According to the latest three-year Federal Reserve Survey of Consumer Finances that measures the state of household finances in the US, American households are paying off more of their debts. Although this is good news, households’ savings have declined when adjusted for inflation.
Household finances across the globe
All indications suggestion that this phenomenon is not confined to the US alone. Households in most countries across the globe are experiences a similar decline, which suggests that we need to find further ways to reduce debt and increase savings in the face of rising inflation.
Here are five tips to help you on your way to greater financial freedom.
Stick to a budget
The quickest way to waste your money is through impulse buying. Work out a monthly budget and stick to it with the same professionalism you would exercise if running a small business. If you’d really love to make a purchase but it isn’t in the budget, cut back in another area – cancel a social event – in order to make that purchase while staying within your monthly budget. You’d be surprised what you can do without, and what takes priority, when you discipline yourself to make trade-offs instead of over-spending.
So, if you want that HD television or the latest energy-saving washing machine, bag lunch instead of buying and stop eating out at restaurants until you can make the new purchase without tipping over budget.
Reduce loan terms and interest rates
Taking a loan over four years instead of six, drastically lowers the amount you will pay out on interest. The same goes for a 15-year house mortgage instead of a 30-year loan agreement. Shorter term personal loans mean lower interest rates, and fewer years of paying interest.
While it is near impossible to get your home mortgage or car loan interest rate lowered without refinancing, you can get your credit card interest rate lowered in some cases. Speak to your credit card company and ask in which circumstances they would lower your rates. Before choosing a credit card company and the right product for your particular needs, do your research and shop around for best interest terms before making a decision.
Find new money to save
Due for a raise? Commit to putting your new raise straight into a savings account. Since this is additional, or new money, the saving will not mean that you have to reduce your standard of living. If ways to spend this additional income keeps popping your head, remind yourself that you have up to this point managed to live without the extra cash, and probably the additional items you’re dreaming of buying. Getting into the habit of saving your annual increase will mean that over time those savings can represent an increasing portion of your income and this, in turn, could mean the difference between being able to retire one day, or being forced to work for as long as you possibly can or relying on family to support you in old age.
Discover additional ways to make money
One of the quickest ways to make some extra money is to work more hours and/or work some overtime hours at work. This option has two additional spin-offs: in most cases you are entitled to 1.5 times your usual wage (sometimes double pay on certain holidays) but there is also the possibility that you will gain in experience and skills which could lead to a promotion that carries a higher salary.
If this option is not open to you in your current job, you could find new ways to bring in extra cash. You’d be surprised at the skills you have that could be marketed for extra income. These could include giving English lessons or, if you’re an ace gardener, offering to landscape the gardens in your neighbourhood. Home bakes are always popular or you could agree to clean up your neighbour’s yard if he’ll help you fix your gutters. This way you pay for a service with your time and skills while your hard-earned cash stays in your wallet.
Shop around for insurance
Insurance is more expensive than it’s ever been, but then again, you’ve never had so many choices of insurance provider than you have today. Make sure you’re getting the best rate you can get while staying with a reputable company. Call around and get quotes for your car insurance, home insurance, and any other insurance you may have. Make use of online sites that allow you to search for reputable insurers and compare their rates and terms. You’ll be surprised just how much you can save in this way with very little effort at all.