. You can’t downgrade the cell phone plan because you have a contract with them, too. You discover you could really use that $2,000 that you lost when the credit card company lowered your limit. And you could really use your old interest rate of 5% rather than the 25% you’re now paying. You need to get out of your car lease, but there are big penalties for early termination. You have to keep paying on the furniture you bought with the same as cash offer. You’ve given control to these companies and now you have no room to make the changes you need in order to gain breathing room. Sometimes negotiating and bargaining work, but more often than not you’re just stuck.

I tend to be a bit of a control freak. I know this. I hate it whenever I feel like someone else has total control over a situation. This is one reason why I am very careful about what I do with my money. I don’t like giving any more control to others than I have to because I know the day might come when I need all the control. I want to preserve my ability to make any decision and take any action necessary to save my finances if I have to.

Sometimes a contract is inevitable. Sometimes I have no choice but to cede control to someone else. Whenever possible, though, I balk at contracts and loans. I keep a prepaid cell phone because I don’t have to sign a contract. If things get tight, I can just stop paying for the monthly minutes. One of the side benefits of dropping cable has been that I no longer have that contract and the cable company no longer has the ability to “extend” my contract when I get new equipment. By avoiding loans and credit card debt I get to retain control over where my money goes each month. Whenever possible, I try to keep as much control possible by not signing contracts and not obligating my money to others every month.

This strategy has come in handy more than once. We’ve been through layoffs and other crises and each time I’ve been able to quickly take control of the finances without having to jump through some company’s hoops. It keeps an already stressful situation from becoming an untenable one. That’s not to say that you should never take out a loan or a contract. Sometimes it makes sense. But be careful about getting involved in too many situations where you’re giving control to others. Too many contracts, leases, and loans will make it impossible for you to deal with a financial crisis because you won’t have the control that you need.

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5 Responses to Keeping Control of Your Money

  1. Dee says:

    I’m queezy about contracts as well. I have a pay-as-you-go cell phone. It is the least expensive option for me.

    In late of 2008, my husband upgraded our satellite receiver to a HD one. We still paid for the extra equiptment but not as much but it did tie us into an 18 month contract (which I don’t like). So many are lulled into the free deals not thinking about the economy and what could happen to their employment as like you said would have them owing the remainder of the money on the contract should they break it.

  2. Mark says:

    I agree completely.

    Cell phone contracts are the worst. We are not currently in one and my wife needed a new phone. Not wanting to be tied down to another two-year contract to get a “free” phone, and having a wife who only wants her cell phone to make calls, a pay-as-you-go phone with her SIM card installed was the perfect solution.

    No contract and the cost was $30.

  3. Scott says:

    You can count me in on this as well. I also have a pre-paid phone, its much cheaper. I have no “contracts”. I can drop any service I have at a moment’s notice. When my mortgage is paid off in two years I will have near total control (property tax will still be there – I don’t think I can evade that).

  4. The most important thing is to prioritize your expenditure and stick within your means. By doing this you may find you have more money to spend than you would expect.

  5. Gail says:

    Although I have been paying the majority of my bills on line and thus saving stamp costs each month, I hate having to be signed up for automatic withdrawals from my checking account. I don’t like the idea that someone else can come in a scoop money out of my account. As we don’t have steady income, it is hard to always be sure that there is a specific amount of money in the checking account to cover those types of withdrawals. Anyhow when I can, I also avoid those just like other contract plans. We don’t have cell phone or cable but we did sign up for a internet satellite plan so that we can run our on line business more efficiently, but for the most I like to keep control.

    I won’t even sign up for paperless billing. I want those bills so that I can inspect them easily and at my leisure and be able to see the fine print if needed. Then they are put away as records for tax purposes.

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