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Ways to Save Big on the Big Three: Car, House, and Education

Ways to Save Big on the Big Three: Car, House, and Education

There are three big-ticket items that most people need to pay for in life: a car, a home, and a good education. However, doing your due diligence can help make these purchases a bit less painful to your paycheck.

Car

Everyone remembers their first car. Turning those keys and hearing the engine roar feels like a graduation to adulthood. Unfortunately, part of being an adult is dealing with the payments along with the thrill of the open road. Here are some ways to make sure to save.

1. Buy at the Right Time

As far as car dealerships go, it pays to do your homework. The end of the month, end of the summer, and end of the year are all great times to snap up some deals. At the end of the month, dealerships may be close to qualifying for sale bonuses from manufacturers. If they are nearing their quota, they make be more ready to make a deal.

At the end of the summer, dealerships are trying to clear out inventory to make room for next year’s models. And, at the end of the year, customers are thinking about Christmas shopping and not car shopping. It’s a lean time for car dealerships, which means they will be very happy to make you happy. This concept also works during periods of inclement weather. If there has been a longer period of ice and snow or an unusually hot spell, many people may not feel like car shopping. Yet, dealerships still need to report good sales numbers. If you can brave the elements, you may find a reward in a much better deal because you visited the dealership when others stayed home.

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2. Increase Your Loan Payments to Save Interest

Of course, the best scenario is to save over time to pay cash for a vehicle. However, realistically most people need to take out some sort of financing. With any loan, you never want to pay the minimum payments if you can help it. Always remember, a loan is set up to benefit the lender, not you. You can easily pay multiple times your original purchase price in interest if you simply follow your lender’s payment timeline.

There are several great sites that can motivate you to pay off your debt faster by showing how much you save over time by just increasing your payments. One fun trick if you can’t afford a lot of money for extra payments is to just round up. So, for example, if your payment is $360 per month, you pay $400. When paying off loans every little bit helps, and that $40 extra per month put toward your principle will equal big savings over time.

3. Buy Used

You pay a price for that new car smell. The minute you drive your new car off the lot, it loses about 9% of its value. During the first year, you lose a total of 19% in depreciation. The following year, you lose another 12%. After this, your car depreciation holds steady at 9% per year. Therefore, it makes sense to look for well-maintained cars that are over two years old. When buying, make sure to take it to a mechanic whom you trust for a full inspection. Also do a background check to verify that it hasn’t been in an accident. If you really just have to have the smell of a new car, save yourself some serious money and get the fragrance spray.

House Savings

When buying a house, the amount of time you take to educate yourself can mean thousands of dollars in savings. You can passively buy a house through normal channels, but you will spend more for the convenience. Remember, many real estate investors don’t have a realtor license. They just took the time to become educated on the process.

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1. Know Your Spending Power – Get Approved for a Loan

Meet with a loan officer, review your credit, and determine your buying potential. You don’t want to waste your time looking at homes that you can’t afford. You can also see if there are any blemishes on your credit report that are easy to fix so you can qualify for a better interest rate. Make sure you research the costs involved with buying a home in your area. You need to know how much you will need for a down payment based on your credit score and debt-to-income ratio. If your credit is strong enough, you may not have to put any money down for the loan. You will still need to pay closing costs and other fees (unless you can get your seller to pay them), so make sure you have enough extra cash on hand before signing the mortgage.

2. Know your market

Knowing the housing market is crucial to making educated real estate purchases. There are several sites you can use to research public records online. Mortgage records are public information. You can easily see how much someone still owes on their property vs. their asking price. This is useful to know when negotiating on a home.

You can see when someone has the breathing room to negotiate down and when someone is trapped in a mortgage and must stick to a certain price. The more equity someone has in their home, the better the chance they will drop their asking price if they need to sell quickly. Also, get comp reports of home sales in the area either through a site or a realtor. See if home sales are rising or falling. Location is key when buying real estate. Look for homes in areas with good schools, strong infrastructure, pleasant neighborhoods, and other amenities that would increase resale value.

3. Look into REOs, Short Sales, FSBOs, and Foreclosure Sales

Not going the traditional route to buy a home can be scary, but if you put some effort into learning the system, the rewards are huge! I want to stress that this is just to an overview of areas you can research. You will need to study these topics in depth to become educated to the point where you can properly evaluate risk vs. return on investment. There are entire books written on these topics, so I will just pique your interest in this article. This is where the investors play. It pays to become educated and comfortable with alternative sources of home purchases.

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FSBO

Our first home we bought was a FSBO (For Sale By Owner). We literally drove through the neighborhood, saw the sign, and knocked on the door. Because the owners didn’t do their homework and comp their home correctly, we saved about $10,000 just in the initial purchase price of the home. Since we didn’t utilize a realtor, the seller didn’t have additional realtor fees to work into the asking price, so we both benefited.

REO

REOs (Real Estate Owned) are properties that are owned by a lender. When a home goes into foreclosure, the bank puts it up for auction. If no one buys it, it clogs up the lender’s inventory. Banks don’t want to hold actual properties and care for their upkeep; they just want mortgages. Many times, a bank will cut a great deal on an REO property just to get it off their books.

Short Sales

Short sales happen when a bank agrees to work with the seller in foreclosure and accept less than the mortgage amount from a qualified buyer. This helps the bank avoid the hassle of going through the foreclosure process. Again, most banks don’t want REOs, and if a buyer shows up with cash to do a deal, the banks may be willing to talk even before the house goes to auction.

Foreclosure

When a home goes into foreclosure, and no short sale deal is made, it is put up by the bank for auction for investors to bid on. If you spend some time understanding this process, you can be right there in the action and pick up a great deal on a nice property. Again, to ensure you aren’t buying a lemon, arraign to visit the house beforehand and get it inspected. Also, make sure there are no additional liens on the title. Since you are representing yourself in this deal, you must do your homework to make sure you are getting a good return on your investment.

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Education Savings

The price tag of a quality education has been steadily increasing in recent years. Student loan debts follow most people well into their career. It pays to limit them as much as possible.

1. Find Free Money

If there is anything more fun that going to college, it has to be finding free money to pay for it! There are so many sites that show you how to find scholarships. You will have to do some digging to see if you qualify. You may also have to write essays explaining your education worthiness over your competition. But, a little bit of work goes a long way if you can decrease the total amount of loans you will need to take out.

2. Choose Federal over Private Loans

Federal loans have a fixed interest rate that is lower than private loans will offer you. Private loans also do not have locked-in interest rates and, therefore, your payments can increase if your interest rates go up. This means you pay more money over a longer period of time. Avoid private loans at all costs unless you have no other option. Also, only borrow what you honestly need and live modestly. You don’t have to take out the full qualification amount. Take a side job for extra income while in school and over summers to make sure you have the smallest possible debt upon graduation.

3. Utilize Community Colleges

You can still have the diploma from the four-year college of your choice without carrying the full amount of debt. Spend your first two years at a community college to get your base credits out of the way. These colleges are usually much less expensive than state or private colleges, which are about triple the price tag. Also, if there is a community college close to your home, you can save additional money on living expenses by staying with family. You can then transfer to the college of your choice for the final two years.

While I’ve given you some ideas on how to save on the three big-ticket items in your life, the work still falls to you. All of these avenues are very doable, you just have to be willing to work harder than the average consumer. This is why most American’s work to pay off huge debts instead of building up their net worth. With some smart planning, research, and applying a bit of knowledge know how, you can spend more time working to build up your nest egg instead of paying off years of unnecessary debt.

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Published on September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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