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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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Sarah Hansen

A corporate-sales professional turned entrepreneur

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Published on January 8, 2021

How To Pay Off Credit Card Debt Fast: 7 Powerful Tips

How To Pay Off Credit Card Debt Fast: 7 Powerful Tips

Ever wondered whether your credit card debt is the reason you’re in a bad financial situation? You can’t enjoy any fun activities because a good chunk of your money goes toward debt payment. Heck, you’re even behind on some of your monthly bills.

The effects of clumsy debt management are too many to list here. This guide is going to help you discover how to pay off credit card debt fast and start chasing your financial goals.

Debt problems are the last thing anyone wants to encounter. But things can get out of hand when all the “little debts” you take accumulate in interests.

What if you knew some simple and proven ways to be debt-free quickly? Implementing them would mean better financial health for you. It becomes possible to free up cash for your “wants.” These include taking a trip or buying something you’ve always desired. All that while paying your bills on time!

Let’s not wait any longer. Here are 7 powerful tips for paying off credit card debt fast:

1. Pay More Than the Minimum Credit Card Payments

Many people only pay the monthly minimum on their credit cards. Truly, that’s the right amount for staying on good terms with your credit card company. But you need a different approach if you’re looking to achieve financial independence within a short time.[1]

Most of your payments go toward interest costs when you only pay the minimum amount. A substantial sum of your balance remains standing. As a result, it becomes more expensive to eliminate your debts.

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You don’t want to wait more than 10 years to get rid of debt while it’s possible to do it sooner. All you have to do is double that $100 minimum payment to $200 or go higher.

The good thing is that minimum credit card payments are affordable in most cases. By paying a higher amount, you reduce your interest costs, lessen your borrowing period, and boost your credit score.

2. Start With High-Interest Credit Card Debt

If you have more than one credit card debt, prioritize putting the extra money toward the ones with the highest interests. This debt pay-off strategy, known as the debt avalanche method, is essential for being debt-free quickly.[2]

First, you need to list down all the credit card debts you have in the order of their interest rates. Next, you choose the one with the highest interest and pay a significant amount toward it each month. It can be an amount twice or even thrice larger than the minimum payment.

At the same time, you make monthly minimum payments on the other debts. Their interest charges won’t be as costly as that of the first debt on your list. You only move on to the next high-interest debt after the first one is gone. Remember that your focus is on the interest rates and not the balances.

3. Revisit Your Budget

Budgeting is useful for tracking your financial moves. Once you create a budget, some tweaks along the way can make it work for you better. One situation that requires you to revisit your budget is when you’re struggling with debts. It might hurt a bit to slash some expenses. But you also don’t want to miss out on achieving financial freedom in the long run.

You can reduce some variable expenses to free up more cash for credit card debt payments. They’re the ones that change from time to time. Some examples are groceries, fuel, and clothing.

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Other opportunities for cutting down your spending lie in non-essential expenses. Instead of dining out all the time, you can cook at home more to save money. You can also share some subscriptions with friends and pay a fraction of the cost.

If you’re determined enough, you can eliminate all your unnecessary expenses and focus on paying off your credit card debt first.

4. Avoid Using Your Credit Cards

Do you want to know how to pay off credit card debt with a low income? One simple way is to stop using them. Having your credit cards everywhere you go means that you’ll be more tempted to buy unnecessary stuff. In this case, you spend money that you don’t really own and get deeper into debt.

The quickest fix to stop the debt build-up is spending with cash. You’ll be more aware of everything you can afford at any particular time. If you decide to keep one or two cards to ease the transition, always make wise choices. For instance, only use them when experiencing financial difficulties.

It’s best to categorize your fun activities under “discretionary spending” in your budget. This way, you won’t need more debt to kill your boredom. By halting your credit debt from accumulating, it’s easy to pay down what you already owe and be happy with the progress.

5. Start a Side Hustle to Boost Your Income

You’re probably turning away a lot of money by not monetizing your skills. Everyone has something that they’re good at doing. And you can use that to generate extra income for attacking your credit card debt.

If you look around your neighborhood, you can find several side hustle opportunities. It can be pet sitting, tutoring, or lawn mowing. You can start an online business by offering services such as digital marketing, content creation, and web development. Such skills go in high demand on freelance sites and job boards.

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Finding clients on social media is also a good strategy to utilize your skills and make more money. Facebook groups, Quora Spaces, and subreddits are some places to look for side jobs. You only have to join a niche-specific platform, share your services, and respond to any opportunities.

It’s possible to learn a skill, practice it, and earn from it. Use the free resources online or purchase some e-courses to get started.

6. Sell Your Used Items for Extra Cash

Starting a side hustle isn’t the only way to generate extra money. You can turn unwanted items into cash for paying off credit card debt. Whether it’s an old TV, book, or furniture, there is always someone itching to buy your used stuff.

A garage sale, as much as it’s old-fashioned, is perfect for getting your neighbors and passers-by to buy from you. You keep all the money because there are no business permits or taxes involved. While you may not make much cash, it’s better than leaving your stuff to go defunct in your storage.

Other than that, you can sell your used stuff on online marketplaces. Facebook groups are great places to start if you want quick approvals and hence sales. You only have to ensure that your listing follows Facebook’s commerce policies.

When selling any pre-owned items online, ensure they’re in good shape to avoid problems with your buyers.

7. Know When to Seek Help With Your Debt

Asking for help with your credit card debt can be challenging to do. But letting it drown you is a road you don’t want to take. While you may feel embarrassed at first, it’s the best way to get back on track when you run out of options.

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There are tons of non-profit credit counseling organizations that can offer you free guidance on how to escape the debt trap. An example is The National Foundation for Credit Counseling. They simply review your finances and help you determine the source of your financial problems. After that, they match you with an actionable debt management solution.[3]

In extreme cases, the debt solution can be:

  • Debt relief – where your debt is partially or wholly forgiven
  • Debt consolidation – taking out one loan to repay others
  • Debt settlement – the creditor forgives a significant portion of your debt
  • Bankruptcy – legal process for seeking relief from some or all your debts

It’s necessary to carefully weigh your options before deciding on the way to go. Find out how it might affect your credit score and any other risks.

Wrapping It Up

Debt is a major setback when you’re trying to prosper in life. Paying off credit card debt is essential if you want to reach your financial goals. That means having more free income, a good credit card score, and even a chance to retire early. You become more productive each day because of the peace in your mind.

So, you now have some tips on how to pay off credit fast. Go ahead and get rid of that good life progress killer!

More Tips on How to Pay Off Debt

Featured photo credit: rupixen.com via unsplash.com

Reference

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