I just made $648 today by shopping around for auto and home insurances

This week I am reading a biography of Andrew Carnegie, the steel industrialist.  The chapter I read today talks about how Andie ruthlessly cut the cost down in order to get an upper hand when competing with well-established rivals. He emphasized so much on cost-cutting as to earn a nickname as cost-cutting king.

To improve profitability, there are only two ways: cutting costs or boosting prices.  If one cannot boost prices, then the only way to improve profitability is to cut costs.  A similar situation applies to personal wealth management. If boosting income is hard to do, then cutting discretionary spending is way easier.  Figuring in personal income tax, curtaining discretionary spending is much more effective to increase your bank account balance. Suppose you are in the 20% federal tax bracket. In Missouri, the personal income tax rate is flat at 10%. If you want to increase your bank balance by $1000, you will need to boost your income by $1000/0.7=1428.57 dollars. Hence, in comparison, cutting discretionary spending is much more effective than boosting earnings because Uncle Sam will get a piece of your hard-earned money first.

As a college professor, my salary over the past 16 years declined even nominally. Figuring in inflation, my main income source, salary, has dropped significantly. Hence, the only way to grow my bank account is through passive investment via index mutual funds. The problem is to have excess money to invest at the end of each money. This necessitates budget cutting. In the past few years, I have roughly kept a record of my daily spending. It has been consistent that housing, utility bills, and transportation costs rank the highest in my spending.

 The real estate tax is high （$3800 annual for a house with $270000 assessment value), utility bills are also high due to relatively high fixed charges; water and sewage alone for a two-person household are about $110-130 per month.

The items I have some control over utility usage, real property insurance, and auto insurance.  My house is a 1929 brick house; insurance premium has been high even with high deductibles. Over the past ten years, the premium has been well above $1200.  I am considering paying off the $60K mortgage so I can choose not to buy house insurance.   I do not drive my car often; my annual mileage is a little over 1000 miles, but I am not ready to give it up just yet.

 It seems to me that local insurance companies often offer a much better deal over both house and auto insurance. In my area （St louis， Missouri), I stumbled onto Shelter Insurance–locally owned. The quote for my house goes down from $1200 annual to $664 and with similar coverage. For auto insurance, I already get a good quote at $460 a year with liberty mutual. However, insurance companies often boost premiums if you do not shop around.  Liberty mutual is to increase my rate to $490. Shelter insurance also offers a lower premium for my auto and better coverage at $348 a year.  Hence, in total,  shopping around for auto and home insurance saves me $648. If I want to have the same increase in my bank account,  I will need to have an increase in pretax income of  $648/0.7=$925.7! 

A word of caution though, do not sign up on insurance advertisement websites if you do not enjoy picking up telemarketers’ calls. Many ad websites merely collect your information but do not provide you any real quotes from any insurance company as they claimed. Moreover, you will be inundated with unsolicited phone calls and emails from all insurance agencies nationwide in the months to come. When you find a local/state-wide insurance company, make sure to take high deductibles to lower premiums. Do not over-insure. In my case, I barely use my car; hence, I consider comprehensive auto insurance coverage superfluous.