Go for the Big Wins

Spending less than what you make is arguably the easiest concept to understand in the world of personal finance. If credit cards/loans didn’t exist, then we’d all be forced to adopt the cash method and personal finance would be super easy. However, we live in the real world. And specifically, real world America. The land of reward point credit cards, easy personal loan access, 30-45 year mortgages, 7 year car loans, the list goes on and on.

It’s no wonder we all get ourselves into trouble and spend more than what we make. Debt is all around us. Constantly being advertised to us in the form of that big trip we SHOULD take. Constantly being emailed to us in the form of promotional rapid reward points on our credit card that we SHOULD take advantage of by spending more. It takes an extremely disciplined individual/family to not fall prey to all the temptations around us.

Now, if you’re one of these people who have been trapped by the “Debt Machine,” first and foremost, don’t feel bad…don’t feel guilty. Debt is a part of everyday Gen X and Gen Y life. It’s almost impossible to afford a house today by saving and paying cash for it. The same goes for an automobile that’s either new or even 5 years old. And forget about paying cash for that shiny new college education.

But if you’re someone who has a significant amount of credit card and personal loan debt, I’m here to tell you that the only way you get out of it is by “Going for the Big Wins.” Enough of trying to save money by cancelling that Spotify and Netflix account. Or by eliminating that daily latte at Starbucks. IT WON’T MATTER. You need to take a step back and analyze your financial situation from a birds eye view. Here are a few ways that I believe you can make that happen:

Look into refinancing your mortgage

For a good while in early 2018, all the buzz was surrounding interest rates going higher. Our economy was booming, unemployment was at historic lows, and the stock market was at all time highs. Fast forward to today, and interest rates have actually gone down significantly enough to make mortgage refinancing something that almost everyone should look into if you’re rate is 4.99% or higher. Now, always remember that nothing in life is free. Mortgage lenders don’t just give you lower rates out of the kindness of their hearts. They will charge you for the privilege to take your interest rate from 4.99% to 3.99% in the form of closing cost fees. However, I think that taking advantage of either a lower monthly payment than what you’re paying today; or saving overall interest cost in the thousands of dollars is a BIG WIN. Here’s an example of rate savings using a $300,000 home.

  • Term: 30 years
  • Interest rate: 4.99%
  • Monthly payment: $1,608.63
  • Total interest paid: $279,107.48

  • Term: 30 years
  • Interest rate: 3.99%
  • Monthly Payment: $1,430.52
  • Total interest paid: $214,986.08

This equates to $178.11 of monthly payment savings, and over $64,000 of interest saved over the life of the loan! If you were always comfortable with your payment amount, you could also look into reducing the term of your loan.

Try not to buy a new car

The average cost of a new lightweight vehicle in 2019 is $37,185 according to Kelly Blue Book. Notice the use of the term “lightweight.” If you’re like most people, you’re most likely looking into a larger SUV or even a pickup truck which can run upwards of $50,000+. First off, I urge you to NOT look into these expensive vehicles in the first place. Your payment will be close to $1,000 per month depending on interest rate and you’ll pay upwards of $5,000 plus in interest cost on a 5 year loan. Instead, you should be looking to buy a modest, used vehicle. Now when I say used, I’m not saying to buy a vehicle with 100,000 miles that’s 10 years old. Ultimately, a vehicle needs to be reliable. More so if you have small children. But there is a HUGE difference between a monthly auto payment of $500 per month and $1,000. And multiply that times two if you’re married. Instead of dumping an extra $1,000 into a vehicle that gets you from point A to point B, you could use that extra savings for a whole host of other things like an emergency fund, increased contributions to retirement accounts, or even savings for big annual vacations.

Stop buying your food in bulk

Costco and Sam’s Club have brainwashed us into thinking that buying in bulk is the way to happiness and true savings. However, based on personal experience, I beg to differ. Full disclosure: I’m married with 4 kids. That’s 6 total mouths to feed in my household. My family is the ideal target market for Costco and Sam’s. And you know what, my wife and I got sucked into this thinking and mentality as well. The per cost unit of a piece of chicken was undoubtedly cheaper than buying at my local Albertsons or Sprout’s Market. But what we started to notice was that even though it was cheaper per unit, there was A LOT of wasted food. We couldn’t eat the 30 pieces of chicken or supersized raspberry package fast enough before it went bad. And yes, is the solution to freeze the leftover you don’t cook right away? Sure. But again, based on experience, those pieces of chicken in the freezer are more likely to be forgotten and get freezer burn than to be eaten in a timely fashion. Another unintended consequence of shopping at these stores is the “extra” things you buy while there. Costco and Sam’s are notorious for stocking products only once. This gives you a huge feeling of FOMO and makes you spend on things that you really don’t need. Ever since my family stopped buying in bulk we’ve seen a savings of over $500/month on food expenses.

The cost of a roof over your head, transportation and food expenses are the largest places I see for the “Big Wins” in your life. By getting these three areas of your life right, they afford you the ability to not feel so stressed about the little indulgences in your life. They are also areas of your personal finance life that provide the largest savings so that you can save more.