Wednesday, August 28, 2013

5 Ways to Pay More Up Front and Save Money

We just paid our semi-annual car insurance payment and it dawned on me that there are a few ways that paying more money up front can actually save us money:

  • Get a 15 year mortgage instead of a 30 year mortgage.  We did this on our first two houses and it really did save us a lot of money in interest over the decades (plus it was cool that I had a paid off house in my mid 30s!).  With our current house, we did do a 30 year mortgage because I wasn't working and we didn't want to squeeze our already fixed income too tightly but (hopefully) any additional income in the future will go to pay down the principal on our house as quickly as possible (we won't refinance to a 15 year mortgage because the current interest rate on our loan is so low that it can't be beat by current mortgage rates).
  • Get a three or four year car loan.  Ideally you would pay cash for a car but many people need a car and they also need a loan in order to finance it.  One of the worst financial mistakes I made in my life was getting long term leases on my new cars (and subsequently rolling them over and rolling them over).  Leases are pretty much a rip off (think four year lease then another five or six year loan to pay off the balance of the car...that's a really bad idea).  Yes, your car payments on a three year car loan will be super high but most of that money will be going towards principal and your car will be paid off super fast.
  • We always pay our car insurance in semi-annual payments.  This reduces the cost slightly because if we pay monthly, there is a service charge but by paying all at once, we get to skip the service charge each month (this is the same for our house insurance as well).
  • Some of our utilities allow us to pay on a quarterly/semi-annually/yearly basis in order to avoid service charges.  We pay our sewer bill annually which avoids a service fee each month and we also pay our garbage bill quarterly to avoid similar fees.
  • I don't use credit cards.  This is kind of a no-brainer, but by paying up front and in full for everything I buy, I avoid paying interest (those great sale prices aren't so great if you end up paying for the item over the course of a year!).

1 comment:

  1. My insurance company (for car and house insurance) used to split the annual bill into 10 payments with no service charges; then without telling their customers, they changed it to 12 monthly payments with an interest charge! I am shopping around now!